President Carter hit the nail on the head.
There is no "simplistic, quick-fix, painless solution" to the highlayoff, low-profit, low-production problems faced by the American steel industry. Carter promised steel management and workers last week to study te depressed industry and come up with a plan for government assistance.
The plan must deal with low-cost steel from abroad. But it must also find ways to force the industry to modernize, as well as help it find the necessary captial to build new facilities and install anti-pollution equipment.
None of the steel industry's problems are new ones. But a crisis atmosphere has developed in recent months as one after another major steel producer has laid off workers and shut down plants, blaming cheap foreign steel.
For the most part, the steel companies are closing inefficient, century-old facilities that should have been shut long ago, but were not partially because of the public relations impact and partially because many communities depend heavily on steel mills for employment.
But a prolonged slump in steel demand - as well as natural disasters such aslast year's severe winter and last summer's Johnstown. Pa., flood - forced steel companies to take a hard look at old, high cost plants such as Bethlehem's Lackawanna (New York) Works and Youngstown's Campbell (Ohio) facility. Bethlehem has curtailed Lackawanna and Johnstown operations substantially, while Youngstown will close its Campbell mill.
Although the plant closing may be good for the industry - leaving it with less capacity but more efficiency, the 20,000 layoffs since mid-year have incensed Congress and prodded the administration into taking an active posture in steel - an industry most earlier crease. Carter has named Treasury Undersecretary Anthony Solomon to head a special task force to recommend ways the administration can help steel.
The President will have to pick his way carefully through a minefield of competing interests in trying to devise his steel strategy. His most pressing problem is low-cost imports from abroad. While both labor and management are adamant about foreign-made steel, Carter's chief economic ad visers know that imports serve as the only effective check on domestic steel prices.
Treasury Secretary W. Michael Blumenthal has said that if the steel industry wants help, it will have to make some sort of pledge to hold down price increases.
Labor unions are upset about the major layoffs in the industry and want quick action to stem what they consider to be the chief enemy: imports. If the unions do not get enough from the administration, they may turn to a Congress which has become increasingly sympathetic to the complaints of many major industries about the evils of too much foreign competition.
But Carter must be careful in dealing with the nation's major trading partners (who for the most part happen to be the major exporters of steel as well). They are willing to take some short-term lumps (Japan and some European nations have volunteered to curb their exports) in return for keeping the U.S. market open. The worries of escalating protectionism lurk in the back of everyone's mind.
In return for their restraint, Japan and Europe want the federal government to discourage domestic steel companies from filing formal complaints under U.S. trade laws designed to insure that foreign producers do not dump (or sell below cost) their products in the U.S.
But the core of the President's program to deal with imports appears to be just such a vigorous enforcement of the nation's anti-dumping laws. If the government finds the foreign manufacturer is dumping his product and injuring an American industry, the government will levy special tariffs on the product. Carter called the government's neglect of dumping in the past decade a "derogation of duty."
On the other hand, Carter wants to avoid any form of across-the-board limits on foreign steel such as quotas.
The President told a news conference Thursday that restraining imports is "an exceptionally artificial and simplistic approach to the problem of the steel industry." He warned a special conference on steel problems at the White House later the same day that "we can't afford to erect trade barriers around our nation."
Carter got surprising support on that score from the steel producers themselves, who always have complained that imports and government interference were the only reasons the steel industry has been a low-profit one for lo these may years. Steel companies, however, are likely to look less favrably on the administration plan of domestic makers.
Steel producers do not want quotas, voluntary curbs (called orderly marketing agreements) or artificial tariffs, Edgar B. Speer, chairman of the nation's largest producer, U.S. Steel Corp., told the special White House conference. All producers want the government to do is make sure that foreign steel makers are not selling their product in the U.S. market below cost.
American steel makers can compete with anyone in the United States, Speer said, echoing a long-standing industry position. But when foreign producers cut their prices below cost (operating either with government subsideies or sustained losses) to sell enough steel in the United States to keep their factories running, U.S. companies cannot compete.
While the President - and his top advisers such as Treasury Decretary Blumenthal and Special Trade Representative Robert S. Strauss - are cool to quotas or orderly marketing agreements, labor is not.
Lloyd McBride, president of the United Steel Workers, said that while he buys the line that enforcement of trade laws will result in a competitive industry, it will take while before the dumping charges can be acted on. In the meantime, McBride worried, more steel mills could close and more steel workers will be out of jobs.
McBride has promised that if the administration does not do enough, labor will turn to Congress.
If labor does so, the administration will regret it, warns Rep. Charles Vanik (D-Ohio), chairman of the House Subcommittee on International Trade. And unless there are some quotas or other temporary restraints to slow the pace of layoffs in the industry, Congress will pass legislation.
Many members of Congress represent districts where heavy foreign competition has caused job losses, Vanik noted. "Forty to 45 members have textiles, 20 have shoes, 22 or 23 have electronics impact and 100 to 120 have steel workers in their districts. With the House already one-third isolationist, any legislation would be an avalanche of trouble," Vanik said.
Carter slso will try to negotiate a long-run accord with major steel-producing countries to set up well-defined procedures for dealing with steel imports, establishing guidelines for countries who find it necessary to act to safeguard their domestic steel industries.
Steel import problems have gathered most of the attention. About 60,000 workers have been certified elegible for special assistance because imports have caused them to lose their jobs. Another 5,000 are in the process of being certified and another 41,000 steel workers applied for special trade assistance but were denied it.
But the import problem is the tip of the iceberg, more a symptom of the difficulties the steel industry faces than a cause, despite the industry rhetoric.
While Japan was building a new, modern steel industry (in part with American money and technology that took advantage of large economies of scale, the American industry, for the most part, was continuing to produce in older platns, some of which date back a century or more.
Only one totally new steel facility (a greenfield site, as steelmen call it) has been started in the United States in recent years, and that was in 1962 at Bethlehem Steel's Burns Harbor plant on the shores of Lake Michigan in Indiana.
Japan's steel industry is now more efficient than the U.S. industry - not only in labor costs per ton but in raw materials costs as well, even though Japan must import nearly all the raw materials used in steel making (iron ore, coal and limestone).
Not only is the U.S. industry saddled with oder, less efficient plants it is also face with a sizeable and costly anti-pollution effort.
Because the industry has been low-profit since 1960 (except for a burst in 1973 and 1974 when a worldwide steel shortage sent profits soaring), steel companies have difficulty raising the capital these need to modernize and clean up. And, as steel executives complain, it is hard to justify investment in further steel-making facilities when the return on current facilities is so low.
The return on investment is low, however, in large part because many of the current mills produce steel at much higher cost than would newer facilities. One government economist estimates that it costs Bethlehem as much as 40 per cent more per ton to make steel at Lackawanna than at Burns Harbor.
The Carter plan will likely contain special tax provisions to help steel companies write off the cost of investing in pollution-control equipment, which take sup large chunks of the companies' investment monies without allowing them to make an additional ounce of steel. Blumenthal told reporters last week that a special investment tax credit for pollution facilities is one possible method of aiding steel.
The administration will at least have to consider special industrial development bonds for steel companies. And a pickup in he general economy would trigger an increase in demand for steel that temporarily would alleviate some of the import pressure as well as the layoffs.
President Carter has promised that he will have a program to deal with the steel industry's problems shortly. It will take seriously the dumping complaints that have been ignored for so long.
In fact, the domestic industry was heartened last month when the Treasury found that five Japanese producers were selling carbon plates at below cost in the United States. If the government determines that the dumping is harmful to the American industry, it will levy special tariffs on the imports.
Blumentahal also has promised that the Treasury will deal expeditiously with further complaints such as the one U.S. Steel filed Sept. 20, alleging widespread dumping on $2 billion worth of products from Japan. U.S. Steel an other producers are readying dumping charges against European producers, a charge U.S. Steel Corp. chairman said should be easier to prove than the case against Japan.
A steel caucus has been formed in Congress, and steel workers will kepp reminding Congress and the administration of the industry's plight.
Steel is merely the latest and largest industry in which a worker-management coalition has brought pressure to bear on government to help out with imports. The Ford and Carter administrations have imposed or negotiated import restraints on specialty steels, shoes, and color televisions. So long as unemployment remains high and the world's major economies remain sluggish, the problems of international trade and protectionism will remain high on the agenda of nearly all industrial nations.