The Carter administration yesterday unveiled its long-awaited, five-art plan to help the ailing steel industry, a program officials said could put between 18,000 and 35,000 steel workers back on the job.
But a special administration task force warned that the ability of the industry to recapture business it has lost to foreign steel makers - thereby increasing production and rehiring workers - depends in large measure on how well the industry holds the line of prices.
"The more sharply the domestic firms raise prices, the smaller will be their recapture of the market," the report to President Carter said.
David M. Roderick, president of the industry giant U.S. Steel Corp., said Monday that no matter what happens to imports, domestic steel producers will have to raise their prices in the near future to cover rising costs.
Treasury Undersecretary Anthony M. Solomon conceded that some slight inflationary impact may result from the plan if it stops "deep discounting" by foreign producers, but he said the program is less inflationary over the long run than either quotas or permitting the current situation to proceed.
He noted that the reference price system encourages price competition at fair market value.
Solomon, who headed the administration task force that developed the program, said that the "centerpiece" is a series of so-called reference prices that will trigger an accelerated government investigation if steel is imported below the reference price.
The reference prices will be based on the cost of production including a fair profit and the cost of shipping steel to the United States of the world's most efficient producer, which probably is Japan.
The administration's Council on Wage and Price Stability will begin to develop the series of prices today, basing them in part on cost-of-production data that Japanese officials are bringing with them from Tokyo.
Many of the details of the plan had already been reported. Steel companides, many of which say they are heartened by the administration's approach, are reserving final judgment until they see what reference prices the administration sets.
Congressional reaction was mixed. Sen. Howard Metzenbaum (D-Ohio), one of the leaders of the congressional steel caucus, said that overall he feels the program has many good points.
But Sen. John Heinz III (R-Pa.), assailed the package. He said the trigger pricing mechanism may help keep Japaniese steel out of the South and the West but probably will not screen out European steel from the Northeast.
Solomon, at a White House briefing, said the reference prices are only meant to insure that competition from foreign steel makers is fair and that American producers are not injured by imports. The procedure makes use of antidumping laws already on the books that are designed to prevent foreigners from selling products below cost in the United States.
The report to the President said that a "preliminary review suggests it is reasonable to assume that the trigger price mechanism will lead to a rapid amelioration of the problems the U.S. industry has endured from unfairly priced imports," which have captured about 20 per cent of the U.S. market in recent months.
Solomon admitted that by setting the reference price on the basis of the cost of production of the world's most efficient producer. Japan, less efficient producers, such as the British, could sell their steel at the reference price but still be in violation of the U.S. laws because the reference price is below their cost of production.
But, Solomon said, it would be administratively impossible to set reference prices for every product from every country.
Futhermore, he said, because the prices are based on the most efficient foreign producer, it is usually safe to assume thap prices below the reference price are at less than fair value.
Solomon said that because the government can make such a presumption it can undertake a quick antidumping investigation and make a tentative determination of dumping within 60 to 90 days. The dumping procedure now takes more than a year. He said if steel makers think they can get better relief using the longer procedures, the administration would scrap the accelerated, trigger price procedure.
By freeing the domestic producers from unfair foreign competition, production and profits in the industry should increase, although Solomon said it was hard to estimate by how much. That should increase cash flow in the industry, which steel companies have agreed to invest in modernizing their facilities.
The task force recommendations, which were approved by the President, said that in addition to general tax incentives the administration will propose next year, the Treasury should consider allowing steel companies to write off the cost of their investments faster. The recommendation would produce tax benefits averaging $60 million a year over the next four years.
As expected, the report also urges the Environmental Protection Agency to see if less expensive ways for the steel industry to reach environmental goals can be found, sets up loan guarantee funds to help steel companies in high unemployment areas modernize their plants, and provides special assistance to communities and workers hurt by layoffs.
The report said that the administration should study abandoned steel mills to see if they can be put to alternative uses. It also said that the government should see if worker takeovers of abandoned facilities are feasible.