STUDY REVEALS THAT PROPOSALS FOR PROTECTING
U.S. STEEL INDUSTRY WILL COST CONSUMERS
MORE THAN $2.89 BILLION ANNUALLY

Cost to consumers per job saved could be as much as $732,000

Washington, DC - A study released today by the Consuming Industries Trade Action Coalition (CITAC) Foundation reveals that restrictions on steel imports proposed in the Steel Revitalization Act (HR 808), could cost U.S. consumers billions of dollars a year, and result in as many as nine times more job losses in the steel-consuming sector as jobs "saved" in steelmaking.

The study, Costs to American Consuming Industries of Steel Quotas and Taxes, commissioned by the CITAC Foundation and conducted by the Trade Partnership, quantifies the negative consequences for steel-users, taxpayers and the economy as a whole of HR 808, a steel quota bill introduced on March 1. The bill imposes quotas on imports of steel raw materials and finished steel products, and a 1.5 percent steel sales tax. The study also examines the economic impact of quotas on finished steel imports - the likely result of an investigation under Section 201 of the Trade Act of 1974.

The study shows that HR 808 would "protect" no more than 3,700 steel jobs, but cause the loss of up to 32,000 jobs in the steel consuming sector while costing taxpayers a whopping $2.89 billion a year. This amounts to as much as $732,000 per steel job protected. Over the five-year term of the legislation, consumers would effectively face a tax bill totaling $14.5 billion.

"The results clearly show that special protection for the steel industry will cause significant damage to the economy as a whole, consumers and globally competitive steel-users," said Laura M. Baughman, President of the Trade Partnership and co-author of the study. "If indeed restrictions provide any real relief to the domestic steel industry and its workers - and we think that's questionable - it would be very limited in scope and have no lasting impact on their ability to compete globally, which they must do to survive."

The study found that quotas resulting from a Section 201 investigation could cost consumers as much as $2.34 billion a year, or as high as $565,000 per steel job protected. Under a 201 quota scenario, roughly two to three times as many workers in steel-consuming industries would lose their jobs as would be protected in steel producing companies.

"There are 50 workers in steel-consuming companies for every one steelworker. CITAC undertook this study to make policymakers and opinion leaders aware that special protection for the steel industry could have serious consequences for broad sectors of the economy. The U.S. government measures how trade restraints on steel protect the domestic steel industry but not what consequences it has on steel users. Now that the costs to the consumers and their employees have been quantified, policymakers can make more informed decisions about the wisdom of steel trade restrictions," said Jon Jenson, CITAC Chairman and President Emeritus of the Precision Metalforming Association.

American steel-consuming industries include major producers of automobiles, housing and commercial buildings, wire and wire products, electronic equipment, heavy machinery, tires, food processing equipment, oil and gas drilling equipment, and others who rely on imports as components and raw materials. CITAC members frequently describe situations where steel import restrictions (duties and quotas) cause damage to their businesses in terms of contracts and jobs lost or relocated offshore. The CITAC Foundation study quantifies those damages to steel users in the U.S. economy.

"Policymakers need to take into consideration the potential negative impact of trade restraints on other sectors of the economy and consumers when attempting to protect a narrow sector of the economy. Unfortunately, current U.S. trade law does not give consumers a voice. At the very least, consuming industries need to be full participants in trade remedy cases and in any consideration of new quotas or taxes, because it is American businesses and American jobs that are jeopardized by these measures," concluded Jenson.

The CITAC Foundation study, authored by Ms. Baughman and Trade Partnership Research Fellow Dr. Joseph F. Francois, employed a state-of-the-art computable general equilibrium model to estimate the potential impacts of the quota and tax features of HR 808. The model reflects the interactions of the entire U.S. economy, rather than of just the protected industry. The model includes 15 specific sectors. The Trade Partnership benchmarked the model's data for national income, trade flows and related data to the year 2000. The study examines two plausible economic scenarios, HR 808 provisions and quotas emanating from a Section 201 investigation. Both restraints are considered 1) under an assumption that the economy was at full employment, and 2) Under an assumption of less-than-full employment.

CITAC is a coalition of companies and organizations who are committed to promoting a trade arena where U.S. consuming industries and their workers have access to global markets for raw materials and other imports that enhance the international competitiveness of U.S. firms. The CITAC Foundation is an affiliate of the Consuming Industries Trade Action Coalition.

The Executive Summary of Costs to American Consuming Industries of Steel Quotas and Taxes is attached. The full study can be downloaded from the CITAC website at www.citac-trade.org or may be obtained by e-mail by contacting Mihaela Cebotari at The PBN Company at 202-466-6210 (e-mail: ).