- The Washington Times - Wednesday, July 11, 2001

President Bush's decision to seek cutbacks on steel imports has alarmed a large group of businesses that fashion steel into other products, like cars, appliances and machinery.
For these companies, reasonably priced steel, including imports, is a lifeline and the difference between sales gained and lost. Import curbs, though they might help beleaguered steelworkers, raise prices for steel users.
"If we can't get access to affordable steel, we're in trouble," said Patricia Torres, who handles purchasing for Computed Tool & Engineering, an 11-person shop in Anaheim, Calif.
Computed turns steel of all types into machine tools, which its customers then use to manufacture other products. Because it is small, Computed cannot keep a lot of steel on hand, making it vulnerable to sharp price increases that a rapid import-reduction can cause, Miss Torres said.
Thousands of businesses like Computed cut a stark profile against the dozens that manufacture steel.
"There is no doubt that more workers use steel than produce it," said Gary Hufbauer, an economist with the Institute for International Economics.
Even so, the steel industry appears to have much more political power in Washington than steel-dependent industries, especially since steel-producing states like West Virginia, Pennsylvania and Ohio played such an important role in last year's presidential election.
"Thousands of small manufacturers don't have those resources, and they are not inclined to come to Washington to get their problem solved," said Jon Jenson, chairman of the Consuming Industries Trade Action Coalition, which represents steel users.
Steel companies like LTV Steel, USX's U.S. Steel and others have joined the United Steelworkers of America in blaming foreign producers for 18 U.S. firms being in, or coming out of, bankruptcy. They argue that foreign firms are "dumping" their steel at unfairly low prices, putting U.S. steel manufacturers out of business.
On June 22, the president heeded their call and kicked off an investigation of U.S. steel industry claims. If the International Trade Commission, an independent agency, concludes that imports are harming the American industry, Mr. Bush can impose a mix of relief, including tough trade restrictions, early next year.
Steel producers concede that curbs on trade will raise prices. But they argue that steel users their own customers have gotten used to the low prices that a flood of imports causes.
"Domestic steel prices have been depressed for over 40 years," said Barry Solarz, vice president for tax and trade at the American Iron and Steel Institute, which represents steel companies.
Small manufacturers warn, however, that higher prices for steel could further dampen their business at a time when the U.S. manufacturing sector is believed to be in recession.
They are dismayed with Mr. Bush's decision to side with steel producers on a matter that could impact other industries. But with little pull in Washington, they stand little chance of reversing it.
"There's nothing I can do with higher prices for steel other than bleed to death," said Mike Aznavorian, an owner of Clips and Clamps Industries in Plymouth, Mich.
Clips and Clamps the name aptly describes its products employs 60 persons and turned over $9 million in sales last year, barely breaking even. Mr. Aznavorian said his small business is already reeling from spending reductions by auto manufacturers, his main customers.
The automakers, in turn, complain that pricier steel will hammer them vis-a-vis their European and Japanese counterparts, whose supply of steel will not be affected.
"The reality is that we have a low profit margin," said Mustafa Mohatarem, chief economist for General Motors Corp. "Any increases in cost that do not affect our foreign competitors will have a serious impact."
The ripple effect of higher steel prices reaches deep into the economy.
Scott Young, the owner of Precision Industries in Providence, R.I., manufactures cutting tools for companies like Clips and Clamps. To the extent that they cut less steel, Mr. Young's small shop sells fewer machines.
"We are an important supplier to these industries, and we'll take a hit as well," he said.
At the very bottom is the consumer, according to Mr. Hufbauer.
"Higher steel costs are then passed on to the American public in a multitude of small markups for cars, washing machines, buildings, and practically everything else," Mr. Hufbauer concludes in a forthcoming study.

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