TREASURY DRAFT REPORT ON S. 2380 THE FAIR TRADE IN STEEL ACT OF 1984

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01370R001201650022-3
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 7
• Document Creation Date: December 21, 2016
• Document Release Date: November 13, 2008
• Sequence Number: 22
• Publication Date: May 7, 1984
• Content Type: MEMO

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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET E kkk;;;/JJ (~ ~, 1 A L WASHINGTON. D.C. 20503
May 7, 1984
LEGISLATIVE REFERRAL MEMORANDUM
Legislative Liaison Officer-
Office of the U.S. Trade Representative
Department of Commerce
Department of Labor
Department of State
central Intelligence Agency
Chrono
Treasury draft report on S. 2380, the "Fair Trade
in Steel Act of 1984."
The Office of Management and Budget requests the views of your
agency on the above subject before advising on its relationship to
the program of the President, in accordance with OMB Circular A-19.
A response to this request for your views is needed no later than
MONDAY, MAY 14, 1984.
Questions should be referred to Tracey Lawler (395-4710 )
the legislative analyst in this office or to Rick Nygard
( 395-3670 )?
RONALD K. PETERSON FOR
Assistant Director for
Legislative Reference
Enclosures
cc: Greg Ballentine v;-
Mike Horowitz `
, - E E"91, [11 n-tv L
Kate Newman
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DEPARTMENT OF THE TREASURY
OFFICE OF THE GENERAL COUNSEL
WASHINGTON. D.C. 20220
MAY 2 1984
Director, Office of Management and Budget
Executive Office of the President
Washington, D.C. 20503
Attention: Assistant Director for Legislative Reference
Dear Sir:
Enclosed are six copies of a proposed report to the
Senate Committee on Finance concerning S. 2380, the "Fair
Trade in Steel Act of 1984."
Is there any objection to the submission of the
proposed report?
Sincerely yours,
Oa-Kc Q
Deputy General Counsel
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DEPARTMENT OF THE TREASURY
OFFICE OF THE GENERAL COUNSEL
WASHINGTON, D.C. 20220
This report responds to your request for the
Department's views on S. 2380, the "Fair Trade in Steel Act
of 1984" (hereafter referred to as the "bill" or the "Act").
For the reasons stated below, the Department of the
Treasury is opposed to the enactment of S. 2380.
PURPOSES
The bill is predicated upon a number of observations
concerning the United States steel industry: (1) inter-
national trade in steel over the past two decades has been
plagued by unfair trade practices; (2) excessive worldwide
steel making capacity; (3) unsatisfactory financial
performance by American steel producers having necessitated
the deferral of many investment projects (some having been
cancelled); (4) steel industry investment having been
seriously jeopardized by the failure of existing trade
statutes-to deal effectively with unfairly traded steel
imports; and (5) litigation in enforcing existing trade
statutes is inadequate and, in the absence of a viable
remedy, some legislative relief is considered essential.
The bill declares that it is the intent of Congress to
promote and expand the economic viability of the United
States steel industry and to prevent the further decline of
the domestic industry. Moreover, the bill declares it to be
the policy of Congress that access to the United States
market of foreign produced carbon, alloy, and specialty
steel mill products should be on an equitable basis in order
to safeguard the national security, ensure the orderly trade
in steel mill products, reduce the unfair trade in steel,
and to alleviate the United States balance of payments -
problems. To achieve all these things, the bill asserts
that it is necessary to limit the import of steel mill
products. to approximately 15 percent of apparent domestic
supply for at least a five-year period.
In order to equitably restrict the import of steel to
approximately 15 percent of apparent domestic supply, the
annual importation of each steel mill product category is to
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be limited on the basis of adjusted average import
penetration levels for the years 1979, 1980, and 1981. The
product categories are relatively detailed and include such
items as rail and track accessories, wheels and axles, bar
shapes under three inches, standard pipe, bale ties,
galvanized wire fence, and cold rolled sheet steel. In all,
36 categories of carbon and alloy steel articles are listed,
together with ten specialty steel products. The Secretary
of Commerce is required to allocate global product
limitations among foreign countries. The Secretary is to be
guided by: relevant provisions of the United States-European
Community arrangement dated October 21, 1982, findings of
unfair trade practices with respect to steel mill products,
and such other considerations as appropriate.
Within 60 days after the effective date of the Act, and
on each October 1st thereafter, the Secretary of Commerce
is to determine the expected apparent domestic supply in
each steel mill product category for the next succeeding
calendar year. The determination would be published in the
Federal Register. In January, April, and July, the
determination would be revised and adjustments to the
tonnage of each steel mill product category made, stating
the amount permitted to be imported by each country, group
of countries, or area. Thus, the intent of the Act is a
quantitative restriction of steel mill products which
ensures the entry of steel products in each category to be
equalized, taking into account historical and seasonal
variations.
If the aggregate quantity of any product category
exceeds the allocation by more than 10 percent in any two
consecutive quarters, additional quantitative restrictions
would be imposed to achieve the required equalization.
Nothing in the Act, however, is intended to result in
material changes to historical patterns with respect to the
regional distribution of imports of steel into the United
States or the proportion of imports in any category of steel
mill products.
Within 90 days of enactment, the Secretary of Commerce
is required to determine whether companies in the steel
industry have plans to utilize substantially all the cash
flow from the steel sector for reinvestment in, and
modernization of, the steel sector. If such plans do not
exist, the quantitative restrictions are to be suspended
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until they are formulated. Therefore, the Secretary is
expected to monitor steel sector investments made and
announced by the steel industry, and on each anniversary of
the Secretary's initial determination he shall evaluate
whether the companies in the steel industry, taken as a
whole, have substantially utilized all of the cash flow from
the steel sector for reinvestment in the steel sector
itself. If substantially less investment is occurring, and
the level of investment is not demonstrably justified by
adverse financial conditions, the quantitative limitations
may be modified or suspended.
If steel consumers assert that domestic producers are
unable to supply domestic demand, the Secretary shall
examine the supply and demand situations for the specific
product category. If domestic producers are in fact unable
to meet domestic demand, additional tonnage of such
articles, equal to the estimated shortfall, would be added
to the amount permitted.
The importation of certain fabricated steel products
will also be monitored. Whenever the Secretary of Commerce
has reason to believe that fabricated steel mill products
are being, or are likely to be, imported into the United
States in such quantities as to render, or tend to render,
the objectives of this Act ineffective, he shall so advise
the President. The President shall request the United _
States International Trade Commission to initiate an
investigation to determine the facts. In the case of an
affirmative determination by the ITC, the President is
authorized to impose import surcharges or such quantitative
limitations on any articles of fabricated steel mill
products as may be necessary. The specific fabricated steel
mill products include 15 categories, consisting of such
items as structural shapes, sashes and frames, fence or sign
posts, and bolts, nuts, and rivets.
The aggregate quantity of iron ore to be imported would
also be subject to quantitative restrictions with the amount
to be imported not to exceed one-fourth of the expected
apparent domestic supply. However, attempts are to be made
to accommodate the requirements of individual steel mills
which have traditionally been dependent upon imported iron
ore. Enforcement provisions of the Act would be carried out
by the Secretary of Commerce and the Secretary of the
Treasury.
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The Act would automatically terminate after four years
unless the President determines that it should be extended
for an additional three years.
OBJECTIONS
The provisions of this bill are directly contrary to
the stated policy of this Administration concerning the
preservation of free trade. The bill represents an example
of the most egregious form of trade interference while
failing to hold out any hope of significant net economic
benefits which might make enduring the economic distortions
here involved worthwhile.
Some of the problems involved in imposing quantitative
restrictions are evident from the provisions contained in
the bill. There is, for example, a variety of steel mill
products imported into the United States which come from
numerous countries and areas of the world, and applying
quantitative restrictions on a strictly neutral basis would
constitute an administrative headache. Moreover, even with
the flexibility built into the Act, the likelihood of the
United States importing steel from new producers would be
reduced because even highly efficient new producers would
face an administrative hurdle in obtaining a share of the
fixed U.S. market.
The provisions pertaining to enhanced investment in the
steel industry are similarly troublesome. The Federal
Government would be put in a position of judging the
adequacy of the investment plans of the industry as a whole,
and if found to be inadequate, would be confronted with the
need to make a judgment to suspend the limitations. The
political implications of such an eventuality are
nightmarish to contemplate, as it would involve judging the
adequacy of investment against prevailing economic
conditions within the context of a commitment by the Federal
Government to help the domestic steel industry.
The interrelated character of steel mill products with
fabricated metal items, and steel inputs, necessitates
further provisions to minimize the distortions which would
be caused in related sectors. What these provisions serve
to point up is that the steel industry does not exist in a
vacuum, and intervention in such a key sector is sure to
have important consequences in other parts of the economy.
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The imposition of quantitative restrictions must be
recognized as having dubious appeal at the macroeconomic
level. While employment may increase in the steel industry,
it is highly likely that overall employment will be driven
down because prices of steel will rise and have an adverse
impact on steel consuming firms.
Finally, the possibility of trade retaliation makes the
attainment of balance of payments improvements
problematic.
OTHER OBJECTIONS
Assuming the bill is enacted as proposed, the
Department does not have the manpower to administer it. For
example, personnel (trained or otherwise)'are not available
to analyze the enhanced entry documents, to determine the
category of imports, and to complete the paperwork required
so that imported goods can be moved. Additionally, the
administrative function is made more burdensome through the
quarterly revision of quotas and the reports required to be
made to the Department of Commerce.
SUMMARY
For the reasons stated, the Department opposes the -
enactment of S. 2380 for both policy and administrative
considerations.
The Office of Management and Budget has advised that
there is no objection from the standpoint of the Administra-
tion's program to the submission of this report to your
Committee.
Sincerely yours,
Deputy General Counsel
The Honorable
Robert J. Dole, Chairman
Committee on Finance
United States Senate
Washington, D.C. 20510
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