REVITALIZING THE STEEL INDUSTRY

The steel industry is an industry in crisis. Steel producers need to streamline and modernize but costs estimated at $14 billion are prohibitive. In addition, the U.S. steel industry is carrying $8 billion in debt.

While the industry has tried to finance capital improvements, imports have stormed the market. In 1984 imports controlled 28.9 percent of the U.S. steel market. Since that time, under the administration's voluntary restraint agreements, import penetration has been reduced to 22 percent. But the policy does not address the need to restructure the industry to make it more competitive.At the heart of the problem are global overcapacity in the industry, high production costs and financial constraints that have inhibited the industry's ability to restructure. Particularly striking is the excess capacity problem. In 1973, a peak year for domestic steel production, the United States manufactured 111.4 million tons of steel. In 1986 that figure was down to only 70.3 million tons of steel. Yet while production has plummeted, the industry's capacity, representing plant and equipment lying idle, has remained virtually unchanged.

Concern over this situation has led me to introduce the steel revitalization legislation in Congress. Steel production is vital to our national interest. Past policies of the federal government have contributed to the difficulties of the U.S. steel industry, while foreign steel makers have benefited considerably from their own governments' help. It is time for a temporary federal program, conditioned on the U.S. industry revitalizing itself, to help the domestic industry back on its feet.

My steel revitalization initiative is aimed at limiting foreign imports while the domestic steel industry cuts its excess capacity and modernizes its facilities. Unfortunately, in the last year, several major steel producers, including LTV Corp. and Wheeling-Pittsburgh, increased their earnings by filing for bankruptcy protection to escape their financial liabilities, including their obligations to pay pension benefits to retired workers.

My proposal will ensure that steelworker pensions are protected while our steel industry increases its earnings through higher sales, not by "dumping" its obligations to its past and present workers.

The Steel Revitalization Act features three essential provisions. First, the right to import steel to the United States would be auctioned off to the highest bidder, generating funds that would be used as incentives for domestic producers. Second, the program is conditional upon the steel industry modernizing, reducing its capacity, and fulfilling its commitments to past and present employees. And third, this legislation would be temporary, lasting five years with a phaseout starting in the sixth year.

The right to import foreign steel to the United States would be auctioned off by the U.S. Treasury, raising significant revenues for the federal government, which would be used in restructuring the industry. The bill places control of the auction process in the hands of U.S. importers, rather than with foreign manufacturers, thereby allowing U.S. companies to negotiate the highest bids.

This program would begin in October 1989, which would allow for the expiration of the administration's voluntary restraint agreements and would ensure a thorough review and preparation of the program by Congress and the administration.

The proposal calls for a five-year limit on foreign steel imports to 20.2 percent of the domestic steel market and would prevent any foreign producer

from gaining more than 5 percent of the domestic market share.

The U.S. Commerce Department would monitor steel imports in relation to imports' market share in each of the 37 categories of steel production as defined by the American Iron and Steel Institute. The Commerce Department would be empowered to limit imports in any category of steel to 33 percent of the domestic market.

By capping the import share in each category, we would ensure that the domestic industry maintains its capabilities in all production sectors.

An essential facet of this program is that it is temporary. A five-year, 20.2 percent quota program will ensure that the domestic industry move as quickly as possible toward modernization and an internationally competitive structure. Starting in the sixth year, the pro gram would be slowly phased out by 5 percent annual quota increases until it no longer has an impact on the domestic market.

By limiting the duration of the plan, we will maximize the prospects that domestic steel producers will use the five-year period during which the plan will be in effect to devise plans for restructuring and modernizing their operations.

To participate in the incentives program, domestic steel producers must submit a five-year restructuring plan to the Commerce Department that would accomplish the following: adequately fund pension, health-care, disability and retraining programs; eliminate excess capacity and modernize plants to internationally competitive standards. The Commerce Department, working with industry and union leaders, would implement the incentive program in a fashion that would not favor one domestic producer over another.

The task facing U.S. policy-makers is to maintain a viable steel industry in this nation that can meet our basic requirements for steel and to ensure the steel industry maintains its commitments to its past and present employees.

The Steel Revitalization Act provides a self-financing method for meeting this challenge, and it does so with the least amount of governmental intrusion on individual steel companies.

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