WHY THE UNITED STATES NEEDS MEXICAN CEMENT

WHY THE UNITED STATES NEEDS MEXICAN CEMENT

After reviewing initial filings presented by interested parties, the U.S. International Trade Commission voted unanimously Nov. 4 to conduct a full sunset review of the decade-old anti-dumping order against cement from Mexico.

If the ITC determines material injury is not likely to recur in the foreseeable future, the anti-dumping order will be revoked, bringing an end to duties next year.A factual basis for an ITC revocation decision emerged not long ago in New Orleans, where the world cement industry gathered to review the current fortunes and future prospects of the industry, particularly in the United States and Latin America.

Among the many private and public-sector commentators, a strong consensus developed that U.S. producers are enjoying record capacity utilization, sales and profit.

Most important, the view is that this positive picture will continue whether or not anti-dumping duties on Mexican cement are removed next year.

Why? Because the structure of the U.S. industry and market makes the duties essentially irrelevant to U.S. producers' performance.

Consider the following facts presented at the New Orleans meeting:

* U.S. cement producers (mostly multinationals headquartered outside the United States) are realizing record profit, despite record levels of imports.

* Significant cement imports and record U.S. producers' profit coexist because the United States is not self-sufficient in cement. Of the 100 million tons needed next year, about 25 percent must be imported.

* This ''high U.S. producers' profits, significant imports'' reality will be sustained because it is the U.S. producers, largely, who now own or control cement import terminals and set the prices of the imports.

* Future U.S. producers' productivity and profit also will be assured due to a structural change in U.S. market demand. In other words, increased infrastructure projects, guaranteed through TEA-21 and other federal funding, mean less reliance on residential construction.

Two additional signals that indicate duties may end appeared after the New Orleans conference.

First, on Oct. 11, Southdown Inc., long the leader of the ''Southern Tier'' U.S. producers favoring duties on Mexican cement, announced it was withdrawing its support for continuation of the tariffs.

In publicizing its decision, Southdown cited the ''robust financial health of the cement industry and the fact that imported cement over the past several years has played a largely supplemental role in the market.'' Southdown also explained that it had just acquired control of additional import terminals in Georgia and Alabama.

Second, on Nov. 2, Harris County, Texas, home to the city of Houston and Southdown Inc., passed a resolution ''that continuation of the anti-dumping order on imports of cement from Mexico threatens the economic interests of the county, its businesses and its workers.'' The county commissioners asked the ITC to revoke the anti-dumping order.

Notwithstanding the facts of the current market, Greg Mastel (''Hit by a load of dumped cement from Mexico,'' opinion column, Nov. 12, Page 9) offers a theory supporting the need for U.S. protectionism.

Mastel suggests that duties must remain in place because: Cement priced higher in Mexico than when sold in the United States is anti-competitive; duties prevent the Mexican cement industry from taking a ''mercantilist'' approach to the U.S. market; and duties permit U.S. producers to expand their capacity to meet demand.

Incorrect information inevitably leads to invalid conclusions.

There is an alternate scenario. First, the Mexican cement market is not controlled by any single company or group of companies. Under the North American Free Trade Agreement, import duties are zero. There are no barriers to foreign investment.

Therefore, any limitation on any U.S. cement producer would be self-imposed.

There is considerable foreign investment in the Mexican cement industry. For example, Mexico's second-largest cement producer is Swiss-owned.

Second, imports of cement from Mexico are sold in the United States at U.S. market prices, not at prices that undersell the market.

To contend that U.S. producers and their prices are hurt by imports from Mexico is not supported by evidence from completed sales in the U.S. market. The ITC will base its sunset review upon matters of fact.

Third, U.S. producers relevant to this case, those in the Southern Tier states, have not added a single ton of new cement production capacity since the anti-dumping order was issued in 1990. If the duties are removed, imports from Mexico will displace imports from distant sources, like China, not U.S. cement.

Southern Tier producers favoring duties are selling all the cement they can produce, enjoying record profit and importing cement themselves to meet growing demand from increased federal infrastructure spending.

These favorable conditions will continue without the duties, if the duties end as scheduled next year.