AAM urges Congress to reject anti-Section 232 legislation

The Alliance for American Manufacturing (AAM) wants United States lawmakers to reject the recently introduced Bicameral Congressional Trade Authority Act of 2019, arguing that it threatens steel and aluminium sector jobs and investment.

Rather than weakening available national security trade tools, Congress should reaffirm its support for a fair and level playing field and urge other countries in the strongest possible terms to confront their own, and China’s, protectionism,” AAM president Scott N. Paul said in a letter to Congress on Tuesday February 12.

The bill put forth by Senator Pat Toomey (Republican, Pennsylvania) and US Representatives Mike Gallagher (Republican, Wisconsin) “abandons Congress’ commitment to trade enforcement, an essential part of the ‘three-legged stool’ of US trade policy – alongside expansion and adjustment,” he added.

Specifically, Paul argued that congressional approval of the proposed bill would slow national security action and open the door to a surge in imported steel.

“The bill requires Congress to pass an approval resolution within 60 days for any Section 232 action to take effect, a burdensome obstacle that delays a national security trade action,” Paul said. “In the months that would pass between the announcement of a Section 232 action and congressional approval, domestic producers and American workers would face a massive surge of imports as foreign producers and importers race to stockpile product before tariffs could take effect.”

“This unrealistic process would only make matters worse and further deteriorate domestic production capabilities already determined to be at risk,” he added. “Congress delegated this authority to the executive branch knowing full well that the legislative process is not well suited to reacting to national security concerns with agility and speed.”

Paul also argued that the legislation’s efforts to retroactively terminate the Section 232 tariffs “endangers the substantial progress already being made to restore our domestic steel and aluminium production capabilities,” he said in the letter.

“The Section 232 action on steel and aluminium has provided the United States with its most significant negotiating leverage in years to force collective global action against China and others to curtail the industrial overcapacity that has put our national security at risk,” Paul said.

“However, the Toomey-Gallagher bill would effectively undermine these talks and put the [World Trade organization] and [Organization for Economic Cooperation & Development ] back in charge of finding a global solution – something that alluded them for years,” he added. “While these are well-meaning institutions, they lack the enforcement powers necessary to tackle major global trade challenges – ones that are putting our national security at risk.”

Industry response
Steel industry groups views on the proposed legislation varied.

“The administration’s trade actions and tax and regulatory reform policies, in addition to the strong economic climate enabled by those policies, have allowed the American steel industry to begin to recover after more than a decade of low capacity utilization and weaker earnings due to repeated surges in imports fueled by global steel overcapacity,” Thomas J. Gibson, president and chief executive officer of the American Iron and Steel Institute, said in a February 8 statement opposing the bill.

“But this recent progress will disappear and our steel industry will again suffer dire circumstances if the tariffs are prematurely terminated. The massive overcapacity in steel still exists globally. And China, in particular, is producing steel at record levels — exceeding one billion net tons in 2018. This means there is plenty of excess supply that will flood into our market but for the continuation of the Section 232 tariffs,” he added.

Meanwhile, John D. Foster, chairman of the American Institute for International Steel (AIIS), feels that “the initiative opposing Section 232 reform is a disservice to the many more thousands of steel-using companies and the men and women who work in them than are working in US steel mills, as well as to the multiple tens of thousands of maritime and retaliation-affected industries now suffering under the Section 232 regime,” he said  in response to AAM’s letter to Congress opposing the Bicameral Congressional Trade Authority Act of 2019.
“Thwarting quality and cost-competitive imports that benefit downstream manufacturers and American consumers is not the answer to achieving a nationally secure steel industry,” Foster said. “Rather, using the globally efficient technology already in place in parts of the US steel sector is the most effective and least trade-distorting way to reach this goal.”

To mitigate pressure from imported steel, the domestic industry must build globally competitive mini-mills and micro-mills – similar to the ones being constructed by Nucor in Florida and Missouri, he noted.

“In my opinion, that is what could truly level the playing field in a free and responsible market fashion and put the domestic industry on a more globally competitive footing,” Foster told Fastmarkets on February 13.

“We very much appreciate the important effort of Senators Toomey and [Virginia Democrat Mark] Warner [another backer of the bill] to restore the appropriate constitutional balance of authority between the legislative and executive branches of our government,” AIIS president Richard Chriss told Fastmarkets via email. “Congress has every right to be cautious about how it delegates its authority to the President with respect to unilateral trade actions. The Toomey-Warner bill is a timely and significant contribution to this debate.”

Separately, the AIIS filed a lawsuit last June challenging the constitutionality of the Section 232 tariffs. The group’s request for a three-judge panel to hear the case was granted by the Court of International Trade (CIT) in September, with oral arguments held in New York on December 19.

The AIIS is currently awaiting the CIT’s decision, Chriss said.

Fastmarkets’ daily US Midwest hot-rolled coil index stood at $34.28 per hundredweight ($685.60 per ton) on February 13, down by 5.3% from $36.21 per cwt at the beginning of the year and off by 25.2% from a nearly 10-year peak of $45.84 per cwt recorded in July of last year.