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On the united States side, the industry has recently moved into a position of quasi-permanent

  On the united States side, the industry has recently moved into a position of quasi-permanent employment for approximately for ty percent ...


On the united States side, the industry has recently moved into a position of quasi-permanent employment for approximately for ty percent of its employees. These forty percent (generally those with the most senior ity) are effectively protected against layoffs until the age of 62. The steelworkers' union promises to increase coverage in future negotiations until all workers are similarly protected. Specifically, the contract provides that: Effective January 1, 1978, an employee with 20 or more years of service as of his last day worked becomes eligible for a Rule of 65 pension if (1) he is off work because of a shutdown, extended layoff or disability, (2) his age plus service equals 6~ or more, and (3) his company fails to provide him with suitable long term employment. Because he -233- accrues age and service dur ing layoff or sickness (commonly called wcreepingW), a twentyyear employee who meets all of the require- mentsneed be only 41 years old when first laid off,

 or when his Sickness and Accident Benefits begin, to become eligible for a Rule of 65 pension. The amount of pension is calculated as it is for other pensions. Bowever, in addition to the pension amount, a Rule of 65 pensioner also draws the pension supplement which has been raised by the 1977 Settlement to $300 per month. This supplement is suspended should the retiree obtain sui table' ~órig term employment, but it is resumed if employment ends. Otherwise, the supplement continues until age 62 or such earlier time as the retiree becomes eligible for Social Secur ity. 81/ Thus, United States' steel labor costs cannot be viewed as completely var iable. It appears that, when one compares the Japanese contract labor and Japan's recession type unemployment compensation with the new permanent employment contract of the United States' steel industry, the labor costs for the Japanese 81/ Quoted from Steel Labor: Wõrkers of America, May, 1977, page 14 that: The Voice of the United Steelp. 15. It is stated there on Similarly, we have laid the foundation in this 1977 contract on which to build a lifetime security program for all steelworkers. This foundation consists of a series of greatly expanded benefits for 40 percent of the employees of the ten major steel companies--those with 20 or more years of service. In future negotiations we must increase the group of employees covered by the plan until all are protected. At the same time, we must work to increase the b~nefits provided by the plan until it fully meets the goal of lifetime job security. -234- are as variable as those in the United States. Moreover, the trend is for greater labor cost variability in Japan: usage of contract labor has been increasing dur ing the pastdecade~ especially in the modern plants which export to the U. S. and the newly ava i 1 able recess ion unemployment compensa t ion lower s the portion of fixed costs cyclically. Meanwhile, American steelworkers are moving in the direction of permanent employment. 82/ The major U.S. producers tend to be integrated backward .~ . into coal and iron ore ni~ning. Thus, when demand falls, producers in the United States cannot reduce raw materials costs proportionately due to the fixed costs of operating iron ore and coal mines. Generally, Japanese steel producers are not as integrated backwards into coal or iron ore production as the U.S. producers. In fact, Japan relies on raw material supplies which are heavily under foreign control. 83/ Japanese steel producers 82/ It should also be noted that labor costs amount to less tnan 15 percent of Japanese revenues, compared with over 35 percent for the United States. See Kawahito (13, p. 169) for estimates for the 1960' s. Kawahito's source was Tekko Shinbun Sha, Tekko Nenkan, 1968. According to the Japan Iron and Steel Federation in 1973, wages as a percentage of total sales were as follows: TOp five Japanese steel firms Four top steel firms in West Germany Eight top U.S. steel firms 12.3 percent 21.7 percent 36.6 percent. 83/ For detailed dat~ on comparative self sufficiency in iron ore see (11, p. 52), and chapter 2 for coal self-sufficiency. I , -235- purchase about 80 percent of their iron ore and coal through Japanese trading companies. The trading companies purchase their raw materials primarily through long-term_contra~ts, although short-term contracts and spot purchases are utilized as well (27, p. 2). Trading companies purchase iron ore on 12 to 15 year contracts. Yearly shipments can vary plus or minus 10 percent provided that a total quantity is taken over the life of a contract (27, p. 1, 2). 

Thus,' recession deliveries can be 20 percent less than boom deliveries under the contract. These contracts are staggered such that a rough ly proport ionate number expire each year. The expiring contracts represent costs which can be varied. Moreover, the raw materials costs of the steel producers are somewhat more variable than for the trading companies since steel producers do not necessarily purchase stocks of raw materials owned by trading companies. 84/ The Japanese steel producers, who are less integrated back to raw material~, may adjust their raw materials costs at least as read i ly as the U. S. producers. ~/ 84/ However, the greater variability obtained through utilizing trading companies should not be overemphasized. Long-term relationships between steel companies and trading companies imply that, one way or another, steel companies will have to pay for storage costs of raw materials. These costs represent a deterrent to having the trading company hold the raw materials. 85/ Raw materials costs amount to approximately two-thirds and four-tenths of total revenues for Japan and the United States, respectively; see (13, p. 169). -236- It is true that most major foreign producers are financed by a grea ter percentage of debt, for wh ich interes t obI iga t ions are fixed. 86/ However, even Japan, wh i ch has the highest debt-equity ratio, has interest payments accounting for less than six percent of its revenues. Moreover there is a quasifixed element to dividend payments as U.S. companies are loathe to suspend dividends. Thus, the difference in the share of fixed costs resulting from the financial'~tructure seems to be negligible and insufficient to be the driving force behind dumping.

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