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Overview of Impact of Imports Discussions by US producer

  Overview of Impact of Imports Discussions of structure are usually concerned with domestic firms, but foreign firms can also influence com...


 


Overview of Impact of Imports Discussions of structure are usually concerned with domestic firms, but foreign firms can also influence competitive conditions within an industry. Competition from imports has had a substantial impact on the steel industry. Table 2.24 indicates the relative importance of exports and imports to the u.s. steel industry. Prior to 1959, the United States was a substantial net exporter of steel mill products. Though imports were increasing during the late 1950's, in 1958 they amounted to only 1.7 million net tons, representing 2.9 percent of the .domestic market. In 1958, the United States exported 2.8 million net tons of steel. The first major foreign penetration of the U.S. market occurred in 1959, partly as a result of the steel strike which lasted 116 days. Domestic users of steel began ordering from foreign sources to assure themselves of steady deliveries and adequate supplies. U.S. exports dropped to 1.7 million net tons and imports surged to the unprecedented height of 4.4 million net tons. For the first time in the 20th century, the United States turned from a net exporter to a net importer of steel. The gap between imports,~nd exports rose steadily throughout the sixties. Apparent steel consumption taken by imports rose from 4.7 percent in 1960 to 16.7 percent in 1968. Since 1960, exports of steel by U.S. producers have fluctuated between about 2 million and 7 million tons per year. Another element of the import si tuation is the importance of foreign manufactured goods that contain large amounts of steel. Indirect trade in steel consists of trade in vehicles, machinery, and other equipment manufactured from steel. The importance of indirect trade in steel should be emphasized. During the period 1962-73, indirect imports increased from 1.2 million net tons to 5.2 million net tons. The United States' balance of indirect steel trade became negative in the late 1960's, and in 1973 reached a minus 1,257,000 tons of finished steel. ~/


Members of the domestic steel industry, acting individually and collectively, have sought to obtain relief from foreign competition in a number of ways. In 1967, the domestic steel industry, with the backing of the United Steelworkers of Amer ica, began a concerted effort to gain protectionist leg islation against foreign imports. The Senate Committee on Finance instructed its staff to undertake a study of the problems resulting from the expansion of impo~~s ~f steel mill products (28). Foreign steelmakers, recognizing the mounting pressure on the Government to provide some degree of protection, thwarteò a possible mandatory quota by agreeing to voluntary restraints to limit shipments to the United States. Voluntary Restraints The Department of State, acting under the direction of the Johnson administration, negotiated with the major steel producers of Japan and the European Community (who together accounted for 80 percent of total U.s. steel imports) threeyear Voluntary Restraint Agreements on steel exports to the U.S. The agreements were in the form of letters from the major western European steel producing nations and Japan (Japanese Iron and Steel Federation) promising to restrict their exports of steel to the U.S. These agreements, which took effect on January 1, 1969, provided for specific tonnage limits on ship- 'ments to the U.S., allowing for a five percent annual growth and a commitment to maintain generally the product mix and geographic distribution of shipments. -73- One of the objectives in negotiating the arrangements was to provide the domestic steel industry with an inter im in which to modernize its facilities so as to improve its competitiveness with foreign proå~cers anå thus avoid an inordinate U.S. dependence on foreign steel. According to the Amer ican Iron and Steel Institute, the steel industry has been spending over $1 billion a year since 1967 for modernization and expansion; and over the past 10 years, expenditures have tota'Iéd'$18.l billion. Capital expenditures for the U.S. steel industry were below the 1968 level throughout the 6-year per iod of voluntary restraints; however, capital expenditures for the other major countries were increasing. An unusual facet of the voluntary restraints is that they restricted the tonnage rather than the value of steel imports. The VRA induced importers to concentrate on higher value types of steel to maintain foreign exchange earnings while adher ing to the quantity limitations. Consequently, the composition of U.S. steel imports shifted to include an increasing proportion of high-val ue products, such as high-qual i ty and coated sheets and stainless and other specialty steels. Additionally, the door was left ajar for other producing nations to increase their exports to us despite the existence of the quotas. Shipments from non-quota countr ies increased to 4.2 mill ion net tons in 1971--50 percent more than the anticipated quantity of 2.8 million net tons. Table 2.27 shows how the voluntary i i limits compared with actual shipments from 1969 through 1974. 

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