How to Help Slumping Steel

Administration plans import curbs, other aid

Under a relentless assault from cut-rate foreign competitors, the nation's steel industry has suffered through a nightmarish year. Steel imports have increased about 50% just since 1975 and in some months this year have captured 20% of the U.S. market. Combined with lackluster domestic demand, that foreign invasion has caused shutdowns of old mills, forcing more than 60,000 workers out of jobs in the past year. Steel executives, union men and a new caucus of Congressmen from steel-producing areas have brought heavy pressure on the Carter Administration to do something. The President's first response was to invite steelmen to file complaints against the "dumping" of foreign metal--that is, selling it below cost. The trouble is that though dumping violates both U.S. law and international trade rules, it is difficult to prove.

Last week the Administration seemed ready to try a new tack and push for a six-point program of aid to the domestic industry. Treasury Under Secretary Anthony Solomon briefed industry executives and members of the congressional steel caucus on the plan that he will present to the President this week, and the main outlines--though not all the details --promptly leaked.

The centerpiece of the program is a proposal to establish so-called reference prices--in effect, minimum permitted prices--on 40 to 60 main categories of imported steel. Any metal entering the U.S. at quotes below the reference prices would be subjected to heavy antidumping tariffs. Most likely, the prices would be pegged to Japanese steel-production costs --and so the reference-price system might permit some continued dumping by European mills, whose costs are higher than those of the Japanese makers. Solomon pledged to have the reference prices set by year's end and to begin enforcement by Feb. 1.

The program's other components:

> Low-cost Government loans to domestic mills to enable them to improve plants and buy efficient new equipment. That would be similar to the help that governments in Europe and Japan extend to their steel industries.

> Faster tax write-offs for aging equipment that would increase the industry's cash flow and provide more capital for modernization. If approved by Congress, the measure would benefit all industries. At present, steel assets generally can be depreciated over 14 1/2years; Solomon would cut that period to twelve years.

> So-far unspecified tax breaks for mills investing in antipollution equipment. This proposal would be included in the tax plan that Carter will send to Congress next year and would apply to all heavy industry. But the stiff cost of installing air-and water-purifying equipment required by the Government has been a particular sore point to steelmen.

> A rejiggering of freight rates by the Interstate Commerce Commission to lower the cost of shipping steel by railroad. The aim is to enable steel produced in the Midwest to compete more efficiently with foreign steel, much of which is sold in coastal areas close to ports of entry.

> An easing of antitrust regulations that would permit small-and medium-size steel companies to form joint ventures to develop advanced technology--for example, designing new rolling mills or coke ovens.

The initial reaction by steelmen to the proposals was cautious, mostly because they are waiting to see just what floor prices the Administration establishes for imports. A Bethlehem Steel executive asserts that U.S. mills will benefit only "if the reference-price levels are set no more than 5% below the going U.S. price." Andrew Staursky, a spokesman for U.S. Steel, adds that "if the prices are predicated on the costs of the most efficient Japanese unit producing a given product, then they are not going to help much." Early this year Japanese mills were selling in the U.S. at prices that American producers charged averaged 38% below cost; European mills, according to one dumping complaint, sold sheets for as much as 47% below cost.

Wall Street financial analysts are even more dubious. Some believe that the reference prices, will require an unwieldy bureaucracy to administer (Solomon estimates 80 additional inspectors) and will be unenforceable anyway. They are also worried that Government regulation of prices on 20% of the metal used in the U.S. will be a big step toward effective price control over the whole industry.

Steelmen are happier with other parts of the plan. William Verity, chairman of Armco Steel, predicts that "the proposals for faster depreciation and pollution-control write-offs will be warmly received." And an official of Bethlehem--which in the third quarter suffered a loss of $477 million, the largest ever reported by an American company--rather wistfully commented that "anything in the way of tax breaks, quicker write-offs, depreciation, just about anything, will help."

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