99–006

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 107–437

DISAPPROVAL OF ACTION OF THE PRESIDENT UNDER

SECTION 203 OF THE TRADE ACT OF 1974

MAY 7, 2002.—Committed to the Committee of the Whole House on the State of the

Union and ordered to be printed

Mr. THOMAS, from the Committee on Ways and Means,

submitted the following

ADVERSE REPORT

together with

DISSENTING VIEWS

[To accompany H.J. Res. 84]

[Including cost estimate of the Congressional Budget Office]

The Committee on Ways and Means, to whom was referred the

joint resolution (H.J. Res. 84) disapproving the action taken by the

President under section 203 of the Trade Act of 1974 transmitted

to the Congress on March 5, 2002, having considered the same, report unfavorably thereon without amendment and recommend that

the joint resolution do not pass.

I. INTRODUCTION

A. PURPOSE AND SUMMARY

House Joint Resolution 84 disapproves the action taken by the

President under section 203 of the Trade Act of 1974 regarding

steel imports, which was transmitted to Congress on March 5,

2002. The effect of the resolution is to enact instead the remedy

recommendations of the U.S. International Trade Commission

(ITC) transmitted to the President on December 19, 2001.

B. BACKGROUND

On June 22, 2001, USTR Robert Zoellick requested the ITC to

initiate a section 201 investigation of the effect of steel imports on

the U.S. steel industry. The request covered four broad categories

of steel products: certain carbon and alloy flat products, certain
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carbon and alloy long products, certain carbon and alloy pipe and

tube, and certain stainless steel and alloy tool steel products.

For purposes of its investigation, the ITC divided steel imports

into 33 product categories. On October 22, 2001, the ITC made an

affirmative determination of injury for 12 of these product categories, finding that the products were being imported into the

United States in such increased quantities that they are a substantial cause of serious injury or threat of serious injury to the U.S.

industry. In addition, the ITC was evenly divided in its determinations for four product categories and made negative determinations

for 17 product categories. In cases where the ITC was evenly divided, both determinations were forwarded to the President, who

may consider either determination as the ITC’s determination (section 330(d)(1) of the Tariff Act of 1930). The imported products covered by the ITC’s affirmative and evenly divided determinations accounted in the year 2000 for 27 million tons of steel, valued at

$10.7 billion (74 percent of the imports under investigation).

On December 7, 2001, the ITC announced the recommendations

and views on the remedies regarding steel. According to section

202(e)(6) of the Trade Act of 1974, only Commissioners who made

affirmative injury determinations for a product are eligible to recommend remedies for that product. On December 19, 2001, the ITC

transmitted to the President its remedy recommendations.

Section 203 provides that the President, not the ITC, makes the

final decision whether to provide relief to the U.S. industry and the

type and amount of relief. On March 5, 2002, President Bush announced trade remedies for all products on which the ITC affirmatively determined or had an evenly divided determination that imports had caused substantial injury except two specialty categories

(tool steel and stainless steel flanges and fittings). The President’s

remedies were imposed as of March 20, 2002, and are effective for

three years and one day.

C. LEGISLATIVE HISTORY

Committee action

House Joint Resolution 84 was introduced on March 7, 2002, by

Mr. Jefferson to disapprove the action taken by the President

under section 203 of the Trade Act of 1974 regarding steel imports,

which was transmitted to Congress on March 5, 2002. The resolution was referred to the Committee on Ways and Means. On April

24, 2002, the Committee on Ways and Means ordered House Joint

Resolution 84 reported adversely without amendment to the House

of Representatives by a voice vote with a quorum present.

Legislative hearing

No legislative hearing was held.

II. EXPLANATION OF THE RESOLUTION

Present law

Title II of the Trade Act of 1974 authorizes safeguard actions to

be taken under certain circumstances and sets forth applicable procedures.
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In a section 201 investigation, the U.S. International Trade Commission (ITC) determines whether an article is being imported in

such increased quantities that it is a substantial cause of serious

injury, or threat thereof, to the U.S. industry producing an article

like or directly competitive with the imported article (section

202(b)). After the ITC makes an affirmative or evenly decided injury determination, the ITC then recommends to the President relief that would prevent or remedy the injury and facilitate industry

adjustment to import competition. The President, not the ITC,

makes the final decision whether to provide relief to the U.S. industry and the type and amount of relief (section 203).

Section 203(c) states that if the President’s remedy action differs

from the ITC’s remedy recommendation, the Congress may enact a

joint resolution within 90 days to disapprove the President’s remedy and instead enact the ITC’s remedy.

Explanation of resolution

House Joint Resolution 84 states that Congress disapproves the

action taken by the President under section 203 of the Trade Act

of 1974 regarding steel imports, which was transmitted to Congress

on March 5, 2002. The effect of the resolution is to enact instead

the remedy recommendations of the ITC transmitted to the President on December 19, 2001.

Reasons for Committee action

The Committee on Ways and Means reports House Joint Resolution 84 adversely because the Members believe the President’s remedy is better tailored than the recommendations proposed by the

ITC to provide relief to the steel industry while minimizing the

negative impact on the rest of the economy. The President’s remedy

acknowledges that the U.S. industry is not homogenous, and it provides the segments of the industry that have already restructured

with the flexibility they need to continue to operate.

The President’s remedy rewards America’s Free Trade Agreement (FTA) partners (Canada, Israel, Jordan, and Mexico) for their

commitments to free trade by excluding them from the relief and

excludes those developing countries accounting for a very small

share of the U.S. market.

The Committee notes that the President made his determination

after a thorough investigation by the ITC which followed World

Trade Organization (WTO) rules on safeguard measures. This is in

direct contradiction to the actions by the European Union (EU)

when it implemented its own provisional safeguard protections on

steel in March 2002 without conducting any investigation. Moreover, Committee Members are very concerned about the EU’s contention that it can retaliate against the United States prior to an

adverse ruling by the WTO.

Effective date

If a joint resolution is enacted, section 203(d)(2) of the Trade Act

of 1974 provides that the President shall proclaim the remedy recommendations of the ITC within 30 days after enactment.
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III. VOTE OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of the

House of Representatives, the following statement is made concerning the votes of the Committee in its consideration of House

Joint Resolution 84.

MOTION TO REPORT THE RESOLUTION

House Joint Resolution 84 was ordered reported adversely without amendment by a voice vote with a quorum present.

IV. BUDGET EFFECTS OF THE BILL

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d)(2) of rule XIII of the Rules of the

House of Representatives, the following statement is made concerning the effects on the budget of House Joint Resolution 84, as

reported: The Committee agrees with the estimate prepared by the

Congressional Budget Office (CBO), which is included below.

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES

In compliance with subdivision 3(c)(2) of rule XIII of the Rules

of the House of Representatives, the Committee states that House

Joint Resolution 84 does not involve any new budget authority or

tax expenditures.

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the

House of Representatives, requiring a cost estimate prepared by

the Congressional Budget Office, the following report prepared by

CBO is provided.

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, May 6, 2002.

Hon. WILLIAM ‘‘BILL’’ M. THOMAS,

Chairman, Committee on Ways and Means,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.J. Res. 84, disapproving the

action taken by the President under section 203 of the Trade Act

of 1974 transmitted to the Congress on March 5, 2002.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Erin Whitaker (for revenues), and Lauren Marks (for private-sector mandates).

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.
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H.J. Res. 84—Disapproving the action taken by the President under

section 203 of the Trade Act of 1974 transmitted to the Congress

on March 5, 2002

Summary: Under the Trade Act of 1974, the President may proclaim that additional tariffs, quotas, or other actions be imposed on

certain articles if the International Trade Commission (ITC) determines that the import of such articles causes serious injury to a domestic industry. However, the President may proclaim that different remedies be imposed than those recommended by the ITC in

its report. On March 5, 2002, President Bush transmitted to the

Congress his decision to raise tariffs on certain steel imports from

March 20, 2002, through March 20, 2005. H.J. Res. 84 would disapprove the President’s action. This resolution would, if enacted,

replace the remedies imposed by the President with the remedies

recommended by the ITC. CBO estimates that altering these remedies would reduce revenues by $80 million in 2002, and increase

revenues by $93 million over the 2002–2006 period. Since adopting

this resolution would affect receipts, pay-as-you-go procedures

would apply.

The bill contains no intergovernmental mandates as defined in

the Unfunded Mandates Reform Act (UMRA) and would impose no

costs on state, local, or tribal governments. H.J. Res. 84 would impose a private-sector mandate on importers of steel that would be

subject to higher tariffs. Although the amount paid by importers

would be lower compared to current law in the first three years

that the new system of tariffs is in effect, CBO estimates that the

net increased costs to importers would total about $300 million in

fiscal year 2006. That amount exceeds the threshold for private-sector mandates established in UMRA ($115 million in 2002, adjusted

annually for inflation).

Estimated cost to the Federal Government: The estimated budgetary impact of H.J. Res. 84 is shown in the following table.

By fiscal year, in millions of dollars—

2002 2003 2004 2005 2006 2007

CHANGES IN REVENUES

Estimated Revenues ................................................................................. ¥80 ¥81 ¥92 52 294 0

Basis of estimate: Under the Administration’s steel action, tariffs

on most U.S. imports of steel were increased for the period between

March 20, 2002, and March 20, 2005. Tariffs were phased in for

product groupings under several schedules, with the greatest tariff

increase occurring between March 20, 2002, and March 20, 2003.

In certain cases, products would be subject to tariff-rate quotas,

under which products would not be subject to higher tariffs until

a certain quantity of imports had entered the United States. Under

the Administration’s action, imports generally would enter with

duty rates as in current law if such imports were from Mexico,

Canada, Israel, Jordan, countries receiving Carribean Basin Economic Recovery Act (CBERA) treatment, or from countries who had

received Generalized System of Preferences (GSP) treatment.

Under the ITC recommendation, as submitted on December 19,

2001, tariffs on most U.S. imports of steel would be increased for

four years rather than three, with most product schedules including lower tariff increases for the first three years than under the
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Administration’s action. The ITC recommendation also included

more products that would be subject to tariff-rate quotas. In certain

cases, imports from countries not subject to the Administration tariff increases would be subject to the tariff increases under ITC recommendations. Based on information from the ITC, the United

States Trade Representative, and other trade sources, CBO estimates that the replacement of Administration steel remedies with

those recommended by the ITC would reduce revenues by about

$80 million in 2002, and increase revenues by $93 million over the

2002–2006 period, net of income and payroll tax offsets. This estimate includes the effects of increased (decreased) imports from

trading partners that would result from the reduced (increased)

prices of imported products in the U.S.—reflecting the lower (higher) tariff rates relative to the Administration action—and has been

estimated based on the expected substitution between U.S. steel

products and imports from trading partners.

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit Control Act sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. The net changes in

governmental receipts that are subject to pay-as-you-go procedures

are shown in the following table. For the purposes of enforcing payas-you-go procedures, only the effects through 2006 are counted.

By fiscal year, in millions of dollars—

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Changes in outlays ............................................. Not applicable

Changes in receipts ........................................... ¥80 ¥81 ¥92 52 294 0 0 0 0 0 0

Estimated impact on state, local, and tribal governments: H.J.

Res. 84 contains no intergovernmental mandates as defined in

UMRA and would impose no costs on state, local, or tribal governments.

Estimated impact on the private sector: H.J. Res. 84 would impose a private-sector mandate on importers of steel and steel products that would be subject to higher tariffs. Although the amount

paid by importers would be lower compared to current law in the

first three years that the new system of tariffs is in effect, CBO estimates that the net increased costs to importers would total about

$300 million in fiscal year 2006. That amount exceeds the threshold for private-sector mandates established in UMRA ($115 million

in 2002, adjusted annually for inflation).

Estimate prepared by: Federal Costs: Erin Whitaker; Impact on

the Private Sector: Lauren Marks; and Impact on State, Local, and

Tribal Governments: Elyse Goldman.

Estimate approved by: Roberton Williams, Deputy Assistant Director for Tax Analysis.

V. OTHER MATTERS REQUIRED TO BE DISCUSSED

UNDER THE RULES OF THE HOUSE

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the

House of Representatives (relating to oversight findings), the Committee believes, based on a comparison of the remedy actions proposed by the President and the ITC, that the President’s remedy
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is preferred and disapproving such action by enacting House Joint

Resolution 84 would be unwise and more harmful to the economy.

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the

House of Representatives, the Committee advises that H.J. Res. 84

has no general performance goals or objectives.

C. CONSTITUTIONAL AUTHORITY STATEMENT

With respect to clause 3(d)(1) of rule XIII of the Rules of the

House of Representatives, relating to Constitutional Authority, the

Committee states that the Committee’s action in reporting the bill

is derived from Article I of the Constitution, Section 8 (‘‘The Congress shall have power to lay and collect taxes, duties, imposts and

excises, to pay the debts and to provide for * * * the general Welfare of the United States * * *’’).
(8)

VI. DISSENTING VIEW OF HON. WILLIAM J. JEFFERSON

Conditions in the US steel industry are difficult. There is a need

to do something. The critical issue is whether a 30% or even a 20%

tariff is the right decision. The answer must be a resounding no.

The President’s decision is an economically indefensible, politically

driven, WTO-inconsistent decision that has, in the short span of 6

weeks, damaged relations with our key trading partners; increased

taxes on consumers; and threatened hundreds of thousands of jobs

across the country. Steel imports have declined steadily over the

past four years and the problems with the domestic steel industry

are primarily internal.

The President’s action simply does not meet the strict standard

for applying safeguards. Better remedies would include global negotiations to reduce steel overcapacity. (At the very least, setting

quotas at historic levels would protect the domestic steel industry

against import surges).

On several fronts, the President’s action on the section 201 steel

investigation is unsupportable.

The Decision is Economically Indefensible and Politically Driven

The President’s decision is not supported by any mainstream

economist. Even senior Bush Administration economic advisers

such as the Treasury Secretary and the Chairman of the National

Economic Council did not support the imposition of tariffs against

steel imports. Ambassador Zoellick, you may recall, initially expressed skepticism about the tariffs but later adjusted his views.

The bottom line is that the President’s action is economically indefensible. It was unadulterated election year politicking. The

Washington Post’s David Broder had it exactly right when he described the President’s decision as follows: ‘‘Bush managed to rise above principle to please industry and

workers in two * * * states, Ohio and Pennsylvania. His deviation

from his avowed free-trade beliefs was described in a Wall Street

Journal news story—not an editorial—as ‘the most dramatically

protectionist step of any president in decades.’ ’’ Commentator George Will described the tariffs as ‘‘an $8 billion

contribution coerced from manufacturers and consumers of steel

products, for the benefit of about six Republican congressional candidates in steel-producing districts, and for Bush’s re-election campaign.’’

The President’s Decision Constitutes an Enormous Tax on American

Consumers

President Bush has been a forceful advocate of tax breaks. ‘‘Tax

relief for American workers and businesses’’ has been a key component of this Administration’s agenda. Ironically, his decision constitutes one of the biggest tax increases that our nation has seen
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in years. In a Washington Post op/ed, George Will describes the

steel tariffs as ‘‘new taxes on American consumers—approaching

$1 billion annually just on the purchasers of cars and trucks.’’

Beyond the pain of imposing a billion dollars in new taxes on

American consumers, these tariffs have already resulted in higher

prices for products manufactured by a broad range of steel-consuming industries. Invariably, these higher costs will be passed on

to average American consumers of products such as refrigerators,

dishwashers and microwave ovens. Here are a few examples:

• Domestic steelmakers have begun to ration steel and increase

prices in response to demand surges. One major domestic

steelmaker has already announced price increases of $50 per ton

for hot-rolled steel and $70 ton for coated steel.

• A Chicago-based auto parts manufacturer has reported a 15%

increase in stainless steel prices.

• As of April 1, an Ohio-based manufacturer of cryogenic containers has applied a surcharge of 8% to 18% on several of its products.

At a time when our nation is recovering from a recession, the

steel tariffs have the potential of plunging us back into recession.

Steel Tariffs Will Trigger Job Losses Nationwide

Some have argued that the President’s steel measures will eliminate 10 jobs in steel-consuming industries for every steel-making

job that is saved. This is not a tradeoff that our nation can accept.

The national maritime industry will be harshly affected. In the

Port of New Orleans, for example, employment for stevedores has

already dropped by 35%. Barge traffic in ports throughout the nation has begun to drop. One shipping executive in New Orleans expects to clear only 15 barges during the month of April. His average volume is 40 to 50 barges.

The President’s Action Has Created Tension With Our Trading

Partners and Triggered WTO Complaints

The President’s decision has significantly exacerbated transatlantic trade tensions. The EU announced temporary tariff measures—ranging from 14.9% to 26%—to protect the European steel

industry from a flood of diverted imports resulting from the President’s decision. The EU estimates that it will incur losses of $2.4

billion on steel exports to the U.S. This situation is compounded by

the fact that the EU has applied to the WTO for authority to impose $4 billion in sanctions on our country as compensation for tax

breaks that are provided to U.S. exporters.

• The European Commission has just proposed a set of new tariffs (some of which are as high as 100%) on a range of U.S. goods

including clothing, citrus fruit, gaming tables, nuts, footwear and

cardboard boxes. The WTO will have to be notified by May 17.

Once this happens, the tariffs will go into effect on June 18.

• The products for which new tariffs were imposed were selected

for maximum domestic political impact in the United States. Citrus

fruit exports are critically important to the state of Florida; we all

know of steel’s importance to West Virginia, Pennsylvania and

Ohio. Textile and footwear exports are important to the Carolinas.
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• Russia has begun to restrict imports of frozen chickens from

the US. • China, New Zealand, Korea, Venezuela, Japan and Norway

have filed complaints with the World Trade organization. • Later this year, the US and Brazil will assume joint chairmanship of the FTAA negotiations. Brazil’s presidential elections are

scheduled in October. There is evidence that the President’s decision has strengthened the hand of protectionist candidates running

for office. Clearly, during an election year, the President’s decision

has the potential for triggering delays in the FTAA talks.

The U.S. Steel Industry and WTO Safeguards

The WTO has very strict definitions as to how safeguards should

be applied. For example, safeguards can be justified when there are

sudden, recent and significant increases in imports. However, as

the distinguished Chairman of the Trade Subcommittee noted in a

recent interview, ‘‘It (the President’s decision on steel) was unwarranted because the steel imports have been declining every years

since 1998.’’ In addition, WTO safeguards should not be applied when an industry’s problems are primarily internal. In the case of the steel industry, it is abundantly clear that this is the case. Decades of inefficiency in the domestic U.S. steel industry have created a situation

where steel companies are saddled with nearly $10 billion in unfunded pensions and health benefits for 600,000 steel workers (socalled legacy costs). The President is unwilling to pay these costs.

Instead, the President imposes a 30% tariff on steel imports that

have steadily declined over the past four years in an effort to prop

up an industry that is unwilling to make the hard choices to increase its competitiveness. It is not steel imports that have hurt

the U.S. steel industry. The wounds of this industry are largely

self-inflicted.

I do not believe that it is in our national economic interest to

prop up a highly inefficient industry at the expense of dozens of

other more competitive industries and hundreds of thousands of

jobs in the United States and around the world. Sacrificing the

global economy at the altar of political expediency by imposing tariffs of 30% or 20% is not the solution to the woes of the U.S. steel

industry. This Committee—indeed the entire Congress—has an obligation to do the right thing and to urge the President to change

his decision. The economic well-being of millions of Americans is at

stake.

I respectfully dissent and oppose the Committee’s decision to adversely report H.J. Res. 84.

WILLIAM J. JEFFERSON.

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