Tuesday, December 26, 2006

Carmakers win trade battle

Friday, December 15, 2006
Carmakers win trade battle
Lifting of steel tariffs could mean bigger profits
David Shepardson / Detroit News Washington Bureau

WASHINGTON -- Automakers won a surprise victory Thursday as the U.S. International Trade Commission lifted most of the 13-year-old tariffs on imports of a high-grade steel used in cars -- a move that should boost ailing Detroit automakers by lowering prices. In a 4-2 vote, the commission lifted tariffs on flat-rolled corrosion-resistant steel from Canada, France, Australia and Japan, but sided with the steel industry and kept them on imports from South Korea and Germany for another five years.

In an unusual display of solidarity, General Motors Corp., Ford Motor Co., DaimlerChrysler AG, Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. jointly worked to end the duties, which they argued had cost them more than $3 billion since 2003.

"This takes the cork out of the bottle," said Stephen E. Biegun, Ford's vice president for International Governmental Affairs, who noted the action will lead to a more competitive market.

"All of these duties are outdated and hurt American manufacturing competitiveness and U.S. jobs, while needlessly helping a steel industry that is now profitable and healthy," Biegun said.

Automakers make case

In making their case, automakers pointed to steel shortages in the United States and a 68 percent price increase over the past two years, fueled by tariffs as high as 35 percent on imports, depending on the country of origin.

Automakers also noted the 12 percent average profit of the largest steel companies after they underwent restructuring. In contrast, GM and Ford have been losing money and are cutting jobs and plants. Because of tight competition, automakers have been unable to pass on higher steel prices by raising vehicle prices.

The tariff rollbacks will especially help smaller auto parts makers, who have often faced shortages, forcing them to pay higher prices on the spot market.

Corrosion-resistant steel is primarily used in auto bodies, said Mark S. McConnell, a trade lawyer for the auto companies. "That's why cars don't rust the way they used to," he said.

In 1993, the commission, a quasi-federal U.S. agency that regulates trade, slapped anti-dumping duties on corrosion-resistant steel from the six countries to stop a flood of low-priced imports into the U.S. market that was driving prices so low U.S. steelmakers could not compete.

There are 160 U.S. tariffs on different types of steel, but corrosion-resistant steel is by far the most important to the auto industry, McConnell said.

The average automobile uses about 1,000 pounds of corrosion resistant steel for a per-vehicle cost of about $400. A 10 percent price cut could save the auto industry $850 million annually.

Ford buys about 5 million tons of steel worldwide each year, about 60 percent of it corrosion-resistant steel for U.S. operations. GM buys about 10 million tons.

Debate gets heated

The steel and auto industries have been in a war of words since an October trade commission hearing on whether to lift the duties, lashing out at each other in print, over the airwaves and in conference calls.

Steelmakers argued the tariffs are needed so they can remain competitive. They said a price cut would only marginally reduce the cost of building a car but could bankrupt steelmakers.

An ad-hoc industry group called "Stand Up for Steel" ran ads headlined "Don't Let America's Steelworkers Get Run Over by the Auto Companies." Automakers insisted they want a healthy steel industry and have no plans to significantly increase the amount of steel they import.

Charles Rice, a spokesman for U.S. Steel, said the industry likely will appeal the commission's ruling, and praised the decision to leave duties in place for South Korea and Germany.

The countries where tariffs on corrosion-resistant steel were lifted "said they have no interest in flooding the market," Rice said. "We're going to have to wait and see if they keep their word."

Steelmakers pointed to the fact that the United States imported 3.8 million tons of all types of steel in October, up 45 percent over 2005.

"It's not a fair playing field," Rice said. "We can't compete with the government of China. We're just asking for the trade laws on the books to be enforced."

Korean and German steel imports amount to about 2 percent of U.S. steel.

Forming a united front

Michigan Republicans praised the tariff rollbacks, while Democrats sidestepped the issue, likely because it pits two powerful labor unions against each other -- the United Auto Workers and the United Steelworkers.

"We did succeed in removing several significant protectionist policies that pit steelworkers against autoworkers," said U.S. Rep. Mike Rogers, R-Brighton. "Making the change will make it cheaper to build cars in Michigan."

The commission will issue a written opinion in January. The steel industry will then have 30 days to appeal to the U.S. Court of International Trade in New York.

Josephine Cooper, Toyota's global vice president and chief lobbyist in Washington, said the fact that all of the major automakers were on the same side made a "huge difference in the receptivity to our argument."

The united attack sent a strong signal that the tariffs had a major impact on all automakers, she said, and could spur a reconsideration of other tariffs, such as duties on Brazilian ethanol and auto parts such as bearings.

You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.

© Copyright 2006 The Detroit News. All rights reserved.


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