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Bush Extends Steel Import Quotas

July 25, 1989

WASHINGTON (AP) _ President Bush said today he will extend steel import quotas against 29 countries in an effort to spur negotiations on ending unfair trade practices abroad.

He said he has directed U.S. Trade Representative Carla A. Hills to negotiate a 30-month extension of the voluntary restraint agreements that currently limit the countries involved to 18.4 percent of the U.S. market.

The quotas, first imposed by the Reagan administration in 1984, had been set to expire Sept. 30. They have limited steel imports from 29 countries, including Japan, South Korea, Brazil and the European Community, into the United States.

″I am taking this step to permit the negotiation of an international consensus to remove unfair trade practices and to provide more time for the industry to adjust and modernize,″ Bush said in a statement released by the White House.

A few days before last November’s election, Bush wrote a letter to Sen. John Heinz, R-Pa., pledging to renew the import quotas in some form.

Nevertheless, there was a major debate inside the Bush administration on whether to retain the quotas in any form in view of its strong free market philosophy.

In extending the voluntary agreements for a transitional period, Bush said, ″I am mindful of the need to improve the availabilituy of steel in the United States and to promote price competition.″

He said he was instructing the Department of Commerce to ″expedite and streamline″ a so-called short supply mechanism that allows U.S. steel users to bypass the quotas if the type of steel they need is in shortage.

Bush said that during ″this transition to an open market, the ceiling on imports from VRA (voluntary restraint agreement) countries will be increased at an annual rate of one percentage point.″

The increase in allowable imports ″will be allocated to countries that undertake and abide by disciplines to address trade-distorting practices,″ he said.

Bush said he has also directed Hills to seek to negotiate, through the Uruguay Round of Multilateral Trade Negotiations and other bilateral agreements an international consensus on how to end government subsidies of steel.

Bush said the extended quotas will end on March 31, 1992.

″Thereafter, U.S. steel producers, like other American industries, will continue to rely on domestic trade laws as an ultimate assurance against the effects of foreign unfair trade practices,″ he said.

″For decades, governments have supported their steel producers through subsidies and import restructions. Steel trade and the international trading system as a whole have suffered,″ said Bush.

″This self-defeating rivalry must end. I urge our trading partners to work with us to restore free and fair trade to world markets.″

U.S. steel manufacturers had lobbied intensely for an extension of the import quotas, which they maintain have helped rebuild an industry buffeted by huge losses in the early 1980s.

But some major steel customers, including Caterpillar Inc. and dozens of smaller companies, had lobbied with equal vigor against extending the quotas, which they charged had artifically driven up the price of the steel they buy.

They complained that the higher priced steel was forcing them to charge more for the products they make and impairing U.S. ability to compete in international markets.

The U.S. steel industry has become profitable again after reducing capacity and closing many older, inefficient mills. Advocates of the import quotas contended the U.S. mills needed more time to rebuild without unfettered competition from foreign countries that heavily subsidize steel exports.

The original Reagan quotas set annual limits on the amount of steel that 29 nations may ship into the United States.

The American Iron and Steel Institute reported last week that steel imports fell sharply in the first five months of 1989, when foreign steel represented just 17.1 percent of the U.S. market.

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