Written Testimony of
LEO W. GERARD
International President
United Steelworkers (USW)
U.S. HOUSE STEEL CAUCUS HEARING
February 4, 2009
I’m Leo W. Gerard, International President of the United Steelworkers (USW). I lead the union that represents the workers employed in the basic steel industry in North America.
I want to especially thank Congressman Peter J. Visclosky (D-IN) – as Chair of the Congressional Steel Caucus. We are grateful for his persistence and support of the steelworkers. I also want to welcome the new steel caucus vice chair, Congressman Tim Murphy (R-PA) from Pittsburgh.
In particular, your co-sponsorship of the ‘American Steel First Amendment,’ which was unanimously approved by the appropriations committee and then included in the final version of the American Recovery and Reinvestment Act passed by the full House, is greatly appreciated by the USW and its members in the manufacturing sector who are facing tremendous uncertainty in these turbulent times. Because we are an International union, and because Canadian and US manufacturing is so integrated, we encourage you and other members of the Steel Caucus to approach your counterparts in Canada to discuss a coordinated approach for the North American industry to strengthen its ability to create and preserve these good jobs in both countries.
ECONOMIC RECOVERY PLAN
The country is in the midst of the fastest, most severe economic downturn since the Great Depression. In 2008, the United States lost 2.6 million jobs – the largest loss in over sixty years. In December alone 524,000 jobs vanished – the steepest losses occurring in manufacturing. January is on track to meet or exceed this stunning figure. The steel industry has not been immune. Since the fall, thousands of our members were placed on voluntary layoffs, short weeks, rotating shutdowns and more recently mandatory layoffs.
We are here today -- both companies and the union -- because we are united in our resolve to ensure the survival and the long-term success of the steel industry. The USW and the companies are committed to finding common ground to work to solve this crisis together. We believe that the steel sector is vital to the nation’s economic and military strength and is the most competitive and productive in the world.
But due to the collapse in demand brought on by factors outside the control of the steel industry, capacity utilization generally is now averaging 35-40 percent – far below the 90 percent levels earlier in 2008. USW data shows that 16 out of 29 blast furnaces are currently idled. From July to November 2008, monthly shipments of steel dropped 33 percent. And during that same period, new steel orders dropped more than 50 percent.
We need bold action that will work for working Americans right now. We support the economic recovery plan, which passed the House last week; it includes much-needed infrastructure investments -- for highways, bridges, mass transit, and construction and repair of public schools and buildings – that will create jobs for American workers. Infrastructure investment will do the most to stimulate domestic demand and get this economy moving again. If anything, we would like to see more investment in infrastructure projects.
A recent study by the Political Economy Research Institute at the University of Massachusetts – commissioned by the Alliance for American Manufacturing (AAM) in which the USW is a member -- confirms that investment in infrastructure projects provides the biggest bang for taxpayer dollars in terms of stimulating the economy.
USW-represented members employed by companies that make rebar, steel plate, beams and wire rod for bridges, highways, electrical grids and public schools and public buildings will benefit from the House-passed economic stimulus bill. The currently laid-off steelworkers who make these steel products would be recalled. And according to the AAM infrastructure report, new jobs would be created in steel.
BUY AMERICA PROVISIONS
We also appreciate provisions in the House bill that require the purchasing of iron and steel for the construction and repair of public works, public schools and other public buildings. If anything, we would like to see it expanded to include all manufactured goods. We think this is good, old fashioned common sense because it would create the biggest bang for taxpayer dollars by keeping and creating many more manufacturing jobs here in the United States and create demand elsewhere. I represent workers in the steel industry in the U.S. and in Canada and would not be here today if I thought this was simply a protectionist measure that would harm our members.
We understand that some are claiming this is a protectionist measure and could ignite a trade war; but this is just plain wrong and simply more of the worn-out rhetoric and thinking that has driven us off the cliff. We are the largest importer in the world – we soaked up $819 billion in imported goods in 2007 -- and are in deficit with every major trading partner in the world. No one is advocating that we close our borders to trade.
But laws to buy American-made goods when the government spends funds on public works and infrastructure are nothing new or unusual – they have been in existence for decades and applied consistently with our international obligations.
The reality is that for most countries – including big exporters like China – we have no legal obligation to purchase their goods when the U.S. government spends funds to stimulate our economy. For countries – like Canada – to the extent we have such obligations, then the Buy America preferences do not apply -- and neither would the provisions in the House stimulus bill.
There should be little doubt that countries facing their own domestic collapse in demand will prefer their own goods to ours -- if no international obligation prevents that -- to create jobs and demand in their own country. There is nothing wrong with that.
So let’s be smart and not lose sight of the purpose of the stimulus – to create jobs and demand in the U.S. That means we should not be afraid to implement these provisions to the maximum extent possible, and in a transparent manner, so that we use the stimulus funds to create the most jobs possible in the United States. It’s all about stimulating the most demand in our own economy.
As we learned in the Great Depression – what’s good for big business – is not always good for America and our domestic economy and the workers who live here. In today’s world, big businesses are the U.S. multinationals, which accounted for nearly two-thirds of imports in 2006. Clearly, they do not always represent the interests of our domestic economy.
TRADE ENFORCEMENT IN TIMES OF RECESSION
Wall Street created this catastrophe, but Main Street and everyday working people are the ones paying the price for Wall Street’s greed.
And if that were not enough, there are even more drastic consequences coming. During economic recessions, it has been common for foreign companies and governments to engage in unfair trade practices to relieve their own economic distress – essentially, they export their unemployment here.
Instead of shutting down their plants when demand declines, they continue to produce and export by whatever means necessary. That causes companies here to reduce payrolls, cut jobs and – worst of all – stop investing in the United States.
While the USW is proud of the creativity and industriousness of our members in meeting the challenges of fair import competition, we simply cannot compete against the coffers of foreign governments or dumped goods.
We are very concerned that in such a deep recession, that dumped or illegally subsidized goods will flood into our U.S. market and create a perfect storm-type economic disaster for our workers and who produce goods here. So it is important that Congress repair and strengthen our trade remedy laws.
CHINA-SPECIFIC TRADE ISSUE CONCERNS
We’ve already been hit in steel for example. China was found to be dumping and illegally subsidizing its pipe producers, causing harm to our domestic producers and workers.
We need to enhance and strengthen these laws to effectively meet the challenges facing us from unfair import competition in this environment, and we will be working with Congress and the Obama Administration to do so.
Let me raise two more troubling issues particular to China.
In 2006, the Chinese authorities announced that they intended to maintain state control and involvement in a number of key industries – including steel. This runs counter to their promises they made when the joined the World Trade Organization to move to a market economy. They subsidize the steel sector. They ignore environmental standards. They abuse workers rights. Taken together, it’s virtually impossible to compete against an industry that has the support of the government like China’s steel sector has.
The U.S. is engaged in a bilateral steel dialogue with China. China has dramatically expanded its production capacity. In the current downturn, their production will flood world markets. At the last meeting of the dialogue, the Chinese officials indicated that they wanted to reduce their uncompetitive production, but that it would be difficult because so many of their jobs relied on maintaining their production.
CLIMATE CHANGE
I just want to make a brief comment about potential climate change legislation. No matter what form it takes – carbon tax or cap and trade – there need to be strong provisions that ensure that goods imported from foreign countries which have not taken equivalent measures to reduce their carbon emissions have an offset imposed at the border. This is absolutely critical. Otherwise, U.S. manufacturers, who would have the added cost of compliance, will have to compete against imports from countries that have not assumed such responsibilities. Indeed, the entire purpose of the legislation would be defeated if this loophole is not closed, because it will encourage more off-shoring of production to such countries.
We look forward to working with all of you in the coming days. Thank you.
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