Remember, nothing is ever disconnected – nothing is happening in a vacuum, every administrative action has a specific administrative policy at the effect level of the action.
♦President Trump has promised to rebuild our military assets. ♦Over the past several decades our big steel manufacturing capacity has dropped. ♦Today Secretary Ross announces efforts to investigate risks of import steel reliance. These three things are not disconnected.
[Transcript] 11:10 A.M. EDT – SECRETARY ROSS: Thank you very much for coming this morning. Last night, the Department of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962. The technical caption is 19 USC 1862.
What that’s all about is that authorizes the Secretary of Commerce to conduct comprehensive investigations to determine the effects of imports of any particular item into the United States on the security of the country. This has been invoked a number of times before, most notably in the period of the Arab oil crisis some years ago.
So what it will include consideration of is, one, the domestic production needed for our projected national defense requirements; two, the domestic industry’s capacity to meet those requirements; third, the related human and material resources; fourth, the importation of goods in terms of their quantities and use; fifth, the close relation of national economic welfare to national security; sixth, the loss of skills and investment, substantial unemployment and decrease in government revenue; and finally, the impact of foreign competition on specific domestic industries and the impact of displacement of a domestic product by excess of import.
What does that mean in real terms? Over the years, we’ve conducted 152 steel cases against improper imports of one type of steel or another, and we have another 25 cases pending. The problem with those anti-dumping and countervailing duty cases is they’re very, very limited in nature to a very, very specific product from a very, very specific country. So what really happens is you’ll bring the action and that will help eliminate the problem with that one little product from that one country. That country then will start shipping something else in, or they’ll modify slightly the product to get around the order, or they will ship it in through another country and pretend that it came from a country not subject to the duties.
So it’s a fairly porous system, and while it has accomplished some fair measure of reduction, it doesn’t solve the whole problem. So we’re groping here to see whether the facts warrant a more comprehensive solution that would deal with a very wide range of steel products and a very wide range of countries.
So that’s really the genesis of it. And, as you know, steel has been a very important issue in the President’s campaign for office and in his actions subsequent to being in office. The then-candidate Trump, a quote from him, “Foreign nations are dumping vast amounts of steel all over the United States, which essentially is killing our steel workers and steel companies. We will put new American steel into the spine of this country. We’re going to use American steel. We’re going to use American labor. We’re going to come first in all deals.”
So this is a consistent investigation with his objectives. Steel imports, despite the activities that we’ve already had in countervailing duties and anti-dumping, have continued to rise, and they’ve continued to rise despite repeated Chinese claims that they were going to reduce their steel capacity when instead they have actually been increasing it consistently.
In the first couple months of this year alone, steel imports rose 19.6 percent year over year, and are now more than 26 percent of the entire U.S. marketplace. So it’s a very serious impact on the domestic industry. The question we will be trying to address in the report is to what extent that impinges on our economic and national defense security.
Under the statute, the investigation needs to be completed within 270 days. But given the number of trade cases and, therefore, the consequent amount of research that we’ve done, we think it will be accomplished a lot sooner than that. And we will be holding at least one and perhaps more public hearings, and we will be inviting public commentary as we go through the research project being expedited by this memorandum issued by the President today.
Q So what if the domestic production does not meet the domestic demands — in other words, the demand is more than the production — what will the reaction of this administration be at that point?
SECRETARY ROSS: Well, the fact is that the domestic industry is only operating at about 71 percent of capacity. And since the foreign imports are some 26 percent, there clearly is room for increase in the productive utilization in the United States.
Q How long will it take to bring it up to 100 percent?
SECRETARY ROSS: Well, that’s one of the questions that we’ll be trying to deal with. Because one of the factors relating to national security would be if you needed a very rapid buildup, are the skillsets there; particularly, are the skillsets there for the very complex alloys that are needed for armor plate and things of that sort. That’s a very good question.
Q So in the meantime — you’ve got a lapse in time — so if you’re 71 percent and you want to build it up to 100 percent, you’re going to have to have foreign steel in the meantime, so what’s the reaction going to be during that period?
SECRETARY ROSS: Well, no decision has been made to take any concrete action as yet. But the net effect of the tariff, if that were what we — came as a recommendation, won’t be to prohibit foreign imports, it just will be to change the price.
Q You mentioned China. The President’s been very clear that he doesn’t think right now is the right time to press China on currency manipulation. Why do you think now is the appropriate time to potentially press them on steel?
SECRETARY ROSS: Well, currency is a totally different issue. That’s not the province of Commerce; that’s the province of the Treasury Department. And as you know, they recently issued a report on currency manipulation dealing with China and various other countries.
The reason for it now is that steel is an important factor in our infrastructure as it relates to national defense, and directly an important factor. As you know, we’re building up aircraft, we’re building up our fleet, we’re building more tanks, building all kinds of military equipment, and that’s even in a peacetime context. If it turned out they had to ramp up, the question is, are we getting to the point where the industry couldn’t be able to deal with that?
Q And what’s the level of concern that China could retaliate if there are, in fact, additional tariffs, and potentially not be as cooperative in terms of the work that’s being done to pressure the North Koreans?
SECRETARY ROSS: Well, we’re not taking any action in this study, so we shouldn’t really be prejudging it. But we have to make our decision based on what’s important to the United States and its security.
Q Are you concerned that China could retaliate there if you do get to that point? I mean, is that being weighed, in other words?
SECRETARY ROSS: The important question is protecting our defense needs, and we will do whatever is necessary to do that. But we’ve come to no conclusion yet because the study has just recently begun.
Q My understanding is that the Trade Expansion Act gives the Secretary of Commerce the authority to launch these investigations on his own authority, and you’ve said you started that investigation yesterday. So could you explain what the presidential memorandum today does, what guidance it gives you or what legal authority it gives you that you didn’t already have when you started this yesterday?
SECRETARY ROSS: Sure. The thrust of the memorandum today is that we should expedite the study. It does not confer any new legal power. The legal power is what was already established under Section 232.
Q Just following up on that question, why last night, then, was this launched before the President signed the memorandum today?
SECRETARY ROSS: Well, it was in the normal course of our schedule to get this investigation going, and there’s a statutory notice that we have to give to the Secretary of Defense, and it seemed appropriate to let him know what we were doing prior to a big public announcement.
Q It’s well-known that the Chinese and the Americans have a conflict over steel, and, as you mentioned, there’s been a lot of cases. But you also mentioned that this order and investigation gives you an opportunity to broaden the scope of steel imports and an investigation into those. Can you describe what other countries and supply lines could be impacted?
SECRETARY ROSS: Well, conceivably it could result in a recommendation to take action on all steel imports, Whereas a countervailing duty investigation or an anti-dumping, as I’ve said, would be limited to one set of products from one or a limited group of countries. So it could be broader both geographically and product-wise.
Q You also gave the rationale a lot about defense use of steel, but isn’t there a contractual obligation by most defense contractors to use U.S.-produced products to make those things anyway?
SENIOR ADMINISTRATION OFFICIAL: I’m sorry, could you say —
Q You talked a lot about the needs of the defense industry for steel as a possible rationale for doing this. Doesn’t the U.S. military already have to prioritize U.S. manufacture of steel in these types of items?
SENIOR ADMINISTRATION OFFICIAL: Sure, they can. But if you need workers with particular skills to make a particular product, prioritizing doesn’t do you much good.
Q There are reports that the Navy is delaying construction of new frigates to fix problems with the littoral combat ships because of shipbuilding capacity issues. Is the President concerned that problems in the steel industry and being under capacity is having a direct effect on our ability to produce ships for the Navy? Is that a specific concern?
SENIOR ADMINISTRATION OFFICIAL: Well, that certainly would be one of the areas that would be covered by the investigation.
Q The President has taken a number of actions related to the U.S. steel industry. It seems that one of his goals is to bolster the U.S. steel industry domestically. But clearly that has implications for steel prices in the United States. To what extent have you guys considered the effect of rising steel prices on steel consumers in the United States, and what that impact will be — the knock-on impact will be on other industries inside the United States? Are you concerned about that at all?
SENIOR ADMINISTRATION OFFICIAL: Well, that surely would be one of the topics in the report because everything interacts with everything else, and so it’s a question of balancing one’s priorities.
Q Apparently, in 2001, the Commerce Department looked into this issue and concluded that there was no risk. So can you explain what it is that is raising your concerns this time around?
SENIOR ADMINISTRATION OFFICIAL: Sure. If you look at the capacity charts, particularly from China, you would now find China has over one billion tons of capacity. That represents one-half the capacity in the whole world. They use about 700 million tons directly in their own country, and they export over 100 million tons. That still leaves 200 million tons of unutilized capacity, and their exports of that 100 million tons
— which is, itself, about the total U.S. consumption — has created all sorts of follow-on effects in other countries.
Q Mr. Secretary, following on the previous question, has Commerce done any kind of preliminary calculation on what the effect to consumers would be of any kind of plan to put tariffs on steel in order to protect the American steel industry?
SECRETARY ROSS: Well, we’ve already got tariffs on a few of the cases, on more than 150 different items. So the question is, what would be the incremental effect if any additional tariffs were recommended? But no decision has been made as to whether or not to do so; if so, what amount or what products.
Q I understand that. Have any preliminary calculations been done in various scenarios — potential scenarios?
SECRETARY ROSS: We haven’t gotten that far yet. We’re still in the research stage.
Q Mr. Secretary, investigations like this may be based on an application from an interested party, a request from another agency or department, or maybe self-initiated by the Secretary of Commerce. Can you clarify who requested that this investigation be launched?
SECRETARY ROSS: We self-initiated this.
Q Based on what?
SECRETARY ROSS: Based on the facts that I have just outlined to you, and based on the fact that the President, in its supplemental budget and in the proposed budgets going forward, is calling for increased military spending, and increased military spending inevitably will have an effect on steel.
Q Are there other investigations that you would consider launching or that you’re waiting to pull the trigger on into other potential imports?
SECRETARY ROSS: Well, I don’t know if that’s — that’s really more a psychotherapy question than it is a policy question. (Laughter.)
Q And the best one-liner of the day.
Q Mr. Secretary, you said that the Commerce Department self-initiated this, and the statute says that there is a 270-day window and that you’re going to try to beat that. So what is the purpose of the memorandum if you are going to try to do this as fast as possible? Is it to set down a new deadline to do this more quickly, or is it just going to tell you to do it as fast as possible, which you already said you are going to do?
SECRETARY ROSS: Well, as you know, the President is very results-oriented, and he has issued this memorandum to stress that he would like us to make this a real priority and to expedite it. Not to short-circuit it, not to cut out any steps that should be followed, but he’d like it to be the real priority and expedited.
Q Mr. Secretary, you talked about steps to protect the U.S. steel industry, but there’s also the problem in China of the overcapacity, the overproduction of steel, which is really a structural problem in their economy, one that they, I think, have tried to address or would like to address. Is that something that you discussed with China in your bilateral discussions? Is there something you anticipate where the U.S. could help China reduce its production and overcapacity in steel?
SECRETARY ROSS: Overcapacity is a topic for the ongoing discussions with the Chinese, and not just in steel. It’s also true in aluminum; it’s true in quite a lot of other products.
Q Is there anything, any steps that you would take there with China? Is there anything specific that you’ve discussed with them that you can share?
SECRETARY ROSS: We’re wading back into psychotherapy.
STAFF PERSON: The Secretary is trying to get to the signing. So, I have all the handouts for you guys. Again, now the embargo is lifted, on the record.
Q Can you recommend a good psychotherapist? (Laughter.)
STAFF PERSON: I think that’s too personal.
SECRETARY ROSS: What did he ask?
STAFF PERSON: Can you recommend a good psychotherapist? (Laughter.)
SECRETARY ROSS: Good comment.