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American steelmen complain that many foreign governments covertly subsidize their steel industries, often dumping products in the U.S. at prices below manufacturing costs in order to keep the mills going at home and prevent unemployment. To fight this practice, the Carter Administration in 1978 implemented the trigger price mechanism (T.P.M.), which sets a floor price below which imports will trigger an investigation for dumping. This floor is based on the cost of manufacturing and transporting a ton of steel made in Japan, which is the lowest-cost producer among big nations.
Consequently, imports fell from 21% of the U.S. steel market in 1977 to 15.2% last year. American mills were operating at an extraordinary 87% of capacity during much of the year, a significantly higher rate than that of any major competing industrial country. Still, the Americans complain that foreign competitors are getting a better deal from Washington than Americans are. For one thing, the Europeans, whose manufacturing costs are about $50 a ton higher than Japanese costs, could be dumping even when they sell their steel at trigger prices. For another, some imports are selling below the T.P.M. A General Accounting Office study concluded that from Oct. 1, 1978, to March 1, 1979, the Government applied the T.P.M. so laxly that almost 40% of imported steel came at prices lower than the floor, though only 6% was "significantly below the trigger price."
This week U.S. steelmakers expect to bring antidumping suits against European steel exporters. The suits could be embarrassing to the Carter Administration because the State Department is trying to line up European support for a grain, technology and Olympic boycott against the Soviet Union. Viscount Etienne Davignon, the European Community Industrial Affairs Commissioner, warns: "If we enter into a trade war and protectionism in steel, then cars will follow rapidly, and after cars it will be shipyards and then advanced technology industries."
American steel manufacturers invest less per ton of steel produced than do any of their major foreign competitors. The American Iron and Steel Institute (A.I.S.I.) estimates that if the industry is to preserve its domestic market from further erosion, steelmakers must raise annual capital expenditures from an average $2.9 billion now to $7 billion over the next decade. The industry is hoping for some tax breaks so that it can recover its capital faster than the 15-year depreciation schedule allows. Pushed by inflation, plant and equipment costs almost doubled in the past ten years or so. Thus $100 spent in 1968 to buy a machine would replace only half the machine when recovered through depreciation in 1978. Forced by inflation and the tax code to eat their capital, steelmen are backing the Capital Cost Recovery Act. Introduced in the House by New York's Barber Conable and Oklahoma's James Jones, it would speed up depreciation to ten years on buildings, five years on machinery and equipment, and three years on vehicles.