International Trade:

The Health of the U.S. Steel Industry

NSIAD-89-193: Published: Jul 12, 1989. Publicly Released: Sep 15, 1989.

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Pursuant to a congressional request, GAO assessed the U.S. steel industry's health and factors affecting it, focusing on import quotas.

GAO found that: (1) the U.S. steel industry and steel consumption have declined steadily and substantially over the past 40 years; (2) most of the problems are concentrated in the integrated-mill sector, which produces steel from iron ore, while smaller operations producing new steel products from recycled steel have grown over the past 30 years; (3) industry profitability is extremely sensitive to labor costs, giving low-wage countries a competitive advantage and making the industry dependent on productivity increases; (4) although average hourly wages declined after 1982, they were still 38 percent higher than average U.S. manufacturing wages; (5) the industry's labor productivity grew slowly relative to other U.S. industries, it was slow to implement new technologies, and it invested little in research and development; (6) a severe recession in 1981 caused drastic declines in production and employment, and as the industry began to recover, imports began to surge, reaching a 1984 high of 26.1 percent and declining steadily thereafter; (7) the administration initiated a successful trade quota program to reduce the import surge; (8) the industry recovered to normal profit levels as a result of the economy's recovery and the declining proportion of imports; (9) recovery in production was significant but incomplete, and there was almost no recovery in employment; and (10) further recovery in production and employment was unlikely because of reduced capacity and improvements in labor productivity.

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