American Steel Industry Statement on the Revitalization Program.

Almost 2 years ago, I formed a Steel Tripartite Advisory Committee, to advise me and my administration on problems within the U.S. steel industry. Since that time, the Committee has served as the forum for constructive talks among government, management, and labor. Last week, the Committee completed a review of industry conditions and recommended to me a series of measures by which the government can assist the American steel industry in its efforts to modernize and regain competitive strength.

I have already acted, in my Economic Revitalization Program, to introduce measures that will help steel, as well as other industries, to accelerate the technological innovation and capital investment that are necessary to our economic growth, in ways that do not rekindle inflation.

Based on the proposals in my Economic Revitalization Program, the recommendations of the Steel Tripartite Advisory Committee, and recent developments in the trade area, I have initiated a new steel industry program consisting of:

• Measures to assist the steel industry in making the investments necessary to modernize its plants and equipment.

• Initiatives to encourage research and development of new steelmaking technologies.

• Reinstatement of an improved trigger price mechanism (TPM) that will provide expeditious investigation of unfair trade practices. The United States Steel Corporation has indicated its intention to withdraw its anti-dumping complaints. These decisions will help ensure a fair environment for trade in steel products during the transition period that both domestic and foreign steelmakers have begun.

• A program for industry compliance with environmental requirements that will, at last, ensure that the steel industry can and will attain our goals of a cleaner environment and a healthier workplace.

• Programs to help workers, their families and communities heavily affected by changes in the industry.

• A renewed commitment to address the problems of the steel industry through the tripartite process.

The challenge of revitalizing this essential industry must be met primarily by the industry itself. The government will develop policies that provide the climate for accelerated modernization, enhanced productivity, lasting and stable employment, and the protection of the environment. If the goals that all share for this industry are to be realized, however, the industry-management, stockholders and labor-must look beyond short-term interests. Attractive short-term investment or diversifying activities should not be permitted to delay or interfere with investment for modernization, a task that will require the full financial resources of the industry. Wage demands must be moderate and consistent with productivity gains, to ensure improved longer-term employment prospects. Once the industry, both labor and management, and government have demonstrated to the financial community and the public their commitment to each of these efforts and to continued cooperations, the industry will be able to meet its capital requirements.

My steel program will help improve the condition of the steel industry. The immediate effects will be a pickup in production, improved job opportunities for steelworkers, increased revenues for steel producers, and a new sense of certainty and stability for international trade in steel products. Over the longer term the program will lead to substantial increases in investment and the introduction of advanced technologies into the steel industry. Those steps will improve productivity, hold down costs and make the industry more competitive at home and in the international marketplace. The end result will be more secure jobs and more prosperous communities.

PRINCIPLES AND OBJECTIVES

In announcing this steel program, I agree with the general conclusions of the Steel Tripartite Advisory Committee. The program is guided by the following principles and objectives, which set both its goals and its limits.

Steelmaking is a basic industry within our economy. With annual sales reaching $57 billion in 1979, the steel industry is larger than any other U.S. industry except for petroleum and autos. Steel remains an essential ingredient in a vast array of the goods that we require. Its size, and the major role it plays in our industrial base, makes an efficient steel industry a prerequisite for a revitalized domestic economy.

The size of the industry will ultimately be determined by market forces, by the demand for steel products and by competition in the U.S. market and in international trade. American consumers and steelworkers will benefit from the efficient, modern steelmaking that will result.

But trade in steel must be conducted according to the established rules of fairness. Unfairly priced imports disrupt our home market for steel products, making it difficult for domestic producers to plan and invest for the future. The American steel industry must be prepared to meet fair international competition, but it is the government's responsibility to take action when injury is the result of competition violating established rules of fairness. Prompt and effective enforcement of our trade laws will help establish conditions in which industry modernization can go forward rapidly.

The industry has exceptional capital needs. Modernization of the American steel industry will call for high levels of investment in new plant and equipment for a number of years. Compliance with environmental laws will require the industry to invest even more. Combined, these expenditures will be very large, much larger than the investment requirements for many other American industries. While estimates differ substantially, almost all studies agree that the industry faces a substantial capital shortfall.

In the past the industry has not been sufficiently profitable to finance its capital requirements. Under current and anticipated business conditions, without changes in Federal policies, it is questionable whether over the next few years the industry would be able to do so.

The government does have a responsibility, working with the private sector, to ease the burden of adjustment for workers and communities that are heavily affected by economic change. Where jobs and communities are adversely affected, new jobs must be created, workers retrained, and economic development encouraged.

Prompt and full industry compliance with our pollution laws is critical to meet our environmental goals. Although the steel industry has spent substantial sums and made considerable progress in the past few years on pollution control, it continues to lag far behind other industries in achieving compliance with air and water pollution control requirements. Since steelmaking is an inherently dirty process, further progress in compliance will contribute substantially to overall attainment of our national environmental goals. Modernization and the use of new, cleaner technologies will result in a more competitive and cleaner steel industry in the years ahead.

For all these reasons, the situation of the steel industry is unique. The magnitude of the effort necessary to modernize and regain competitiveness will require the full cooperation of the industry and government. Modernizing the steel industry will also take time. A coordinated and integrated set of initiatives, maintained for a substantial period, will be necessary to set the industry on a new path. Our aim must be to have a steel industry that is as productive and efficient as possible, one that is completely competitive by world standards.

Working together, we will do so.

THE PRESIDENT'S PROGRAM

MODERNIZATION AND INVESTMENT

Modernization of the domestic steel industry will require sustained investment at high levels, as well as research, development and use of advanced steelmaking technologies. The proposals contained in my economic revitalization program will help the industry in this effort.

My proposals to liberalize and simplify the current depreciation system will help the steel industry finance its long-term modernization program. Under the new system of constant rate depreciation, the rate of depreciation for equipment (which accounts for 85-90 percent of the steel industry's fixed capital) would be about 40 percent greater than is permitted under current law.

In addition, the full 10 percent regular investment tax credit (ITC) will be made available for all new equipment with a useful life of more than one year. (Current law provides for a reduced credit in the case of short-lived assets.) Furthermore, an extra 10 percent credit will be allowed for up to $10 billion of capital investments which provide job opportunities and contribute to the economic base in distressed regions; this credit should be of particular benefit to steelmakers, in light of the location of many of their existing facilities.

Another important measure for the steel industry is my proposal to make the regular investment tax credit partially refundable and the special credit fully refundable. This proposal, which represents a major innovation in Federal tax policy, will extend the benefits of the ITC to firms that have no current tax liability. It provides the bulk of immediate tax relief for steel industry modernization.

These proposals will improve the outlook for investment in steel in several ways. In addition to their substantial direct benefits to steel companies, the new capital recovery provisions will yield important indirect benefits in the near term as a result of new investment and increased steel demand in other industries. In addition, diversified steel firms may realize direct short-term benefits by reducing tax liabilities in profitable nonsteel areas.

DEVELOPMENT AND USE OF NEW

TECHNOLOGY

Increased use of new technology is essential to make the United States steel industry more efficient, productive and competitive. Some U.S. firms are world leaders in the development and use of advanced steelmaking technologies. Others, however, have lagged considerably. For the most part, firms will modernize if the industry's ability to generate the funds for investment in new technology improves; my tax proposals will help in this regard. However, programs to develop and test important technical advances, under actual steelmaking conditions, will also be required.

Many promising technical opportunities have been identified. After extensive review, the Steel Tripartite Advisory Committee concluded that both existing and prospective steel technology is moving toward continuous, closed operations, which offer significant progress in manufacturing productivity, energy utilization, environmental protection, and worker health and safety. The Committee also concluded there were promising opportunities in broader application of continuous steel casting, formed-coke technology, dynamic control systems for steelmaking, recycling and recovery technologies, and a range of advanced process technologies.

Examples of additional possible areas of cooperation to be explored include coal-based direct reduction of iron ore and basic research on high performance steel alloys, plasma technology, and the physical chemistry of steel and steelmaking.

As announced in my recent Economic Revitalization Program, I am committed to providing an additional $600 million over the fiscal years 1981 and 1982 for the support of basic research and other scientific programs to improve the performance of the U.S. economy. These funds will be used to maintain a real annual growth rate of 3% in Federal funding of basic research and also to support increased collaborative research among government, industry, and universities. The steel industry, among others, will benefit from these steps.

I believe industry and government should cooperate to ensure full consideration of the opportunities that can put domestic producers back at the forefront of steelmaking technology. I have therefore instructed the Director of the White House Office of Science and Technology Policy, the Secretary of Commerce, and other senior officials to review carefully the technical proposals outlined by the Steel Tripartite Advisory Committee and others. I am further directing these officials to explore promptly, in collaboration with industry, the feasibility of establishing a cooperative basic and applied research program.

EFFECTIVE ENFORCEMENT OF TRADE LAWS

Under the United States trade laws, the Federal government is responsible for ensuring that domestic producers are subject to fair competition in the international marketplace. Our trade laws are fully consistent with the obligations we have accepted under the Multilateral Trade Agreements. My Administration has often stated our insistence on vigorous and prompt enforcement of these laws.

My Administration has continued to work towards an environment in which international trade in steel products is free of government obstruction, is determined by competitive conditions, and is conducted without injurious dumping or subsidization. The steps announced today advance these goals.

Today, the Commerce Department is announcing that the trigger price mechanism (TPM), which was suspended in March 1980, will be reinstated. The TPM, which has been improved in several respects, will help achieve prompt and effective enforcement of the trade laws during the transition period in which the industry—both here and abroad-will modernize and restructure, for a period of not more than five years.

At the same time, the United States Steel Corporation is announcing immediate withdrawal of its anti-dumping complaints against steel producers in seven European countries.

Administration of the TPM, particularly monitoring efforts, is being improved. In addition, a change will be introduced in the method of calculating trigger prices in order to reduce the distortions from short-term exchange rate fluctuations. Furthermore, a procedure is being established to review import surges which may be the result of dumping or subsidies. (Details are being announced today by the Commerce Department.) As before, the TPM will impose no quantitative restrictions, will guarantee no market share, and will not impede fair international trade.

Reinstatement of the TPM will help ensure that unfair import competition does not disrupt the steel industry's modernization program. Indeed, the reinstatement of the TPM is premised on the industry's readiness to undertake such a program. The new TPM system will be reviewed after three years; continued operation of the TPM beyond three years is specifically conditioned on the industry's undertaking the investments necessary to ensure its long-term competitiveness.

The new TPM is thus designed to cover only a transitional period for domestic and foreign steel producers. The United States Government has received assurances from European Community authorities that they will press forward with their efforts to restructure the European steel industry during the period when the TPM is in operation.

In no longer than 5 years, the TPM will be terminated, and there will be no special administrative procedures for steel imports. Should trade complaints arise, they will be handled through the normal enforcement of our antidumping or countervailing duty laws.

As the Committee suggested, I am directing the United States Trade Representative and the Secretary of Commerce to review the other trade issues identified in the Committee's report. Also, the Secretary of Commerce will follow closely the situation in specialty steel trade, and advise me if inclusion of specialty steels is necessary and feasible.

ENSURING COMPLIANCE WITH ENVIRONMENTAL LAWS

I believe that prompt compliance with the Clean Air and Water Acts is absolutely essential for the health and quality of life of the American people. The steel industry is, by the nature of its operations, one of the country's largest sources of air and water pollution. It is particularly important, therefore, that the steel industry comply with the environmental laws. This package is intended to get that job done.

The problems of environmental compliance are unique to steelmaking. Because steel production is an inherently dirty process, the clean-up costs are very great. Although the industry has spent substantial sums, during a period of declining profits, and made considerable progress in the past few years on pollution control, it continues to lag far behind other industries. Full compliance will require large additional expenditures at the very time that the industry must also make major investments for modernization.

Modernization of the industry is critically important to the well-being of the steel workers, their families, steelmaking communities, and the economy generally. But modernization is equally important to environmental objectives, since modern facilities are inherently much cleaner, and all parties (including the industry) have agreed they will use the most modern technology available.

For these reasons, I agree with the Committee report that, for this industry uniquely, flexibility is needed to assure that the goals of modernization and environmental protection will both be met.

The program announced today is designed to make sure that the steel industry can and will, at last, comply with the environmental statutes. It will encourage and enable the industry to raise the capital necessary for compliance by fostering modernization and technological development and providing tax incentives. It will allow companies the time necessary to secure capital for achieving compliance by providing flexibility on deadlines in those individual cases where it is necessary. And it will ensure that there will be environmental compliance by requiring strict schedules spelled out in compliance orders and enforced by the courts.

I am firmly committed to the reauthorization of a strong Clean Air Act next year. I do not intend to endorse an across-the-board relaxation of deadlines for this industry or others. I recognize, however, that the unique conditions of the steel industry identified in the Tripartite report may require some modification of compliance deadlines for a limited number of steel facilities. So that these special needs can be addressed without distorting the general debate on the Clean Air Act, I will recommend legislation to deal separately with the unique situation of the steel industry immediately after the Congress convenes in January. I will not recommend an automatic deferral of compliance deadlines—there are steel facilities that can comply without further delays—but rather, a discretionary, case-by-case stretchout of required action.

In preparing the amendment, the Administration will consult with the Congress, the Committee (which will be expanded to include public members with respect to its work on environmental matters), with representatives of environmental organizations, and with the National Commission on Air Quality. The amendment would allow the EPA Administrator to grant an individual steel source an extension for up to three years of the deadline for compliance with the requirements of the Clean Air Act. The Administrator could grant the extension only where the following conditions are met:

1. The extension is no longer than necessary to allow the company to make modernization expenditures on iron and steel facilities; and

2. Funds which would have been spent to comply with the deadline will be expended in the same time period for modernization and in existing steelmaking communities; and

3. The company will have sufficient capital to meet all air pollution control requirements in a timely manner; and

4. The company is under a company wide judicial order which

—establishes a schedule for each violating source to comply with as expeditiously as practical, consistent with any extensions granted; and

—provides means to assure no degradation of air quality during the deferral period.

Existing consent decrees will remain in force until, in particular cases the Administrator is granted by legislation, and uses, this extension authority.

In the Committee report, all parties-including the industry—agreed that effective implementation of their recommendations would resolve the major health-related environmental regulatory issues concerning the steel industry. It will make an important contribution to the modernization of the industry. I am accepting this and the Committee's other proposals because doing so will remove the need for further amendments to the Clean Air Act as it affects the steel industry during reauthorization by the next Congress. My decision is also premised on my understanding that the steel industry has committed to comply with the Clean Air Act. The conditions for obtaining extensions of deadlines will be strict, and I have been assured by the industry that when a source obtains a deadline deferral, efforts to improve air quality will continue. The amendment would only allow a stretchout—not a postponement—of investments on controls.

The amendment recommended by the Tripartite Committee would allow the Administrator to extend the deadline for a facility to permit investment in modernization of other steel facilities owned by the company. I believe it is appropriate to require that the investments made possible by the deadline extension should be for facilities located in existing steel communities.

The Committee also recommended that "to the extent substantial additional expenditures will be required" by forthcoming EPA regulations to meet water pollution control requirements, the Clean Water Act should be amended in the same manner. The regulations will be proposed in December and the level of expenditures required by new regulations is not now known. My Administration will then take appropriate action in light of the Committee's recommendation, taking into account whether substantial additional expenditures will be required by the forthcoming regulations and whether the overall capital requirements of the industry are as high as projected. Before my Administration forwards any amendment, we will consult with all interested parties.

EPA has already begun work to effect the Committee's recommendations that it explore ways to increase the availability of the "bubble concept" to the industry, and that discharge permits under the water act not be modified until EPA's revised regulations take effect next year. I accept both recommendations as important to the modernization of the steel industry.

WORKER AND COMMUNITY ASSISTANCE

The modernizing and restructuring of the steel industry will result in the competitive industry that is necessary to ensure the stability of steelworkers' jobs. As the modernization process takes hold over a period of years, productivity will improve. Nonetheless, job losses can be reduced or avoided, especially since the modernization will take place in steelmaking communities. However, some dislocation must be anticipated. Both government and industry can and will take steps to help relieve the anguish and uncertainty that accompany these changes, but change cannot be avoided entirely. Failure to modernize the steel industry would lead to still greater economic and personal distress, with permanent shutdowns of major plants.

Trade Adjustment and Other Current Efforts

The Federal Government has in recent years provided substantial financial assistance through trade adjustment programs for workers and communities harmed by temporary layoffs or permanent plant closings. From 1975 to the present, for example, over 100,000 steelworkers have received nearly $200 million in trade adjustment assistance (TAA) benefits to supplement unemployment payments from other sources. Similarly, over $30 million had been disbursed since 1977 in adjustment assistance to communities affected by steel plant closings. Earlier this year I requested and Congress approved an additional $1.5 billion for trade adjustment benefits in fiscal 1980 and 1981, part of which will go to steelworkers. My Administration has also supported legislation that would extend TAA benefits to workers in supplier industries.

Over the past year, guided by the deliberations of the Steel Tripartite Advisory Committee, the government has begun a number of important steps to channel Federal aid to workers and communities more effectively. In 1979, my Administration, in cooperation with the companies and the United Steelworkers of America, established a task force to respond to the problems posed by steel shutdowns on an individual plant basis. This task force has served as a useful vehicle for improving the flow of unemployment benefits and employability service information to the site of plant closings, for speeding up the application and payment of TAA benefits to unemployed workers, and for developing action plans specifically geared to the needs of individual groups of workers and communities. A joint Commerce-Labor Adjustment Action Committee has worked in eleven of the communities most severely hurt by steel layoffs and shutdowns, helping to organize and expedite financial, training and job finding help for workers and, in six communities, helping secure Economic Development Administration funds. The Committee also recommended that Federal officials be assigned to work fulltime with local governments, labor and managements to ensure that available Federal assistance programs be delivered as quickly as possible; this program, too, has begun.

New Initiatives

My proposals for worker and community adjustment assistance, as announced in my Economic Revitalization Program, draw upon the adjustment experience gained from the steel industry and indicate my commitment to expand these efforts. The proposals include the following:

Supplemental Unemployment Benefits: As a temporary measure my proposal to authorize 13 additional weeks of unemployment compensation will provide immediate and direct financial assistance to steelworkers and workers in related industries who have lost their jobs.

Job Training/Assistance: I have proposed a $300 million expansion of current job training programs under GETA, some of which will help retrain skilled workers. In addition, the Department of Labor will establish in 1981 about a dozen pilot programs to test innovative new ways to assist in retraining and relocation of workers affected by industrial change. I have instructed the Department of Labor to conduct some of these pilot programs in steelmaking communities. If the demonstrations prove successful, I will propose a full-scale program offering dislocated workers throughout the Nation similar training and assistance.

Targeted Investment Tax Credit: My proposed targeted investment tax credit will be of special benefit to steel communities. Many steel communities are older cities and towns suffering not only from temporary or permanent shutdowns of steel plants but also from general declines in economic activity. Many would qualify as eligible sites for the targeted investment tax credit. For these communities the modernization of the steel industry, in combination with the targeted investment tax credit, should be an important step towards revitalizing their economic bases.

Programs Assisting Communities: The Federal government, through agencies. such as the Economic Development Administration (EDA) of the Department of Commerce and the Department of Housing and Urban Development (HUD), provides a wide variety of programs aiding the development of businesses in steelmaking communities, including loan guarantees, development grants, direct loans, and interest subsidies.

My proposal for increased program levels for economic development of $1 billion in 1981 and $2 billion in 1982 will allow a significant expansion of these programs benefiting steel communities.

CONTINUING PARTNERSHIP

In large part, my Administration's program is a result of the continued discussion and collaboration within the Steel Tripartite Advisory Committee. The Committee's deliberations have shown the value to Government decisionmaking of close cooperation and discourse with business and labor. In recognition of this contribution, I decided to create an Economic Revitalization Board to advise on matters of economic policy affecting all industry.

To obtain additional guidance, and help in monitoring the progress of the program being announced today, I have directed Secretaries Marshall and Klutznick to renew the Committee's charter, which expires next January. I have also directed them to modify the Committee's charter to include representatives of the public with respect to its work on environmental matters.