IMPACT RELIEF OF THE DOMESTIC STEEL INDUSTRY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00759R000100200031-1
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 4
• Document Creation Date: December 22, 2016
• Document Release Date: November 16, 2010
• Sequence Number: 31
• Publication Date: September 14, 1984
• Content Type: MEMO

Sanitized Copy Approved for Release 2010/11/16: CIA-RDP87T00759R000100200031-1
CONFIDENTIAL
The Director of Central Intelligence
Washington, D.C. 20505
National Intelligence Council
NIC #05304-84
14 September 1984
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
FROM: Maurice C. Ernst
NIO for Economics
SUBJECT: Import Relief of the Domestic Steel Industry
1. As you know, this is an exceedingly complex issue on which CIA
has contributed little, except for some background studies of world
steel trends, the most recent of which is attached. Moreover, neither
I, nor to my knowledge anyone else in the Agency, has followed the
policy development process closely, so that I am not in a position to
give you any sophisticated comments on the issue and on how different
agencies view it. On the basis of a few telephone calls and very
limited reading, however, several points seem apparent:
With respect to underlying economic trends:
The competitiveness of the US steel industry has generally
been on a downward trend for many years. One of the reasons
is that average wages in the industry have gone up from 130
percent of the US industrial average in 1970 to 176 percent
of the industrial average currently.
o The massive appreciation of the dollar in recent years has
certainly been a major factor further reducing the industry's
international competitiveness.
o Consequently, import growth has accelerated and domestic
production and employment have fallen sharply.
(2) With respect to the policy options:
o Although most agencies would prefer no protection, all agree
that this is politically impossible.
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o There is no support for the ITC recommendations (which were
arrived at by a three-to-two majority) that include a
combination of tariffs, market share quotas, and tariff rate
quotas for up to five years. Although the degree of
protection these measures would give the industry apparently
is not particularly large, there is little doubt that they
would cause all kinds of problems for US foreign trade and
relations and encourage domestic protectionist pressures.
o The policy debate will be over two packages of actions:
-- One option eschews use of Section 201 of the Trade Act
as a legal basis for remedial action, relying instead
on jawboning, and negotiation of informal voluntary
export restraints.
The other option would rely on negotiating Orderly
Marketing Arrangements under the authority of Section
201, supplemented by other actions.
o The two main options differ more in appearance, political
impact, and flexibility than in economic effect.
-- Both would rely mainly on new arrangements to restrict
steel imports from South Korea, Spain, and Brazil to
supplement those already affecting the European
Community, Mexico and other countries.
The "non-201" option would aim at holding the import
share to 20 - 26 percent of the domestic market
(compared with 24 - 25 percent in the first half of
1984), while the 201 option would hold imports at 18
percent. The latter option, probably would be easier
to implement because it would give the USG more
leverage with foreign steel exporters.
It is unlikely that either set of measures would raise
steel prices substantially. It is hoped that they
would somewhat improve the outlook for steel
modernization.
The countries most affected (South Korea, Spain and
Brazil) expect to have to negotiate Voluntary Export
Restraints and probably will not object strenuously.
The steel industry favors the "201 option" and, if it
were adopted, would be more likely to drop other
protectionist initiatives, such as the current dumping
action against Brazil.
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CONFIDENTIAL
The "201 option" is the more clearly consistent with
existing domestic and international laws, agreements
and arrangements. The "non-201 option" may be more
flexible--that is, more easily changed or removed.
o The agencies apparently line up as follows:
David Stockman is the main author of the "non-201"
option. I gather that STR, CEA, and the leadership at
Treasury and possibly State also favor this option.
-- Commerce developed the "201" option. Apparently the
middle levels at State and Treasury also support it.
o I do not believe that either option would have major foreign
policy or national security effects.
2. Attached are:
A. An options paper for the TPC prepared by
B. A briefing paper by Craig Fuller, which contains useful
statistics.
C. A legal interpretation from State.
0. A recent OGI paper on world steel trends.
Attachments,
As stated
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 Sanitized Copy Approved for Release 2010/11/16: CIA-RDP87T00759R000100200031-1
CONFIDENTIAL
NIC #05304-84
14 September 1984
SUBJECT: Import Relief of the Domestic Steel Industry
DCI/NIC/NIO/Econ:M.Ernst:bha(14 Sep 84)
Dist:
Orig - DCI
1 - DDCI
1 - DCI/SA/IA
1 - ER
1 - C/NIC
1 - VC/NIC
1 - DDI Reg
2 - NIO/Econ
CONFIDENTIAL
Sanitized Copy Approved for Release 2010/11/16: CIA-RDP87T00759R000100200031-1