Chairman Stearns, Ranking Member Towns, thank you for the opportunity to testify before you today on this important matter. I am an original co-sponsor of H.R. 4646, the Steel Industry Legacy Relief Act of 2002, and I strongly urge the subcommittee and full committee to favorably report this measure to the full House before we adjourn.

The U.S. steel industry is fighting for its life. We as a nation are at a crossroads: we can decide that maintaining a U.S. steel industry is vital to our national interests, or we can watch it wither and die. While it is entirely appropriate that we act to protect the U.S. steel industry from unfair foreign trading practices, we also have a separate problem that must be faced: namely, legacy costs. The U.S. steel industry cannot survive and takes steps to restructure unless we tackle the problem of legacy costs.

Let me briefly review the circumstances which led to the imposition of tariffs on imported steel. In March, President Bush acted to save the U.S. steel industry. Following a unanimous ruling by the International Trade Commission (ITC) that there had been serious import injury in key U.S. product lines, the President decided to impose Section-201 remedies of up to 30% tariffs on imported steel. While I would have preferred that the President impose an even stiffer tariff penalty on foreign imports, his decision was an important step in the battle to save the U.S. steel industry.

The current crisis facing the U.S. steel industry has been building for some time. It's important that we understand the history of what has lead us to this current situation. Since 1998, 34 U.S. steel producers have filed for Chapter 11 bankruptcy protection. One example of a company who has filed for bankruptcy protection is the Bethlehem Steel Corp., which employs some 3,800 workers at its Sparrows Point, MD, facility. Beth Steel reported a net loss of some $97 million in the first quarter of 2001 and some $118 million in the second quarter of 2002.

The immediate crisis threatening the U.S. steel industry can be traced to excess foreign steel production and the 1998 Asian and Russian financial crises. At that time, Asian markets dried up and foreign producers -- particularly Japan, Russia, Brazil and Korea -- began to unload their high inventory of steel in the United States. Since then, these dumped imports, which are highly subsidized by foreign governments, have penetrated the U.S. market by a historic 30%.

It is important to note that the U.S. steel industry is not in crisis because it has failed to be competitive. It is in crisis because of the massive world steel overcapacity, pervasive steel market distorting practices and because the United States had become the world's steel dumping ground.

The antecedents for this crisis were evident before the steel crisis of late 1990s. There has been a 50-year legacy of foreign government intervention in the steel sector, and this intervention has produced a distorted world steel market and a global steel industry that is not subject to normal market forces. Its chief legacy is massive world steel overcapacity -- approximately 268 million tons in 2000. This world overcapacity is more than twice our domestic demand for steel.

As a Congressman from the Baltimore area, I have a particular interest in Bethlehem Steel Corp, which employs many of my constituents in its Sparrows Point facility. Many steelworker retirees also live in my district. Bethlehem Steel is a good example of a U.S. steel company that has done everything right, but that has still been hammered by global market forces.

In 2000, Bethlehem Steel opened a new cold-rolled steel production facility at Sparrows Point. In the last five years, Beth Steel has spent some $900 million to modernize production at this Maryland plant. These improvements have improved yield, quality and delivery time. Yet Bethlehem Steel still cannot compete with highly-subsidized foreign steel that is dumped in this country at prices that are below their costs of production. In October 2001, Bethlehem Steel filed for Chapter 11 protection.

As much as 85% of non-U.S. steel production is either subsidized, cartelized, government owned or government controlled. Foreign steel has been more heavily subsidized than any other manufacturing sector in history, with subsidizes totally more than $100 billion since 1980. These unfair practices have hurt the U.S. steel industry especially hard because the U.S. market is both very large and very open.

For example, in 2001 U.S. steel imports exceeded exports by 23.5 million metric tons. Yet the European Union (EU) and Japan -- both of which have steel industries that are no more productive the U.S. industry -- are net steel exporters.

During the Section-201 process, the United States was careful to comply with World Trade Organization (WTO) rules. In fact, the remedy announced by the President includes numerous exceptions, including: our four partners in free trade agreements (Canada, Mexico, Israel and Jordan), 99 developing countries, and nearly 200 steel products not made in the United States. There also is an ongoing process that allows for additional product exclusions if warranted.

We also need a strong U.S. steel industry for our national defense and economic security. The American steel industry produces high quality, cost-competitive carbon, alloy, and armor plate steels and specialty metals for use by the military in applications ranging from aircraft carriers and nuclear submarines to Patriot and Stinger missiles, tanks and field artillery pieces, and every major military aircraft in production today. One example is the Deepwater Program for cutters (ships) of the U.S. Coast Guard, which will require about 90,000 tons of military-specification plate and structural steel. We must not become dependent on foreign steel in order to maintain and upgrade the Coast Guard, which is critical to America's homeland security and our ability to disrupt and prevent future terrorist attacks on American soil.

I agree with the sentiments expressed by President Bush, in his address to the United Steel workers of America in August 2001: "If you're worried about the security of the country and you become over-reliant upon foreign sources of steel, it can easily affect the capacity of our military to be well supplied. Steel is an important jobs issue; it is also an important national security issue."