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Steel: Legacy Cost Issue

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Publication Date: August 2002

Publisher(s): Library of Congress. Congressional Research Service

Series: RL31279

Topic: Manufacturing and industry (Metals industry)

Abstract:

The question of "legacy costs" has emerged as a key issue in the debate over efforts to aid the American steel industry. Such costs may be defined as pension and health care benefit provisions of contracts covering steel workers and retirees that are funded by the earnings of steelmaking companies. As many of these companies have faced bankruptcy in recent years, and some are moving into liquidation, current and former steel company employees face the loss of benefits. According to the United Steelworkers union, a total of 600,000 retirees could lose their health care coverage altogether, for example, and total unfunded liability costs may be $13 billion or higher.

Now that President Bush has acted to establish temporary remedy relief for the domestic steel industry under Section 201 of U.S. trade law, the union and many legislators have said that resolution of the legacy cost issue is the next critical step in restoring the domestic steel industry to full competitiveness. But, while the Bush Section 201 decision was widely praised by the steel industry, no support has coalesced in a similar way among private sector industry and union representatives, and between legislators and the executive branch, on legacy cost assistance.

H.R. 808 (S. 957) was introduced in 2001 and deals comprehensively with this issue. To some extent, it has been rendered moot by President Bush's Section 201 remedies. It combines legislatively mandated steel import trade restrictions, a tax on steel to pay for legacy costs through a government-managed system, and other proposals. H.R. 808 is co-sponsored by 228 House Members and has been endorsed by the United Steelworkers union, though not by steel companies and trade associations. On April 17, 2002, Sens. Rockefeller, Specter and seven other senators introduced S. 2189, which focuses solely on steel retiree legacy health care costs. On May 1, the Majority Leader, Sen. Daschle, incorporated the eligibility provisions of S. 2189 to add steelworker retirees as beneficiaries of new health care provisions in Trade Adjustment Assistance Act reauthorization within the Trade Promotion Authority bill (H.R. 3009), though this provision was dropped in a substitute amendment. An effort was made on May 21 to add a version of the steelworker retiree relief provision as a separate amendment to H.R. 3009. It received 56 votes, not enough to invoke cloture on debate, and was withdrawn. Two bills have also been recently introduced on the House side. Rep. Phil English and a group of Republican co-sponsors introduced steel legacy cost legislation on April 24, 2002 (H.R. 4574). Rep. John Dingell and 95 co-sponsors introduced a different legacy cost relief bill on May 2, 2002 (H.R. 4646).

These legislative proposals, and other legislation that addresses the steel legacy cost issue are discussed in the report. This report is based on CRS Report RL31107, Steel Industry and Trade Issues, a more comprehensive report dealing with all aspects of the steel issues currently before Congress. This report will be updated as developments warrant.