Clinton signs $ 1.5 bn government-backed loans for steel, oil and gas companies

Aug 18, 1999 02:00 AM

Steel, oil and natural gas companies hurt by fallen prices will be allowed to share $ 1.5 bn in government-backed loans to help tide themselves over. The loan program was signed into law by President Clinton on the same day U.S. steel producers announced a challenge to deals the Clinton administration reached with Brazil and Russia over steel shipments to the United States.
Sen. Robert Byrd, D-W.Va., chief proponent of the steel loan program, welcomed the help it would provide to steel communities and companies that have suffered from low-priced imports.
"These loan guarantees will provide important access to capital for U.S. steel companies," he said. "It is time to stanch the damage and give the domestic steel industry a chance to recover." Steel companies will be able to tap into a $ 1 bn loan fund and borrow up to $ 250 mm each at market interest rates. U.S. oil and gas producers and service companies could borrow up to $ 10 mm each from a $ 500 mm fund.

The measure will cost taxpayers an estimated $ 270 mm to back the loans. Opponents say the measure will force U.S. taxpayers to support companies and banks that make bad business decisions. Meanwhile, lawyers for U.S. steel producers said they will seek to void the agreements Brazil and Russia reached separately with the United States to avoid punitive tariffs.
Five companies mailed their lawsuits, while seven other producers plan to join the complaint against Russia later. The U.S. Court of International Trade in New York, which handles trade disputes, will hear the cases.
Industry attorney Mike Stein said the two agreements would not sufficiently protect American producers from illegal foreign pricing, although he admitted the challenge will be "an uphill battle." Had the deals not been reached, Brazil would have faced tariffs of as much as 53 % and Russia as much as 185 % on the industry's main product, hot-rolled carbon steel. Brazil and Russia agreed to quotas and minimum prices to avert tariffs.
The U.S. industryalready won tariffs on Japanese hot-rolled shipments and sought sanctions against Russia and Brazil as well to combat low-priced hot-rolled imports. The lawsuits filed do not challenge a second deal with Russia restricting other types of steel. The federal government is named as the defendant, although Russia, Brazil and their steel producers will be allowed to join in the defence.
Commerce Department spokesman Morrie Goodman said the department had not received the lawsuit. Lawyers for Russian and Brazilian producers also said they had not seen the complaints but believed the agreements complied with U.S. trade laws. A decision is likely to take at least a year.

Source: AP
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