Global Steel Trade; Structural Problems and Future Solutions

These productivity increases and shifts in demand over the past two decades have resulted in a
significant decline in employment in the steel industry. In the fifteen years between 1979 and 1994,
total steel industry employment fell 58 percent, from 570,500 to 239,200, a loss of 331,300 jobs.
However, by the mid-1990s, the major restructuring efforts were complete, and the sharp drops in
employment leveled off.
While finished steel product shipments, as of the late 1990s, were down only slightly from the peaks
of the early 1970s, employment in the industry had fallen by more than 60 percent. According to AISI,
man-hours per ton of finished steel decreased from about ten in the early 1980s to well below four by
the late 1990s.
With few inefficient producers left, a very lean and highly productive U.S. steel industry emerged. It is
in this context that the industry saw an abrupt decline in employment in 1998 when thousands of steel
workers were laid off at the end of the year.
Storm Clouds on the Horizon
Financial Crisis in Asia
The financial crisis in Asia began in mid-1997 in Thailand and quickly spread to Malaysia, Indonesia, the
Philippines and Korea. In country after country, currencies collapsed and stock prices plummeted despite
efforts at intervention. During the last half of 1997, the Thai baht lost 49 percent of its value against the
dollar, while the Malaysian ringgit, Indonesian rupiah, Philippine peso, and Korean won lost 35 percent, 44
percent, 34 percent, and 48 percent of their values, respectively. 21 In the same six-month period, Thai
stocks fell 29 percent while stocks in Malaysia, Indonesia, the Philippines, and Korea fell 45 percent, 45
percent, 34 percent, and 50 percent, respectively. 22 Banks began to fail due to over lending and the high
costs incurred through dollar denominated debt payments which could not be met after very large currency
devaluations.
The crisis was the worst economic downturn in the region in thirty years. Three countries—Thailand,
Indonesia, and Korea—sought International Monetary Fund (IMF) assistance. In August 1997, Thailand
agreed to an IMF Program that included a $17 billion package of loans, provided by the IMF, World Bank,
Asian Development Bank, and selected governments. In October, Indonesia agreed to an IMF loan that
included $40 billion in multilateral and bilateral support. In December, Korea agreed to $57 billion in
multilateral and bilateral support. The economic policies pursued under the IMF-supported program,
combined with emergency financial support, helped these countries begin the slow and painful process of
economic recovery.
In the first year of the crisis, an additional 40 to 50 million people in the region fell below the poverty line,
not only in Indonesia and the Philippines, but also in Korea, Thailand and Malaysia, countries that had
made considerable strides in alleviating poverty. 23 Millions of children in the region left school as a result
of the crisis to either work as laborers or beg on the streets. 24 Fears of widespread hunger and malnutrition
in Indonesia arose as government officials in 1998 estimated that 100 million Indonesians, close to half the
nation’s population, would be unable to afford food and basic necessities by year’s end. 25
In the years prior to the financial crisis, the massive amount of available capital in Asia encouraged
unsound lending practices, which were exacerbated by government interference in the financial sector,
crony capitalism, and corruption. 26 Foreign lenders had been rushing in to take advantage of new
opportunities in a growing region. For example, total foreign debt in Korea almost tripled between 1992
and 1997, increasing from roughly $43 billion at the end of 1992 to $121 billion at the end of 1997. 27
Chapter 2: The U.S. Steel Import Crisis 17