He asked U.S. Trade Representative Robert B. Zoellick to begin negotiations with the aim of eliminating inefficient, excess steelmaking capacity around the world, and to eliminate market-distorting subsidies.
To pass antitrust muster, the steel companies must show that any new company will not dominate its market, said Eric Talley, a USC law professor.
To do that, they probably will argue that the market is the world, making a consolidated U.S. company's share look like "little potatoes," he said. But if the steel companies get the trade restrictions they are seeking, they may lose the argument that they are actually competing against foreign rivals.
U.S. steelmaking capacity is about 126 million tons a year, according to figures form the American Iron and Steel Institute, with worldwide capacity of more than 900 million tons a year.
Another problem the steel companies would have is convincing antitrust regulators that the new company is more efficient--a requirement of mergers--when they are asking the government to pick up expenses, Talley said.
"It could potentially be an antitrust problem," he said.
Lourenco Goncalves, president and chief executive of Fontana-based California Steel Industries Inc., said his company is not involved in the merger talks and does not share the problems of the companies seeking consolidation.
He said he would support the proposed merger if it strengthened the U.S. steel industry. But he opposed their efforts to simultaneously win protective tariffs or quotas that would "create problems for healthy competitors."
Supporters of imports, such as the Consuming Industries Trade Action Coalition, say the U.S. industry is capable of supplying only about three-quarters of steel needed by U.S. manufacturers
USX shares closed at $16.95 on the New York Stock Exchange, up 79 cents. Bethlehem rose 11 cents to close at 47 cents, and WHX Corp., parent of Wheeling-Pittsburgh, fell 2 cents to $1.49, also on the NYSE.
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\o7 Times staff writer James Gerstenzang in Washington contributed to this report.
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