Last night, CNN'S Lou Dobbs reported on the controversy surrounding subsidized Indian steel pipe being imported for the TransCanada Keystone pipeline.  Both AAM Director Scott Paul and AAM volunteer Jeff Rains were interviewed: There is rising outrage tonight in Granite City, Illinois, over imported steel coming from India. Tons upon tons of Indian-made steel pipe are being imported to build an oil pipeline and it's all happening as hundreds of American steelworkers are being laid off. Lisa Sylvester has our report. (BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Retired steelworker, Jeff Rains, often walks the mile from his house to the union hall in Granite City, Illinois. On one trip he noticed steel pipes coming in on a freight train, not made in the USA, made in India. That caught him off-guard because just yards away from where the Indian steel pipe was delivered sits a U.S. steel plant. A steel factory that in December laid off more than 1,600 workers. And now sits idle for the first time in its 130-year history. JEFF RAINS, RETIRED STEELWORKER: It's a slap in the face to the working people in America. I mean, you grow up thinking if you work hard that you're going to prosper, and then this stuff happens. UNIDENTIFIED MALE: What do we want? UNIDENTIFIED MALE: Jobs! SYLVESTER: Workers rallied recently at the pipeline construction strike, incensed foreign steel is being used to build the oil pipeline that will stretch from Alberta, Canada, to the heart of the Midwest. While their closed plant couldn't have made the pipe, they say it could have been made the steel for the pipe. Trans-Canada, which is building the keystone pipeline, says it is purchasing 30 percent of the steel pipe from U.S. suppliers, 20 percent from Canadian sources and 50 percent from India. Spokesman Robert Jones said the Indian company was, quote, the most price competitive and could produce the highest quality and meet delivery schedule. That company is Caldwell's fund, based in Mumbai. It shipped the steel from a port in India, discharged at the port of Houston, and then brought to Granite City, Illinois, via railroad. A 9,844-mile trip. Delivered India steel is up to $166 a ton cheaper than U.S. steel, which might not sound like much, but over the life of this project, that's a difference of $46 million. How is the Indian steel able to come in cheaper even with the transportation costs? Government subsidies, according to the Alliance for American Manufacturing. SCOTT PAUL, ALLIANCE FOR AMERICAN MANUFACTURING: India has been cited by the department of commerce at least 20 times for different sorts of subsidies that they provide to their steel industry. SYLVESTER: Wells Fund, the company that made these pipes, has not been cited for improper subsidies. Back in Granite City, Doug May is among those out of work after 36 years on the job. DOUG MAY, LAID OFF WORKER: We can compete with anybody, as long as these laws are enforced, as long as the competition is done fairly. SYLVESTER: These steel pipes, May says, a sign of a broken trade system.

(END VIDEOTAPE) SYLVESTER: Trans-Canada, the company making the pipeline, says at the time they were seeking business in 2006, U.S. steel plants were running almost at full capacity. Now, there is a parallel pipeline that is also being built. The united steelworker union is actively pushing to get some of that work. But I spoke to a company spokesperson, and he would not commit -- Lou? DOBBS: Lisa, thank you very much. That is incredible. 9,844 miles from India, to that steel plant. I mean, it's just -- it's amazing. SYLVESTER: These workers are so outraged, because they know that they can do the work. And if it were a level playing field, if there weren't subsidies involved, there's no doubt that this steel would be cheaper if it were bought in the United States. Coming all that great distance. But because this is subsidized steel, it comes into this market a lot cheaper and that's why those workers are out of work. And that's what they say is the basic problem with the trade system in this country, Lou. DOBBS: All right, Lisa, thank you very much. Terrific report. Lisa Sylvester from Washington.