Commentary

Visclosky’s SISTA Isn’t Pretty

By Aaron Lukas
February 8, 1999

Arise in steel imports has provoked a furious political response from U.S. steel mills. Calling on the government to “stand up for steel,” they have filed antidumping cases against Brazil, Japan and Russia and lobbied for quotas and other restrictions on imports. Peter Visclosky, a Democrat from Indiana’s 1st Congressional District, has heeded their call.

Rep. Visclosky introduced a bill recently, the Stop Illegal Steel Trade Act or SISTA, that will, if passed, freeze steel imports at their July 1997 levels. In addition to Visclosky, SISTA was crafted by Reps. Bob Ney (R-Ohio), Jack Quinn (R-NY) and Dennis Kucinich (D-Ohio). The bill purportedly has the support of more than 100 members of Congress on both sides of the aisle.

This isn’t the first time Rep. Visclosky has befriended big steel. In the fall of 1998, he joined other members of the “Congressional Steel Caucus” in introducing a resolution that called on the president to use every available means to block foreign steel. To its credit, the administration has largely ignored such self-defeating protectionist demands. On January 7, the U.S. Trade Representative issued a report that proposed, among other measures, granting special tax breaks to steel companies to help them deal with increased foreign competition. Visclosky, who thinks steel producers deserve meatier special treatment, called the report “a mockery.”

The steel industry is upset because American companies are buying more foreign steel. Over the past 18 months, imports have risen by 47 percent. The industry claims that this surge could wipe out domestic steel production, destroy jobs and undermine U.S. industrial strength. In the face of such a dire threat, they say, U.S. companies ought not be free to choose from whom they buy their steel.


There is nothing fair about protecting steel companies and labor unions at the expense of everyone else.


Of course, domestic steel companies still control 66 percent of the American market and did manage to turn a profit last year. Moreover, imports are already falling in anticipation of the antidumping duties that are likely to be slapped on Brazilian, Japanese and Russian steel exports. Clearly, quota legislation like SISTA is unnecessary overkill.

But those facts haven’t fazed Rep. Visclosky, who remains loyal to his corporate and union pals. “More than 10,000 American steelworkers have lost their jobs over the last year,” declares Visclosky, citing the nice, round figure that the industry uses to publicize its plight. But in the flurry of full-page newspaper ads, 30-second TV spots and labor-union rallies, it is easy to forget that many U.S. industries rely on and benefit from steel imports. Indeed, steel-using industries employ 40 times as many people as do steel producers.

Lower steel prices aren’t the only benefit of imports. The dollars we spend on foreign steel return to the United States to buy American wheat, farm equipment, auto parts, computer software and insurance services, creating new jobs in export sectors to replace those lost to import competition. Repatriated dollars build new factories to make Americans more productive, or they finance Treasury bonds, leading to lower interest rates for homebuyers and other borrowers. There is nothing fair about protecting steel companies and labor unions at the expense of everyone else; on the contrary, protectionist legislation like SISTA is profoundly unfair.

If Congress wants to grant special favors to steel companies, erecting trade barriers is the worst way to go about it. Quotas harm American businesses, workers and consumers — and Washington doesn’t even end up with tariff revenues. If Congress were honest about its intentions, it would simply appropriate some corporate welfare cash. That would be more economically efficient, more just and more obvious. Members of Congress love quotas precisely because they redistribute wealth covertly.

“We cannot allow the American steel industry to be undermined by unfair and illegal practices,” said Visclosky at a press conference on Tuesday. In reality, it is his SISTA bill that is unfair, and should be illegal. Washington’s job is to promote the general welfare, not safeguard the profits of America’s biggest companies.

Fortunately, SISTA faces an uphill battle in Congress. If it passes, however, Rep. Visclosky will have plenty of grateful donors come election time. Of course, the congressman should be free to accept contributions from whomever he chooses, including steel companies and labor unions. But average Americans should be aware that when Visclosky “stands up for steel,” he is turning his back on them.

Aaron Lukas is an analyst at the Cato Institute’s Center for Trade Policy Studies.