The steel industry claims that a recent surge in imports threatens to wipe out domestic production, destroying jobs and undermining our national industrial might. The industry has petitioned the Commerce Department for relief from imports allegedly “dumped” on the U.S. market at prices that are below “fair value” — a move that could impose high tariffs on steel imported from Japan, Brazil and Russia. On October 15, the U.S. House voted 345–44 to threaten a one‐year ban on steel imports from those and seven other countries.
Lower prices caused by a rise in steel imports may be bad news for steel producers, but they are good news for the vast majority of Americans who make and consume products that contain steel. Like all forms of trade protection, imposing tariffs or quotas on imported steel would boost wages and profits in the favored industry by driving up costs for steel users, including other U.S. industries.
Consider automobiles. The typical five‐passenger sedan contains about $700 worth of steel. Lower steel prices mean lower car prices for American families and higher sales, profits and employment for the domestic automobile industry. More affordable steel will have the same beneficial effect on other steel‐consuming industries such as construction and food packaging. Propping up steel prices through protection will force other industries to contract and make it more difficult for such voracious steel users as General Motors and Caterpillar to compete in world export markets.
Rising steel imports may reduce membership in steelworkers’ unions, but they also free labor and capital for other sectors where America has a greater comparative advantage. The dollars we send abroad to buy more imported steel return to the United States to buy American wheat, chemicals, machine tools, 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. Thus the jobs “saved” by protecting the steel industry will only come at the expense of destroying potential new jobs in other sectors of the economy.