The Perpetual Steel “Crisis”

This article originally appeared in American Metal Market on October 23, 2000.
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The tired, low dishonesty of another phony steel "crisis" isonce again upon us. Sky-is-falling rhetoric, bellicose demands, andstrong-arm political tactics - it's business as usual for America'smost aggressively protectionist industry.

The steel lobby's latest campaign is proceeding simultaneouslyalong three fronts. First, Senate magician and Big Steel sugardaddy Robert Byrd managed recently to sneak into the agriculturalappropriations bill a devilish change in the U.S. antidumping andcountervailing duty laws (which impose penalty duties on allegedlyunfair imports). Under the Byrd amendment, duties collected underthose laws will be doled out directly to U.S. industries. In otherwords, the steel lobby and other users of the trade laws willactually get reward money from the U.S. Treasury for scalping theircompetitors and fleecing downstream industries and consumers. Thissubsidy scheme is a clear violation of WTO rules and an invitationto foreign countries to perpetrate similar mischief againstAmerican exports.

Meanwhile, the steel lobby isn't content with its usual relianceon the antidumping and CVD laws - even with the Byrd amendment'snew, "user friendly" upgrade. The problem is that these laws arelimited to knocking off foreign competitors one country at a time.Impatient, Big Steel is now calling for a single, efficient killshot: a Section 201 "safeguard" action that would simultaneouslytarget all steel imports from whatever source. In a letter datedOctober 16, 76 steel executives and union leaders asked PresidentClinton, among other things, to self-initiate Section 201proceedings. The next day, Big Steel's friends in the House ofRepresentatives introduced a resolution along the same lines; sofar they have rounded up 230 cosponsors.

Finally, while seeking to add new trade barriers, the steellobby is fighting hard to hold on to prior gains. The U.S.International Trade Commission must conduct "sunset reviews" todetermine whether to repeal old antidumping and CVD orders, and theindustry has been pulling out all the stops to ensure that thoseorders remain in place. Back in September, 27 steel countrySenators and Representatives showed up at the ITC's public hearingson the sunset reviews of three categories of flat-rolled steel.This extraordinary political muscle-flexing before an independentregulatory body was meant to remind the commissioners of the ITCwho confirmed their appointments and approves their budgets— and to suggest, none too subtly, that they cast their votesaccordingly.

U.S. demand for steel is at historically high levels, andshipments by U.S. mills for the first eight months of this year areup 10.7 percent over 1999. Yet the domestic industry claims thatimports are threatening its very existence. It's true that importshave risen recently; meanwhile, a string of Fed interest rate hikesand slowing automobile sales have undercut prices. But the claimthat present circumstances amount to a "crisis" cannot be takenseriously.

Actions speak louder than words, and the commercial actions ofU.S. steel mills reveal that their import-baiting is just a cynicalploy. After all, U.S. mills are themselves major steel importers:In 1999, more than 7 million metric tons of semifinished steel wasimported for use by domestic steel producers to process intofinished products. It seems that the only real difference between"fair" and "unfair" imports is the effect on Big Steel's bottomline. Meanwhile, American steel giant USX just inked a deal toacquire ailing Slovak mill VSZ - despite the fact that VSZ wastargeted in a recent antidumping case against cold-rolled steel. Sowhich is it - is foreign steel production an economic threat toAmerica or an attractive investment opportunity? Apparently theanswer depends on the audience and the occasion.

The American steel industry is facing some tough competitivechallenges. Production costs at U.S. integrated steel mills areamong the highest in the world, and there is substantial excesscapacity in the United States. But instead of addressing theseissues head on in the marketplace, Big Steel is addicted to relyingwhenever possible on political fixes. More than any other industry,it has systematically integrated the quest for competition-stiflingtrade barriers into its core business strategy. Any time thateconomic or political circumstances create an opening, the steellobby pounces - howling about unfair competition, making direpredictions about the impending extinction of the industry, anddemanding that we "stand up for steel" while it stiffs the rest ofus.

It is a shameful state of affairs. But it will continue as longas Big Steel wields an effective lobbying monopoly on steel tradeissues. Steel-using industries may employ over 40 workers for everyone worker at a steel mill, but until now those industries havebeen out-organized and out-maneuvered. Unless those interests witha stake in open markets start standing up to Big Steel's bullying,the perpetual steel "crisis" - and its protectionist consequences -will continue unabated.