Steel’s Deal

This article appeared on National Review (Online) on June 6, 2001.

Have no doubt: The steel industry and its unions have found afriend in President Bush. The White House has rewarded theboisterous steel industry with the launch of a Section 201 tradeinvestigation, which promises to quell import competition. Onceagain, by summoning its disproportionate political muscle, bybadgering congress and the administration, and by deflecting blamefor its own state of affairs, the steel industry has the countryunder its thumb.

All of which will likely lead to quotas on imported steel, whileclarifying the administration's trade policy as shortsighted andprotectionist. The Section 201 trade investigation is a majorsetback for consumers and steel-using producers, who will be forcedto absorb higher prices stemming from curtailed supply, and forexporters whose prospects for improved foreign-market accesssuddenly look more gloomy. After all, which countries would want tonegotiate with a government that only talks the talk of freetrade?

The steel industry has continuously sought to subvert tradeinitiatives and U.S. leadership on the issues. It views itself asentitled to the U.S. market and makes little attempt to cultivatemarkets abroad. A mere 5 percent of U.S. steel output was exportedin 2000. With nothing to lose and everything to gain by underminingmarket-liberalization initiatives, the steel industry's agenda isclear, as it has been for decades: Exaggerate the stakes, accept noblame, and rabble rouse until you hit pay dirt.

The measures that steel has sought and obtained over the decadesinclude quotas, minimum import prices, antidumping and anti-subsidyduties, and "voluntary" export restraints. These barriers have beenerected against broad categories of steel coming from every part ofthe world for the past five decades, costing American consumers anddownstream industries tens of billions of dollars. Steel's tacticshave discouraged investment in new equipment, efficient productionprocesses, and a long-term market strategy, in favor of high-pricedlawyers and lobbyists.

And yet, despite all of this involuntary subsidization, much ofthe industry is incapable of competing on an international scale.The dozens of reprieves that steel has received, at substantialcost to the economy, have yielded no palpable business plan toaddress the shortcomings that put it on the welfare line in thefirst place. It has demonstrated nothing short of arrogance andirresponsibility, passing off its problems as our own.

While there is consensus regarding the worldwide over-capacityof steel, neither the domestic industries that rely on steel norconsumers of products containing steel are to blame. Yet they arethe losers who bear the brunt of price hikes. Meanwhile, autoproducers, appliance manufacturers, and other steel-usingindustries abroad, which are not burdened with quotas, will enjoyenormous competitive advantages over their U.S. counterparts.Quotas, antidumping, loan guarantees, and taxpayer-supportedpension funds -- all these interventions prolong the problem ofsurplus capacity, which is the underlying problem.

Collectively, these protectionist policies conspire to weakenthe WTO and agitate U.S. resistance to trade agreements in general.The most notable example at the WTO meeting in Seattle, and againin ministerial discussions regarding the FTAA, was the U.S. refusalto discuss antidumping reform, an issue of primary importance toseveral of our key trade partners. And the most vocal obfuscator ofantidumping reform has been the steel industry, which abuses thelaw to keep vital foreign sources from dipping into its customerbase.

Legislation such as the controversial Byrd Amendment, whichdisburses collected antidumping and countervailing subsidy dutiesto domestic petitioners, and the Steel Revitalization Act, threatenthe very viability of the WTO. Each of these measures at leastborders on WTO-illegality, and will spark yet another internationalrebuke to U.S. policy. Should the U.S. balk at its responsibilitiesto bring its laws into compliance, the system will collapse --while consumers suffer the world over.