Stop Steeling

by Don Boudreaux on October 30, 2006

in Trade

In a letter in today’s Wall Street Journal, Andrew Sharkey, President of the American Iron and Steel Institute, pleads for Uncle Sam to force Americans to pay higher-than-necessary prices for steel.  Here’s Mr. Sharkey’s letter, in full:

Your Oct. 17 editorial "Steeling Jobs"
misses the point of the sunset reviews before the International Trade
Commission, although there are some areas on which we agree. Yes,
America’s steel industry has gone through a transformation out of the
ashes of the 2000-2003 period. Through consolidation, new
labor-management agreements and streamlined operations, a low-cost,
high-tech, globally competitive U.S. steel industry has emerged with a
lighter environmental footprint. Meanwhile, the Commerce Department
points out that if the duties on corrosion-resistant steel, a high-end
product used in automobiles, appliances and construction, are lifted it
would likely lead to recurrence or continuation of dumping. As many
members of Congress, including House Steel Caucus Chairman Phil English
(R., Pa.), and the major steel producers explain, our steel industry
remains vulnerable, so why pull the rug out from under it when it is
just regaining its footing? The threat is from foreign governments
actively subsidizing excess capacity, which creates regional imbalances
that are already negatively affecting the global steel market,
including the U.S. The duties in question in no way affect access to
fairly traded steel, and there is absolutely no shortage of this
product available to the car companies.

The steel industry wants
the car companies to do well, but their profits should not be built on
access to steel dumped in violation of U.S. trade laws. GM Chairman
Rick Wagoner pointed out the true causes of the Big Three’s losses in a
speech earlier this year: health-care costs, lawsuit abuse and unfair
trading practices, such as currency manipulation. It is not the $19
profit that steelmakers earn from the corrosion resistant steel in each
$27,000-plus vehicle. Ultimately, any consuming industry can argue it’s
hurt by lack of access to illegally traded raw materials. If we fail to
enforce our trade laws, the destruction of competitive American
industries by government-subsidized foreign competitors is certain to
occur. Now that will be a true case of stealing jobs.

Andrew G. Sharkey III
President and CEPO
American Iron and Steel Institute

Here’s a letter that I just sent to the WSJ in reply to this little piece of shameful special-interest pleading:

that foreign steel producers are subsidized by their governments,
Andrew Sharkey argues that Uncle Sam should artificially raise the price
that Americans pay for imported steel (Letters, October 30).  This
argument fails.

The only plausible case for preventing consumers
from accepting a gift of low-cost steel from foreigners is if such
subsidies threaten to oblige us to pay higher, monopoly prices in the
future.  But the likelihood of this outcome is minuscule.  As Mr.
Sharkey says, subsidies encourage excess capacity.  So for as long as
the subsidies continue, we enjoy steel on the cheap.  And if and when
the subsidies stop, the excess coke ovens, blast furnaces, and other
steel-making equipment don’t dissolve into thin air.  They’ll be around
to ensure that steel is supplied competitively.

Donald J. Boudreaux


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