Opinion Editorial | |
| Wednesday, October 28, 1998 | |
The Steel Industry Wants Protection from Imports |
Last week, a group of steel industry executives and labor leaders met with top Clinton Administration officials to demand increased trade protection against foreign steel imports. The steelmakers are complaining that the world financial crisis has forced steel producers in Japan, Korea, Brazil, Russia and other depressed countries to "dump" steel here. Dumping occurs when a nation sells products abroad at lower prices than are charged in the domestic market. Although ordinarily eager to pander to any special interest with either votes or campaign contributions, the Clinton Administration is taking an unexpectedly tough line against steel. The reason appears to be a fear that if the administration grants protection for steel, it will be forced to give protection for textiles, machine tools, semiconductors and other industries also suffering from foreign economic woes. Furthermore, the Clinton Administration understands that the U.S. economy is the locomotive keeping the world economy afloat right now. Our willingness to import from places like Japan, even at the cost of a huge trade deficit, is the only life line those countries have. If we were to restrict imports now it risks a worldwide economic collapse that would ultimately engulf us as well. That is why U.S. Trade Representative Charlene Barshefsky was in Europe last week asking the European Union to ease its restrictions on Japanese cars and Russian steel. Even if there were no risk to the world economy of adopting trade protection, it would still be a bad idea. The steel industry has enjoyed various forms of protection almost continuously since the 1960s. It has almost always argued that it only needed temporary protection to help it modernize and compete more effectively. But while the industry has modernized and become more efficient, so have foreign producers. Thus the need for "temporary" protection never seems to end. Numerous studies by the Congressional Budget Office, Federal Trade Commission and the U.S. International Trade Commission (ITC) have documented that past trade protection has failed to revive the steel industry. There is no reason to think that this time will be different. In truth, the economics of free trade versus protection have little to do with the steel industry's case. It is all about gaming the system, using the law to impede their competitors so that they can raise their profits. And this result will occur whether or not the Commerce Department or the ITC ultimately grant relief. The reason is that anti-dumping duties are assessed retroactively. Once a preliminary investigation begins, companies exporting steel to the U.S. will be required to post a bond equal to the estimated anti-dumping duty. If the case is ultimately thrown out they get their money back, if they lose the money is forfeit. Because the anti-dumping process is so burdensome, the mere threat of it is enough to reduce exports. Brink Lindsey, director of trade policy at the Cato Institute, notes that industries will often announce plans to bring an anti-dumping case in hopes of forcing their foreign competitors to raise prices and cut back on exports. This often accomplishes the industry's purpose and no anti-dumping case ever emerges. Lindsey calls this "price collusion via press release." In the end, the only real winners in an anti-dumping case are the lawyers and lobbyists, who make millions bringing such cases and millions more defending against them. Consumers are the clear losers since they are forced to pay more for the things they buy. If the steel industry wins again, we can all expect to pay more for cars and anything else made from steel.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, October 28, 1998. Home | Support Us | All Issues | Social Security Debate Central | Contact Us |