NCPA - National Center for Policy Analysis


June 30, 2004

With high prices on scrap steel, mini-steel mills " the largest U.S. consumers of scrap "want Washington to limit scrap steel exports in hope of reducing domestic prices. Sara Fitzgerald of the Heritage Foundation says such a policy would do more harm to the economy than whatever benefits would accrue to scrap consumers.

According to Fitzgerald:

  • U.S. scrap steel producers would be forced to surrender their market share to foreign competitors.
  • Interfering with the market would damage U.S. credibility in its push for establishing free trade agreements around the world.
  • Even if successful, the federal government should not be in the business of favoring one industry over another.

Fitzgerald says the high prices for scrap steel are being fueled by a weak American dollar. Other commodities, such as oil and nickel, have also increased in line with the dollar's decline.

In addition, she says, strong global demand for scrap steel from countries like China, Canada, and Mexico has raised prices. China, in particular, has been buying scrap steel and nickel for construction projects and consumer goods such as refrigerators, washing machines and cars.

Therefore, instead of manipulating the forces of supply and demand, Washington should spend its time focusing on stabilizing the dollar and continuing to advocate free trade agreements and free up markets worldwide, says Fitzgerald.

Source: Sara J. Fitzgerald, "Export Controls on Scrap Steel Would Harm the U.S. Economy," Heritage Foundation, May 2004.

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