THE STEEL INDUSTRY WON'T BREAK WITHOUT TARRIFFS
September 13, 2004
The U.S. steel industry is enjoying strong profits, but as a result of ongoing trade restrictions, record-high steel prices are imposing harsh costs on domestic steel-using industries.
Policy analyst Dan Ikenson says steel prices have entered record territory. Average prices for a basket of 10 carbon steel mill products were 60 percent higher in April 2004 than in December 2003, and 71 percent higher than in April 2003. The causes for the dramatic price increase are many:
- There has been rising world demand, led by China, for finished steel and steel-making materials.
- The relatively weak dollar has made the U.S. market less attractive to foreign producers, thus reducing supply.
- U.S. production has been curtailed as result of capacity reduction stemming from large-scale industry consolidation.
The high costs have been transferred onto steel-using industries, such as makers and consumers of automobiles, appliances, and housing. Ikenson says manufacturing costs have reached a 25-year high, with record steel prices contributing to that trend. Steel producers are even imposing shortage surcharges on domestic buyers.
Despite President Bush's removal of steel tariffs that he imposed nearly two years ago, imported steel remains subject to 188 antidumping and countervailing duty orders. Ikenson says there is little reason to artificially impose higher costs on domestic steel consumers in order to protect an industry that is arguably in its best condition in decades.
Source: Dan Ikenson, "Ready to Compete: Completing the Steel Industry's Rehabilitation," Cato Institute, June 22, 2004.
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