NCPA - National Center for Policy Analysis

Workers Would Pay The Price for Protecting Steel

March 4, 2002

As it has for decades, the shrinking U.S. steel industry is seeking restrictions on imports, says Bruce Bartlett. They hope that if tariffs were imposed on foreign steel, prices would rise enough to make domestically-produced steel competitive again.

But since there are many more businesses that use steel than produce it, the economy as a whole suffers. Estimates are that 8 times as many jobs will be lost in steel-consuming businesses than would be saved among steel producers.

According to a study by economists Joseph Francois and Laura Baughman for the Consuming Industries Trade Action Coalition, a group of steel consumers:

  • A low tariff would impose about $2 billion in additional costs on U.S. consumers, and might save 4,375 jobs that would otherwise be lost to imports.
  • However, the higher costs on steel consumers would likely result in a loss of 36,164 other jobs, for a net loss of 31,789 jobs (see figure).
  • They calculate that each job saved in the steel industry will cost the economy $439,485.
  • They also calculate that a high tariff, costing consumers $4 billion, might save 8,902 steel industry jobs, but would destroy 74,502 jobs, for a cost per job saved of $451,509.

In short, the costs of steel protection are far greater than the benefits.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, March 4, 2002; see also Joseph Francois and Laura Baughman, "Estimated Economic Effects of Proposed Import Relief Remedies for Steel," December 19, 2001, Consuming Industries Trade Action Coalition (CITAC).

For study text

http://www.citac.info

 

Browse more articles on Economic Issues