Joe Biden is seeking to boost his reelection campaign by torpedoing Chinese imports. In an April 17 speech in Pittsburgh, the symbolic heart of the steel industry, Biden announced that he asked his US trade representative to triple tariffs on Chinese steel and aluminum imports. The tariffs are currently roughly 7.5 percent. A White House press release proclaimed, “President Biden knows that steel is the backbone of the American economy, and a bedrock of our national security.” Biden’s edict is fresh proof that on trade policy, American politicians have learned nothing and forgotten nothing.
Did Biden vow to leave no boneheaded policy behind? Remember Donald Trump’s knuckleheaded 2018 assertion that “trade wars are good, and easy to win”? When Trump imposed a 25 percent tariff on steel imports in 2018, he was widely criticized for subverting the health of American manufacturing to cater to a single lagging industry.
But Biden perpetuated that Trump boondoggle. The Washington Post noted in 2021, “One of Trump’s most controversial trade initiatives, which angered U.S. allies and drew scorn from many economists, has become a plank in Biden’s ‘worker-centered’ trade policy.” There are 135,000 steel workers in the United States compared to more than six million workers in steel-using industries. Politicians and bureaucrats pretend that the latter number doesn’t exist. The Post observed that “the Biden administration is determined to retain support from the United Steelworkers, a force in key states in the industrial Midwest.” The tariffs became increasingly destructive. The price of hot-rolled steel rose more than 300 percent, and manufacturers complained of material shortages, rising prices, and delivery delays.
Steel producers have been the biggest whiners and trade racketeers in modern American history. The steel industry has been heavily protected since the erection of the first steel mill in America in 1875. Behind high protective tariffs, Andrew Carnegie engineered the steel trust, which became legendary for selling steel overseas at a far lower price than it sold in the US market. US Steel got a black eye when President Theodore Roosevelt bought US-made steel in Central America for 40 percent less than in Pittsburgh for the construction of the Panama Canal.
During the Johnson, Nixon, and Carter administrations, imports of steel from Europe and Japan were stifled by so-called voluntary restraints, which foreigners grudgingly accepted in lieu of getting totally banned from the US market. But banning foreign products brought out the worst in US companies. US deputy trade ambassador Linn Williams admitted that the United States in 1984 was “one of the world’s least efficient [steel] producers.” Nucor minimill boss Ken Iverson observed in 1986,
As soon as prices began to rise [thanks to import restrictions] so that the steel companies began to be profitable, they stopped modernizing. It’s only under intense competitive pressure—both internally from the mini-mills, and externally from the Japanese and the Koreans—that the big steel companies have been forced to modernize.
But those basic realities did not deter the Reagan administration from severely restricting steel imports from 1982 onward. In 1984, Congress enacted a trade bill that contained a short-supply provision intended, as a congressional conference report noted, “to protect domestic purchasers of steel products from undue hardship due to an inability to obtain adequate supplies from domestic sources.” But the Commerce Department decided that no burden was too heavy, no price too high, and no quality too low to force American manufacturers to bankroll US steel producers.
In 1986, Commerce took an average of 236 days to approve a short-supply request. As Allan Mendelowitz of the General Accounting Office testified, “One of the reasons why the decisions took so long . . . was specifically to create obstacles to acquiring steel through the program.” Deputy assistant secretary Gilbert Kaplan, who ran the program, declared in 1988 that a short supply is “not a negative situation . . . that’s a positive situation,” meaning the industry is “doing very well.” Federal steel policy routinely gave one man authority to judge whether American manufacturers really needed the steel they were begging for. Bill Lane, a top official with Caterpillar recalled, “High steel prices and quota-induced shortages were undermining factory efficiency as just-in-time processes gave way to just-in-case workarounds.”
Reagan’s steel quotas destroyed far more jobs than they saved. Professor Hans Mueller estimated that the quotas resulted in thirteen jobs lost in steel-using industries for each steelworker’s job saved. The Institute for International Economics estimated that quotas were costing the equivalent of $750,000 a year for each steel job saved. A 1984 Federal Trade Commission study estimated that steel quotas cost the US economy $25 for each additional dollar of profit netted by American steel producers.
Despite the economic devastation, President George H.W. Bush extended steel import quotas for another two and a half years in 1989. Bush ludicrously labeled the quota extension a “Steel Trade Liberalization Program”—as if free market rhetoric could magically transform the nature of a protectionist act. The 1989 quotas were expanded to include oil pipes and railroad locomotive axles and wheels, thereby hurting both the US oil industry and locomotive producers. Under the Bush regime, the US imposed 231 separate quotas covering 500 different steel products on steel imports from different nations.
The Reagan-Bush steel policy kneecapped US competitiveness. Former International Trade Commission (ITC) chairman Paula Stern noted, “Inflated U.S. steel prices were an important factor in the erosion of U.S. manufacturing preeminence and employment from the 1960s to the mid-1980s.” The ITC concluded that the steel import quotas actually increased the US trade deficit, causing a significant increase in imports of manufactured goods containing steel and a decrease of US exports of steel products.
The politicians who championed blockading American harbors against foreign steel never admitted that American steel was widely perceived as inferior in quality to foreign steel. Ford Motor Company’s rejection rate for US-made steel during the 1980s was five times higher than its rejection rate for foreign steel. A 1990 ITC survey found that 55 percent of American purchasers of stainless-steel bars and rods rated Japanese product quality and customer service “excellent,” while only 2 percent rated US product quality and service this highly.
But the protectionist follies of the late twentieth century did not deter George W. Bush, the first president of the new century, from imposing new restrictions on steel imports. When Bush took office, more than half of all steel imports were restricted by federal price controls—through penalties for foreign subsidies or penalties for low prices (so-called dumping). Steel lobbyists had a major role in writing US “fair trade” laws, which help ensure that foreign competition is routinely found guilty despite the absence of wrongdoing.
Even though overall steel imports were declining in the early 2000s, the ITC concluded that the American steel mills were being injured by a “surge.” The only product with sharply increasing imports were steel slabs—unfinished products being bought by American steel mills and transformed into finished, higher-value products. The ITC effectively concluded that American mills were being badly injured by the foreign slabs they voluntarily purchased and profited from. It didn’t make any sense but, since it was US trade law, it didn’t have to make sense.
The Bush administration knew even before imposing new tariffs that the steel industry’s problems were not due to unfair trade. In early 2001, the Treasury Department hired the Boston Consulting Group to analyze the US steel industry and the world steel situation. American Metal Market reported that the study “highlighted inefficiencies in US steel production compared with global competitors” and “measured U.S. steel industry efficiency in the bottom one-third of a global comparison.” US steel companies were outraged by the study, so the Treasury Department suppressed the report.
On March 5, 2002, President Bush slapped a new 30 percent tariff on steel imports. Bush announced, “Free trade is an important engine of economic growth and a cornerstone of my economic agenda.” He then revealed how he would protect American workers from that cornerstone:
An integral part of our commitment to free trade is our commitment to enforcing trade laws to make sure that America’s industries and workers compete on a level playing field. . . . Today I am announcing my decision to impose temporary safeguards to help give America’s steel industry and its workers the chance to adapt to the large influx of foreign steel.
Bush invoked US fair trade laws and the “level playing field” and then announced that he was providing special relief to steel producers that had nothing to do with laws on allegedly unfair imports.
The Bush administration knew its steel tariffs would destroy American manufacturing jobs but imposed them anyhow. Bush’s chief economic advisor, Glenn Hubbard, “drafted detailed analyses against the tariffs, including state-by-state job losses that he forecast for manufacturing,” the Washington Post reported. The estimated job losses were never made public. A late 2001 economic analysis by the Trade Partnership Worldwide consulting firm estimated that “new steel tariffs would cost about eight American jobs for every one steel job protected.”
Prices for hot-rolled steel almost doubled between the time the ITC recommended tariffs on imports, in December 2001, and the summer of 2002. US manufacturers were also devastated by shortages of steel products, as the tariffs disrupted international trade and deterred exports to the US. In many cases, US steel mills broke their contracts and forced their American customers to pay far higher prices. The Consuming Industries Trade Action Coalition estimated that “higher steel prices cost 200,000 American jobs and $4 billion in lost wages from February to November 2002.” An ITC analysis concluded that the new tariffs cost steel-consuming industries nine dollars for every dollar in additional steel profits. In late 2003, facing threats of European trade retaliation after the World Trade Center rulings against the tariffs, Bush suspended the steel tariffs.
Trump echoed the follies of pre-Depression Republican presidents like Herbert Hoover. Trump’s steel and aluminum tariffs sparked foreign retaliation they sparked and destroyed an estimated three hundred thousand jobs. On April 7, 2021, Commerce secretary Gina Raimondo declared that those tariffs “helped save American jobs in steel and aluminum industries.” She also justified the tariffs as a way to “level the playing field.” Raimondo continued Commerce secretaries’ tradition of refusing to use double-entry bookkeeping, instead looking solely at the profit of protected industries. Unfortunately, the Biden administration viewed those tariffs as a shining success.
If protection actually produced competitiveness, American steel manufacturers would have become world leaders long ago. Steel tariffs are one of the most brazen anti-industrial policies, a lasting warning of the incorrigibility of politicians chasing votes and campaign contributions. The future of trade policy is crucial to the future of liberty. Every restriction on a foreign seller is a control over an American buyer. It should not be a federal crime to charge low steel prices to American manufacturers.
Full story here Are you the author?Tags: Featured,newsletter
