Put Politics Ahead of Economics by Supporting the President's Steel
For Immediate Release.
May 8, 2002 The House
of Representatives wrongly followed President Bush’s lead and overwhelmingly
supported his imposition of substantial tariffs on imported steel. This decision has put steel manufacturers and
other American manufacturers at a disadvantage in the global marketplace.
For example, of all the steel imported into U.S. ports, domestic
steel mills import between 25 to 30 percent.
Since the imposition
of the tariffs, it has been easier for domestic producers to increase
prices because low-cost foreign supplies are no longer available to
the American market. For example, the average spot, or market, price
of hot-rolled steel sheet (the type of steel used for motor vehicle
bodies and domestic appliances) has increased from $215 a ton in November
to $290 in April according to surveys of steel buyers by Purchasing
magazine. Expected to increase to $300 a ton are prices
for May and additional increases for the summer have been announced
by some producers.
The fight for free
trade in the U.S. for years was led by the steel industry. However, today this same industry now fights for protectionism.
For decades, U.S. steel
manufacturers have benefited from varying degrees of import protection
and subsidies because of their political clout.
For example, for the last 25 years more than $17 billion in government
subsidies have been given to U.S. steel producers. Furthermore, steel imported in 1981 from nine countries was, in
fact, subsidized and being sold in the U.S. at unfairly low prices according
to the Commerce Department in June 1982.
The government, as a result, imposed an additional tax on foreign
steel that on some imports ran as high as $250 a ton. Consequently, this higher steel price cost U.S. consumers at least
$5 billion annually.
Too many mills during
this time exacerbated their problems by making overtly generous deals
with their unions and pocketing profits instead of capitalizing on their
sheltered status to invest in new equipment and improve worker efficiency.
Now, the scales have
been tipped by the emergence of a mature, efficient steel industry in
Germany, Japan, South Korea and elsewhere.
Priced out of many foreign markets, the profitable North American
steel market is in a struggle with foreign competitors.
The industry is also
suffering from higher costs associated with environmental protection
regulations and lagging productivity.
These increasing production costs have resulted in American steel
users importing larger and larger quantities from foreign supplies because
they are finding it more cost-effective since the cost of a ton of domestic
steel is so high.
However, able to undersell
imported steel and increasing their sales are some small steel plants
using advanced smelting technology the so-called minimills. In fact U.S. steel imports actually declined 21 percent last year
as a result of newer and better-managed mills.
At steel-using companies
and at ports that handle steel, higher steel prices will also cost thousands
of Americans their jobs. This
eventually will result in a ripple effect that is felt across the nation. Jobs will migrate to areas where steel is lower
in cost. Across the U.S., companies
may be forced to lay-off employees as a result of price increases triggered
by the rise in tariffs.
will not absorb the increase tariff imposed on them but will pass it
on to the American consumer. On
every U.S. family, in a time of economic uncertainty, this will result
in an additional cost burden of perhaps $200 or more.
“The U.S. steel industry
should not be shielded from mismanagement and inefficiency by blaming
their failures on foreign competition,” said Dr. Joel P. Rutkowski,
president of the American Voice Institute of Public Policy.
“The best policy that the government could promote for the industry
is allowing efficient mills to thrive in the challenge of world competition. However, the governments current course of
action will not give inefficient mills the incentive to improve but
will harm the industry further and will cause prices to rise. As usual politicians that claim their policies help the American
people at election time in actuality will burden consumers with extra
costs that could be used elsewhere to meet other family and individual
needs. In a time of economic uncertainty, those who
will be hurt will be those that can afford it the least — the poor.”
Joel P. Rutkowski, P.h.D.
President, The American Voice Institute Of Public Policy
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