Bush's Steel Opening

The Wall Street Journal ^ | Tuesday, November 11, 2003

[TroutStalker]

The World Trade Organization surprised no one yesterday when it once again ruled that the 30% steel tariffs the Bush Administration imposed in 2002 are a violation of global trade rules. Now the question is whether the Administration will use the verdict as a convenient way to extricate itself from the tariffs. The other option is to sit by as the world levies billions in retaliatory duties.

[Bikers4Bush]

So the WSJ thinks we should go back to allowing third world crap holes to dump their steel here?

[VRWCmember]

So the WSJ thinks we should go back to allowing third world crap holes to dump their steel here?

No the WSJ recognizes that ending the steel tariffs would boost manufacturing, would avoid significant retalitory tariffs on our exports, and would remove a significant barrier to continued economic growth. If that means "third world crap holes" have a market for their steel that was shut off by the tariffs, then our domestic steel must not be that much better than "crap hole" steel.

[Bikers4Bush]

No, it means that their steel is subsidized by their governments and produced with what is in effect slave labor.

[BMiles2112]

If other countries want to tax their citizens to subsidize steel to be sold here, that's fine by me. It means we can buy the steel cheaper, which means final products containing steel produced in the US are cheaper, which makes the US more competitive in those steel using industries.

[Bikers4Bush]

Brilliant deduction. And just how do you expect to be able to protect national security interests without the ability to produce steel?

Allowing steel to be dumped here does a lot of things, none of which make us more competitive in anything.

[SAJ]

Fact is, virtually any non-first-world country that cares to, whether a pseudo-democratic one or a totalitarian one, can make and ship most kinds of steel far cheaper than the US can. The US' wage and tax and legal structures guarantee this result.

This is unfortunately true for almost all commoditized manufactured goods. Undifferentiated, low-value-added, low- or no-tech goods will not be able to be produced on an economically viable basis ever again in the US, bar a worldwide depression.

[Bikers4Bush]

For anyone who thinks this is a good idea and good for America I will refer them to something I have posted in the past from a family member of mine who works in the steel industry.

"The major offenders are countries like Korea, Brazil and Japan(more so
before than now), who have very poor currencies and need American dollars
much more than a paid work force. These countries in general also get
heavy government subsidies, where rather than run insane wellfare programs
they pay the steel industries to hire more people (cheap labor when it not
only cost you nothing, but puts money in your pocket).

If you're referring to (XYZ co), the (new owners) group is insane if they
think they can get the plant running in 6 to 8 weeks. There is no more raw
material on the ground there, (XYZ) used every last pound. Not only that but
(XYZ) took alot of thier vendors (who they owed money to) down with them.
It's difficult to rebiuld a scorned vendor base. Not to mention the blast
furnaces. When they go down it takes months to get them back up unless
they've been hot idled (not likely without any money). If a blast furnace
freezes over the s%$# at the bottom has to be dynamited out. Then
religning is essentially the same as building a new one. The only reason
you don't build a new one is because it then has to follow the latest
environmental laws (impossible)."

Clearly it is not competition when slave labor is used to produce the goods.

[Bikers4Bush]

I agree completely. The problem is that the steel industry is critical to our national security interests. The WTO being the mistress of the UN would love to be able to put our steel industry out of business and weaken our ability to defend ourselves which would subsequently give the UN more power over us.

We should no more allow the steel industry to go away than our defense contractors. Doing so is national suicide.

Every pissant little hell hole wanting to hold something over us would refuse to sell us steel.

[MNlurker]

I am a steel rep and we have been hoping for quite awhile that he'd dump it. Expect allocation for material next year because of demand and the lack of domestic suppliers. The joke about allocation. Us reps can spend all of our time on the golf course because you'll be paying the price we say and get it when we get around to it. Revised price sheets are coming out constantly right now and I can assure you they are not saying pricing will remain stable.

The simple fact is that small mom and pop fab houses got killed by 201. The US could make steel with anyone right now in the world, but the majority of those that are left have to pay off legacy costs to their unions.

Now would be the right time to call off the dogs.

[BMiles2112]

And just how do you expect to be able to protect national security interests without the ability to produce steel?
The tariff was enacted a couple years ago, and we've been producing steel just fine for quite some time before that. There are, and were, plenty of steel producers in existence prior to the tariffs. The "national security" concern is a legitimate one in some cases. Unfortunately it gets used for every argument in favor of tariffs. The US produces steel just fine.
Would you be in favor of a large tariff, say 100%, on imported oil? I view that as a more serious national security issue than steel, since we get most of that from our friends in the mid-east.

Allowing steel to be dumped here does a lot of things, none of which make us more competitive in anything.
Please follow this for a minute. When the tariff was enacted, steel prices jumped over 30%. If I make steel parts, and the cost of the final product is 50% material, then the cost of the final product goes up over 15%. If I'm competing with a French company to sell the same product, then I just became less competitive. The business likely goes to the French, and American jobs suffer.

[BillM]

The problem is that US steel manufacturers have costs in the billions before they smelt their first pound of steel. The pension and medical benefits for current employees and retirees make it impossible to compete with new steel companies. Foreign countries subsidize through government medical and pension benefits.
This is a problem without a simple solution.

[Bikers4Bush]

We don't need to import oil, we have all we need in alaska we just refuse to go get it.

Please follow this, if the prices jumped 30% because the imported steel was being dumped here below market then the market came up to where it should have been in the first place.

[BMiles2112]

Us reps can spend all of our time on the golf course because you'll be paying the price we say and get it when we get around to it.
I'll agree with that completely. Real convenient for those of us trying to buy steel!

[Bikers4Bush]

Well your motivation is certainly apparent.

[SAJ]

Philosophically, I agree completely. The problem, as usual, lies in the practical world.

Which course shall we take, then? A) Subsidise the steel industry, world without end, which would mean, among other things, forcing the taxpayer to pick up the multi-billion $ tab for (as MNlurker so correctly points out) supernumerary legacy pensions? B) Revamp the tax code to remove its punitive depreciation and amortisation provisions, esp. regarding low-tech industry? C) Force a renegotiation of legacy pension schemes and other economically now-ridiculous contract provisions? D) Forget entirely about the production of ''plain'' (if you will) steel, focus on the production of high-value-added specialty steels, and stockpile the hell out of plain steels via imports? or E) Invent Rearden Metal?

I know the two courses I'd prefer, but I'm afraid voting considerations on the part of our always feckless politicos would prevent their implementation, probably forever, or until a REAL disaster looms.

FReegards!

[BMiles2112]

We don't need to import oil, we have all we need in alaska we just refuse to go get it.
I know, but wishing that enviro-whackos don't exist doesn't make them disappear. Until we get the green light to drill for oil in Alaska, we're dependent on foreign oil.

if the prices jumped 30% because the imported steel was being dumped here below market then the market came up to where it should have been in the first place.
You're proposing that there is a certain, proper value for a given amount of steel. The Soviets had some ideas about what things SHOULD cost, as well. Because foreign nations have lousy economic policies doesn't mean that we should follow suit. It turns into economic warfare, as seen by the recent WTO ruling, and everyone loses.

[BMiles2112]

I've admitted before that I work in the steel (consuming) industry. However, that has no bearing on my opinion. I'm opposed to ALL tariffs in ALL industries as a form of protectionism. They are typically used for political gain, as seen here. This does not mean I'm opposed to tariffs as a form of revenue for the gov't.

[SAJ]

Don't you find it a rather tasty irony that these tariffs do NOT seem to have had the political effect that Rove expected? Heh, heh, heh...

[o_zarkman44]

does anyone else hear the sucking sound of more jobs leaving America so undeserving and unmotivated 3rd world workers can make a buck an hour? The WTO exists to bring down the industrial might of America and with it our financial structure. All to give away to the 3rd world.
All so as to cripple America and bring us closer to the global socialist net of the UN.