by Charles H. Blum[1]

For more than a fifth of its 228-year national history, the US has struggled to devise an effective, lasting solution to the problems posed by steel imports. Nine successive American administrations faced pressure from the steel industry to curb rising foreign competition. All but Clinton responded in some way to limit imports. Each attempt was justified by claims of massive unfair trade practices and the threat of excess production capacity abroad. No policy response worked, at least not for very long. Some had unintended negative consequences, and the global problem is bigger than ever. Now, the Trump administration seems determined to act differently to deal with the steel import problem as a national security matter under Section 232 of the trade laws.

Here’s a short summary of key steel trade actions taken by successive US administrations, both Republican and Democrat, before drawing a few conclusions from this frustrating history of failure.

Johnson (1963-9): voluntary export restraints on carbon steel products from major exporters in 1968.

Nixon (1969-74): added specialty steel products to voluntary export restraints.

Ford (1974-77): launched Section 201 (safeguard) investigation on specialty steel.

Carter (1977-81): rejected relief for specialty steel; instituted trigger price mechanism (TPM) to toughen antidumping enforcement; established OECD Steel Committee; revised TPM after antidumping complaints were filed.

Reagan (1981-89): terminated TPM when industry filed new cases; negotiated quotas to settle new antidumping cases against imports from Western Europe in 1982; self-initiated Section 201 case on specialty steel, leading to orderly marketing agreements with seven countries and quotas on all others in 1983; rejected Section 201 relief for carbon steel product; instead negotiated voluntary restraint agreements (VRAs) with about 30 countries in 1984-5.

Bush 41 (1989 – 93): extended VRAs through July 1992.

Clinton (1993-2001): abandoned negotiations of a multilateral steel agreement (MSA) and a multilateral specialty steel agreement (MSSA); agreed to “zero-for-zero” tariff cuts as part of final Uruguay Round package, ending what was left of tariff protection without reciprocal concessions from many emerging steel producing countries; agreed to permanent normal trade negotiations with China with inadequate attention to its burgeoning state-owned, heavily subsidized steel capacity.

Bush 43 (2001 – 09): self-initiated Section 201 investigation on almost all steel products, leading to tariffs up to 30 percent on most imports.

Obama (2009 – 17): no steel import program; established Global Steel Forum to discuss global excess capacity.

Trump (2017 – ??): instituted Section 232 (national security) review; report due to President by January.

Having played some role in almost all of this sad saga, I draw the following conclusions about what doesn’t work:

–antidumping and countervailing remedies are costly, highly targeted and difficult and expensive to enforce.

–temporary import tariffs (such as Bush 43’s) can help rationalize overall supply imbalances but at the risk of promoting off-shoring with lasting negative consequences on domestic supply chain.

–even well designed quotas (such as Reagan’s VRAs) that restore order to markets, preserve key international supply chains, and put pressure on uneconomic producers in the US and abroad to undergo are inadequate. Much of Reagan’s success was due to the realignment of major currencies following the Plaza Accord in 1985; in fact, the steel quotas were only about 2/3 utilized over their 7-year life.

Import measures alone cannot be expected to produce effective and lasting results. Combined with currency realignments, they can improve the competitive conditions in the US market. But, even in that case, no import restraint program has yet proved even remotely effective in reducing overall global excess capacity.

Isn’t it time to try a new approach?

 

[1]Served as Assistant US Trade Representative for Industrial Trade from 1983 through 1985) and in other steel-related positions in the White House and the State Department from 1977 through 1983.   As an independent consultant, he advised steel clients in the US, Western Europe, Latin America and Asia from 1988 through 2012.