Steely silence / Bush should be mindful of the victims of trade (Pittsburgh Post-Gazette)

Pittsburgh Post-Gazette ^ | Thursday, December 04, 2003

[presidio9]

Pittsburgh experienced a quick visit by President Bush on Tuesday, though not quite as stealthy as his Thanksgiving visit to Baghdad. He scooped up nearly a million dollars in campaign contributions but did not address the subject foremost in River City dwellers' minds -- steel tariffs.

[Naspino]

One might hope that this concern would lead to sympathetic consideration of other benefits for displaced and retired steel employees -- and others victimized by global trade.

Victimized by global trade? They better figure out a way to compete because a trade war would have really hurt the workers.

[Hermann the Cherusker]

What higher steel prices?

Everyone keeps parroting this, but no one seems to want to bother with the facts at hand.

[presidio9]

no one seems to want to bother with the facts at hand

Good point. What, then, are the facts at hand?

[Mr. Bird]

Are they not higher? Relative to? It's a near certainty that an unprotected commodity's price will be lower relative to the protected one. That's the whole premise behind protective tariffs.

[DCBurgess58]

Bush attempted to protect the steel industry and the payback he got from the steel workers union was an endorsement for the Democrats who will be running against him in 2004. On top of that the E.U. threatened targeted tariffs to try and hurt Bush's re-election chances by causing anger in states where he does not have a solid majority. It's not too hard to see why he's abandoning the steel tariffs, considering that there is no up side for him. The steel workers have just learned a painful lesson about biting the hand that feeds them.

[Willie Green]

They better figure out a way to compete because a trade war would have really hurt the workers.

A full blown trade war is already in full swing.
Facilitated by Government policies, it is being waged against the prosperity of the American Middle Class by transnational business interests.

[Hermann the Cherusker]

presidio9: What, then, are the facts at hand?

Steel prices are averaging in the tarriff regime at or below where they were averaged over the several years previous to it - around $300/ton hot rolled sheet, $400/ton cold rolled sheet.

Mr. Bird: It's a near certainty that an unprotected commodity's price will be lower relative to the protected one. That's the whole premise behind protective tariffs.

No, no, no! You've got it all wrong! The premise of tarriffs is to make a relative incentive for domestic investment over investment abroad. It has nothing to do with raising or lowering prices, which are determined by the marketplace demand quite independently of tarriffs. Tarriffs don't set prices or prohibit foreigners from selling their product. Foreigners are welcome to set up domestic plants to employ Americans in a tarriff regime, exactly what we have seen with the Auto import quotas Reagan used. While GM and Ford and Chyrsler have closed plants from lost market share, Toyota and Honda and Hyundai and Mercedes, etc. have opened domestic plants, not increased imports. Remember the goal is to create domestic investment to get Americans high paying manufacturing jobs.

We've got well over a dozen steel producers, none with more than 15% of the domestic market. There is plenty of competition at home that kept prices down under the tarriff regime. That tarriffs allowed a lessening of imports and a greater use of domestic steel, giving producers time and money to restructure and strengthen the industry (i.e. US Steel and ISG mergers).

This isn't like a tarriff on passenger airplanes, which would give Boeing (the only domestic producer) unlimited pricing power up to the level of the tarriff.

[presidio9]

The premise of tarriffs is to make a relative incentive for domestic investment over investment abroad. It has nothing to do with raising or lowering prices, which are determined by the marketplace demand quite independently of tarriffs.

So, in other words, the President just screwed a whole bunch of domestic investors?

[Hermann the Cherusker]

Not at all, unless the new US Steel and ISG suddenly get short of cash, which I think is unlikely.

[evets]

President Bush offered greetings to "Knowledge City" but no assurances to Steel City "knowledge" city?!? Will the "Steelers" be moving or changing their name?

[presidio9]

Not at all, unless the new US Steel and ISG suddenly get short of cash, which I think is unlikely.

LOL. I'll answer your goofy logic with your own earlier point:

"Remember the goal is to create domestic investment to get Americans high paying manufacturing jobs. "

[Hermann the Cherusker]

"Remember the goal is to create domestic investment to get Americans high paying manufacturing jobs. "

I was speaking of tarriffs in general, and their effect of making owners of capital, foreign or domestic, more desirous of investing in the US to avoid paying a tax on imports.

[presidio9]

I was speaking of tarriffs in general, and their effect of making owners of capital, foreign or domestic, more desirous of investing in the US to avoid paying a tax on imports.

There's your problem. You have not yet grasped how fleeting your benefit is. Tariffs are a temporary fix, and they tax all to help a few.

[Hermann the Cherusker]

You have not yet grasped how fleeting your benefit is. Tariffs are a temporary fix, and they tax all to help a few.

A) All that was needed was a temporary fix.

B) The price data indicate no real effect, hence no "tax". The bellyahcing by some is a lot of nonesense.

[Willie Green]

We've got well over a dozen steel producers, none with more than 15% of the domestic market.
This isn't like a tarriff on passenger airplanes, which would give Boeing (the only domestic producer) unlimited pricing power up to the level of the tarriff.

Interesting observation.
I'd suspect that the Automotive Cartel (GM, Ford, DCX) used their political influence to PREVENT similar consolidation of the domestic steel industry throughout most of the 20th Century. Now that the Cartel has gone global, it has become more expedient to undermine domestic steel with imports.

[presidio9]

A) All that was needed was a temporary fix.

B) The price data indicate no real effect, hence no "tax". The bellyahcing by some is a lot of nonesense.

LOL. The US Steel industry is benefiting from two things right now:
1) The weaker dollar makes exporting to the US less desirable.
2) Strong economies in Asia are importing steel voraciously.

When these conditions change, the US Steel industry can't compete. Why? UNIONS.

I thought you wanted to talk facts. You don't seem to be equipped with any. The idea that there is no effect from a tax on raw materials is the real nonsense. All money comes from somewhere. Economics does not get much simpler than that.

[presidio9]

I'd suspect that the Automotive Cartel (GM, Ford, DCX) used their political influence to PREVENT similar consolidation of the domestic steel industry throughout most of the 20th Century.

And your evidence for this is? The steel industry was regulated against consolidation after the trustbusters broke up US Steel.

[Hermann the Cherusker]

When these conditions change, the US Steel industry can't compete. Why? UNIONS.

Really? Why then has there not been a complete collapse in US steel production over the past 30 years? We are producing as much now as we did in the 1970's (consumption is not up much because of plastics substitution). All those horror stories about Bethlehem and Pittsburgh and Youngstown mills going under have less to do with foreign steel and more to do with economic factors in production (nearby iron ore deposits becoming spent out, shift of production to other areas of the country, greater ue of scrap remelting in new mills, etc.) The largest costs in steel production are material inputs, not labor, and a lot of the material cost is bulk transportation, since rocks of various sorts (iron, coal, and limestone) are relatively cheap. One can buy limestone for $5 per ton crushed, but shipment even 100-200 miles might run $10 per ton. If your nearby quarry is spent out, your mill might become uneconomical.

I thought you wanted to talk facts. You don't seem to be equipped with any.

I've yet to see a single fact come from your way. I don't think you even know the first thing about American steel production and its economic geography and production history. You certainly aren't demonstrating it here.

The idea that there is no effect from a tax on raw materials is the real nonsense. Economics does not get much simpler than that.

Except when your "theory" has no support in any the data. See the graphs I previously posted. Steel price has continued a long-term secular down trend. Tarriffs had no long term price effect and no stabilization effect on prices. Your theory is just hot air.

[Hermann the Cherusker]

US Market is around 125 million tons per year, IIRC. US Steel and ISG are at around 18 million tons capacity each. Even combined, they would not be a third of the total market. Even combined with Nucor (13 million tons per year, all relatively brand new investment), they wouldn't even be 40% of total market.

The "destruction" seen in places like Pittsburgh is more attributable to the rise of Nucor and Co. than to imports. A lot of imports are unfinished slabs going to mills that have spent their local iron ore deposits. Its much cheaper to send unfinished steel from a plant nearer raw materials than all the raw materials.

As far as steel employment goes, it was rather inevitable it would collapse with the onset of technology, just like it has on railroads, as we've moved from 5 man crews on steam trains to 2 man crews on diesels.

Even the banning of all imports would only, in theory, increase employment by perhaps 25%. Yet total employment in steel is down something like 80%+.