Steel tariffs cost more jobs

Reuters ^ | 1/27/03 | Michael Ellis

[Toddsterpatriot]

DETROIT (Reuters) - A group of automotive suppliers said on Monday that the Bush administration's protective tariffs on foreign steel have driven up their costs, forcing them to cut jobs and consider importing steel and other materials.

The companies, who are some of the largest purchasers of U.S. steel, said they may import more steel from countries that are exempt from the tariffs, such as Brazil, Argentina and Turkey. They may also import parts that use steel, they said.

"Wherever possible, we will purchase finished goods from non-U.S. suppliers whose steel costs are lower," said Jeff Stoner, vice president of worldwide procurement for ArvinMeritor Inc., (NYSE:ARM - News) which bought 1 million tons of steel globally last year.

Stoner said that ArvinMeritor, which makes wheels, drive trains and suspension systems for cars and trucks, said that rising steel costs were one reason it decided last week to close its Gordonsville, Tennessee, plant that makes window regulators and sunroofs.

[Toddsterpatriot]

I'm sure these workers were glad to give up their jobs for the U.S. steel industry.

[justshutupandtakeit]

This is the way tariffs always work. Supporters never take their analysis any further than the first effect of a tariff, the protection of profits and jobs in the protected industry. Somehow it never gets through them that it is everyone else in the country who PAYS for that protection.

[Willie Green]

This is the way tariffs always work.

No, this is the way "targeted tariffs" work. Revenue tariffs are quite different.

Bush's targeted tariffs were riddled with special interest loopholes that negated any domestic benefits.

The optimal solution is a relatively low, across-the-board revenue tariff of 10-20% on ALL imported goods from ALL foreign countries.

"Targeted" tariffs have the disadvantage of providing loopholes and, as others will be quick to point out, the potential to hurt other domestic industries.

A prime example is our failed embargo on the importation of Cuban goods. Cuban sugar has been routinely imported to the U.S. through the back door: Canada. Cuban sugar is shipped to Canada where it is dissolved in molasass. "Canadian" molasass is then legally imported to the U.S. where the sugar is easily refined back out. The leftover molasass is then exported back to Canada where the cycle is repeated. Large sugar-users (such as candy makers) are also closing their domestic factories and moving to Canada where they can legally use Cuban sugar, then import it as candy to the U.S.

An across-the-board revenue tariff of 10-20% would circumvent this type of abuse. Additionally, the revenue could be used to offset a major reduction or elimination of the corporate income tax, providing domestic producers a more "level playing field". (A Proposal to Abolish the Corporate Income Tax)

From a historical perspective, a revenue tariff of 10-20% is NOT excessive:

[Doctor Stochastic]

This is the way tariffs are supposed to work. Some gotta win, some gotta lose.

[Cacophonous]

Nice summary, Willie, on the difference between a targeted tariff and an across-the-board tariff. My only objection to Bush's targeted tariff's was just that: it was targeted.

A more telling article is the following link, from the source porvided in this post:

http://biz.yahoo.com/rc/030121/autos_arvinmeritor_earns_3.html

ArvinMeritor is posting a tidy profit, and blamed its job cuts on the excess in the auto supplier market. The excess of demand on steel suppliers (from all the excess auto suppliers) will have a big impact on steel prices too.

[kaktuskid]

Of course the rest of the world THEN puts tariffs on our goods....
Then we raise tariffs on their goods...
Then they raise tariffs...
And so on, and so on....

VOILA!!!ANOTHER WORLD DEPRESSION!

[Willie Green]

Of course the rest of the world THEN puts tariffs on our goods....

If that's the tax policy they wish to pursue,
they have the right of sovereign nations to do so.

Then we raise tariffs on their goods...

Nope, that's the "targeted tariff" reaction.
Such retalitory measures do not occur with revenue tariffs.

[iranger]

While I've always considered myself a free-trading capitalist pig, I've had a change of heart with regards to some tariffs. Specifically when the international competition is "dumping" in order to gain market share while benefiting from subsidies from their home country. If, for example, South Korea is dumping steel at below production cost and is only able to do so only because it receives subsidies from the South Korean government, are we not correct to hit them with a tariff. Afterall, in current worldview, having a viable domestic steel industry is in the best interest of our nation from a national security standpoint. Furthermore, if U.S. steel companies are only losing marketshare because their foreign competition is state aided, it belies the American ideal of allowing our workers to be higher compensated because they are more productive than their international counterparts.

[Libertarianize the GOP]

http://www.freerepublic.com/perl/bump-list

[Toddsterpatriot]

If, for example, South Korea is dumping steel at below production cost and is only able to do so only because it receives subsidies from the South Korean government, are we not correct to hit them with a tariff. Afterall, in current worldview, having a viable domestic steel industry is in the best interest of our nation from a national security standpoint.

I think you're looking at this backwards. If they want to give us something for less than it cost to produce, and they tax their citizens to give us this discount, I say bring it on. The extra profits and jobs generated by the discount should be more than enough to compensate those American steel producers and their employees who would lose their jobs.

[iranger]

I'm not looking at this backwards. Steel is a capital intensive industry. Once our companies are dissolved, they are gone for good. The subsidized foreign competition will eventually phase out their subsidies and the price of steel will rise again to market prices. At that point, no American entrepreneur in his right mind would start a new steel venture, knowing the competition may resort to the same old dumping practices to drive you out of business. There are also a national security aspects to think about. I don't want to be reliant on the Japanese, Brazilians, or Koreans for steel anymore than I want to be reliant on the arabs or the Russians for oil.

[Toddsterpatriot]

The excess of demand on steel suppliers (from all the excess auto suppliers) will have a big impact on steel prices too.

Not sure what you were trying to say there.

From the article: said it would eliminate 575 jobs in its light vehicle systems division due to excess capacity in the auto supplier market.

Thay need to cut costs or go out of business. They've got the worst of both worlds, too much capacity and rising steel costs thanks to tariffs.

[Toddsterpatriot]

The subsidized foreign competition will eventually phase out their subsidies and the price of steel will rise again to market prices.

Eventually, probably never. So, we eventually pay market prices in the meantime look at all the money we saved and jobs we created in steel using industries.

You really think the steel producing nations wouldn't crawl over broken glass to sell into our market? Please. I'm not worried about an OPEC of steel springing up.

[mountaineer]

fyi

[iranger]

"Eventually, probably never. So, we eventually pay market prices in the meantime look at all the money we saved and jobs we created in steel using industries. You really think the steel producing nations wouldn't crawl over broken glass to sell into our market? Please. I'm not worried about an OPEC of steel springing up."

LOL...probably, definitely. In the long run, say 15 years, you could argue you'd pay more for steel because the most efficient producers were eliminated. As for OPEC, thats a laugh. OPEC has had little effect on oil prices and its not my concern. Our dependency on arab oil has created greater problems than little ole feeble OPEC. Namely, Sadaam, the Saudi regime, Qadafi, Khomeni. We tread lightly with the Saudi's primarily because of our dependence on them. I do not savor the same beholding relationship with the South Koreans if there were a North Korean problem further on down the road. The "cost" of giving up our sovereign steel industry could be much higher in terms other than dollars and cents. Let the market price be the deciding factor. I'll take the American steelworkers over the Nips and Koreans anyday. Its a lot easier to get a iron ore pellet from northern Minnesota across the Great Lakes to the steel mills in Ohio than it is to ship it from the otherside of the world.

[Toddsterpatriot]

LOL...probably, definitely

How long have those countries been subsiding their steel industry? Ever since they were created. What makes you think South Korea after 50 years is suddenly going to stand up to their steel industry?

In the long run, say 15 years, you could argue you'd pay more for steel because the most efficient producers were eliminated.

Actually, the least efficient would be eliminated.

The "cost" of giving up our sovereign steel industry could be much higher in terms other than dollars and cents. Let the market price be the deciding factor.

You want to let the market price decide, them you want to add tariffs? If they want to sell to us at market less their subsidy, I'd say thats better than the market price.

I'll take the American steelworkers over the Nips and Koreans anyday. Its a lot easier to get a iron ore pellet from northern Minnesota across the Great Lakes to the steel mills in Ohio than it is to ship it from the otherside of the world.

If you want to pay extra, go for it. If we can improve the environment for steel makers here, so they can compete against the Nips and Koreans, lets do that. It'd be cheaper than what we're doing.

[iranger]

"How long have those countries been subsiding their steel industry? Ever since they were created. What makes you think South Korea after 50 years is suddenly going to stand up to their steel industry? "

As soon as there is nothing left to gain, i.e. no benefit to the Korean steel industry, then the subsidies stop. Or, you can put your trust in the South Korean government to continue your minimally cheaper steel. You seem to have more faith in the South Korean gov't than the free market.

"Actually, the least efficient would be eliminated. "

Wrong! The most efficient, judged by bringing the highest quality steel at the lowest prices, in many if not most instances is American steel. Close proximity to its final destination is a huge pricing advantage.

"You want to let the market price decide, them you want to add tariffs? If they want to sell to us at market less their subsidy, I'd say thats better than the market price."

As already explained, you won't get to keep that artificially low price forever.

"If you want to pay extra, go for it. If we can improve the environment for steel makers here, so they can compete against the Nips and Koreans, lets do that. It'd be cheaper than what we're doing."

I didn't know that the market price = "extra". Why didn't the NFL step in and allow Oakland to play with 12 players in the second half? It was obvious that they couldn't compete with Tampa. Why not give them an advantage. Afterall, we'd all benefit with a closer game.

Care to take a swing at the national security side of the argument? I think Al Quieda, Iraq, North Korea, Venezuala, Brazil (marxist president), and China are all on your side.

[Toddsterpatriot]

Wrong! The most efficient, judged by bringing the highest quality steel at the lowest prices, in many if not most instances is American steel. Close proximity to its final destination is a huge pricing advantage.

So, American steel has a huge pricing advantage it shouldn't need tariffs. End the tariffs now. Let consumers who want to pay for shipping bring in foreign steel, sounds good to me.

As already explained, you won't get to keep that artificially low price forever.

So, you'd raise our prices now, instead of some time in the future. That helps us how?

I didn't know that the market price = "extra".

If their subsidized steel is "less" than the cost, that's below market.You want to pay more? Thats above their "market" You said let the market price decide. I think theirs is cheaper, that's my decision.

Why didn't the NFL step in and allow Oakland to play with 12 players in the second half? It was obvious that they couldn't compete with Tampa. Why not give them an advantage. Afterall, we'd all benefit with a closer game.

Now you're being silly.

Care to take a swing at the national security side of the argument? I think Al Quieda, Iraq, North Korea, Venezuala, Brazil (marxist president), and China are all on your side.

Where were you when the buggy whip industry needed protection, it's all about national security.

What about computers? They're important for security too. Maybe we should make all the parts here? Who wants to pay triple for a computer? It would help national security though.

[iranger]

"So, American steel has a huge pricing advantage it shouldn't need tariffs. End the tariffs now. Let consumers who want to pay for shipping bring in foreign steel, sounds good to me."

No, end subsidies and end tariffs and let the best man win. Who is afraid of capitalism?

"So, you'd raise our prices now, instead of some time in the future. That helps us how?"

Who is raising prices? The market is determining the price instead of some South Korean governmental beaurocracy. You know the Russkies tried your approach for 50 years or so. A lot of good that did them.

"If their subsidized steel is "less" than the cost, that's below market.You want to pay more? Thats above their "market" You said let the market price decide. I think theirs is cheaper, that's my decision."

You seem to be a big fan of "managed economies." We already know that managed economies lead to an inefficient use of resources.

"Now you're being silly."

Not really. If you bothered to answer the question you'd see the point I am making. The reason they don't is because in a competitive forum, there are rules which govern the field of play. All parties are expected to abide by them so that a winner can be determined. There is a 15 yard penalty for 12 men on the field. A punative tariff works in the same manner. Foreign steel companies receiving subsidies are not playing by the same rules. By definition, they are inefficient pathetic creatures, much like the Oakland Raiders.

"Where were you when the buggy whip industry needed protection, it's all about national security."

Last I heard, the M-1 Abrams tank did not employ buggy whips. Try again.

"What about computers? They're important for security too. Maybe we should make all the parts here? Who wants to pay triple for a computer? It would help national security though."

First, computer components are not capital intensive. Steel is derived from iron ore, which is only available in certain areas, i.e. northern Minnesota and Michigan's upper penninsula. Computers are made from components which are abundent around the world. Silicon is next to oxygen in respect to its abundance in the ground. Second, many components are manufactured here. The computer industry changes so quickly that the managed economies you seem to prefer continually mismanage their attempts to become involved in it.