Bush to impose steel tariffs of 20 percent to 30 percent on help ailing steel industry

Mpls (red)Star Tribune / AP ^ | 3/5/02 | Ron Fournier

[Valin]

WASHINGTON -- President Bush will impose tariffs of up to 30 percent on steel imports in a bid to aid the ailing U.S. steel industry, White House officials said Tuesday of a move certain to draw opposition from American allies.

[yankeedame]

t Walter Williams was talking about last week. Paraphrased, it went something like this: Bankruptcies are good as they mean that resources will be naturally reallocated elsewhere, where they will be put to better use than before. So instead of bailing out players in the markets, let other players come in and try their hand at doing a better, more efficient job.

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Right. Right. Right. It's called "Economic Darwinism". If you want to get a look at "protected" industries-- an their effect on a nation's economy-- just take a look at Japan, or, even worse, India.

And why all this handwringing over "dumping"? If other nations are desperate (or stupid) enough to sell us steel at below cost who are we not to take advantage of it? That's like someone offering to sell you a (US)dollar for 90c. What are you going to say? "No thanks, I'd rather go to the bank an pay $1.05 for it".

[HamiltonJay]

And why all this handwringing over "dumping"? If other nations are desperate (or stupid) enough to sell us steel at below cost who are we not to take advantage of it? That's like someone offering to sell you a (US)dollar for 90c. What are you going to say? "No thanks, I'd rather go to the bank an pay $1.05 for it".

This is a poor analogy and a even more myopic view of economics and industry. Today these nations dump, because they are not profit driven, but employment driven.. in the process our profit driven industries are driven out of business, because they cannot compete. Now in 5 or 10 years when the economies of Japan or Korea eventually come out of depression and profits once again drive their industries, and their prices naturally rise, there is no domestic producer left to compete. You just exported Billions of dollars of wealth, destroyed untold numbers of jobs by destroying an entire domestic industry, and lord forbid a conflict break out, you now depend on foreign sources for a fundamental building block for industry, that can be cut off at any time...

Blanket "free trade" policies are some of the dumbest policies ever employed. It is a pity that this group has coopted the entire conservative side of the isle. If putting economics strictly before sovereignty is conservatism, then it is a sad sad day in america.

[Wyatt's Torch]

This is easy. If people/companies have to use more disposable income to pay for artificially high steel costs, that is an inefficient use of capital that could otherwise be directed to more efficient investments.

[Cacophonous]

We need to stop the dumping, ASAP. Combine the tariff with a modernization tax credit. Take things from there.

I agree completely, but would point out that the US steel industry is modernized, within the last ten years. Technology is not the issue. How about ending the dumping and loosening EPA, OSHA, EEOC and other restrictive government regs? They are far more damaging that any perceived lack of modernization.

[Wyatt's Torch]

If, as you predict, prices rise in the future, why would a new, domestic, more efficient competitor rise up and sell steel for a more competitive price? If the US companies can't compete then they should go out of business. This protectionism serves to promote an inefficient allocation of capital which is, at least in part, the problem with our economy today.

[Cacophonous]

This is easy. If people/companies have to use more disposable income to pay for artificially high steel costs, that is an inefficient use of capital that could otherwise be directed to more efficient investments.

You've given me no facts, just economic theory. A valid theory, but one that does not apply. As HamiltonJay says so well in #22: "Today these nations dump, because they are not profit driven, but employment driven.. in the process our profit driven industries are driven out of business, because they cannot compete."

In other words, your theory is right, but only if all parties play by the same rules...and they are not.

[Doctor Stochastic]

So we are punishing the steel consumers for the steel industry's inefficiency.

[Cacophonous]

Nicely said.

[Wyatt's Torch]

What is wrong with a company selling a product for less than it cost them to produce? Why is that bad?

As for quantitative facts, I am not a PHD economist, so I don't have the numbers backing up those economic laws.

[JohnGalt]

How painful to endure...

Clinton raised income taxes but cut the capital gains tax and was over-all good for free trade.

Bush sends a $300 rebate check and promotes tarrifs.

Clinton, more pro-growth than Bush?

What's up is down; what's down is up.

[Cacophonous]

No, the steel industry is being punished for playing by different rules than their competitor.

This whole question amazes me.

Do those that oppose protecting American interests actually think American industries cannot compete, given a level playing field? That's the implication.

All I ask is that the US government level the playing field by imposing some leveling tariffs. Those that oppose the tariffs seem to have given up on American steel; since US Steel, Bethlehem Steel, et alii, cannot compete against unfair trading practices, let's dump them and go with those that are breaking the rules.

And this whole notion of protecting the consumer is a red herring.

First, using consumer protection as a basis for a trade policy is disastrous on its face.

Second, if tariffs are imposed, it is true that consumers might see a temporary rise in prices. (although some claim we have excess capacity, so logically, prices should not go up). Even if they do, however, I have faith in the ability of the American steel industry to immediately meet the demand and for prices to go back down. Additionally, our foreign competitors will have to clean up their trading practices in order to compete.

This means we would then have a free market.

Just as you promote peace by having (and being willing to use) a military might, you create a free market by having and being willing to use your economic might.

[Cacophonous]

What is wrong with a company selling a product for less than it cost them to produce? Why is that bad?

They are not doing this. Their losses are being subsidized by their government.

[Wyatt's Torch]

In a half-hearted attempt to stick up for Bush, he doesn't have a GOP congress to work with. That being said, he hasn't even proposed any supply-side economic plans. His tax plan, even before it was corrupted by the awful "tax-credit" idea, was never "pro-growth". I'll listen when he proposes immediate, accross the board marginal tax relief as well as an elimination of the capital gains tax.

[box221]

Agreed, I guess when you look at the big picture in the long run, it is better to pay welfare and EIC than collect taxes from an indrustry. Dumping is employment and tax driven.

[HamiltonJay]

If, as you predict, prices rise in the future, why would a new, domestic, more efficient competitor rise up and sell steel for a more competitive price? If the US companies can't compete then they should go out of business. This protectionism serves to promote an inefficient allocation of capital which is, at least in part, the problem with our economy today.

Where do these domestic competitors come from? Do you think building a steel plant and all the infrastructure that goes with it just shoot up overnight? It will take years to build the plant, let alone the infrastructure etc... Not to mention that the foreign nations are more than willing to keep the barriers they have and accept more losses to end plant construction to keep their dominance... your ideal of the open free and equal system on all parts is foolish at best. Do you think the old steel mills will just sit around for 20 years empty and be ready to go the minute the price goes up? It doesn't work that way...

Your stand is based on the false assumption that protectionism serves to promote an inefficient allocation of capital ... In the current situations you are not talking about all other things being equal. If you built a steel plant in the US today, that was the most technologically advanced and the most efficient, it could not compete with the foreign dumping... the systems is not "all things being equal". There is nothing efficient about dumping, you have a system that is subsidizing employment dumping product for less than it costs to manufacture... your argument about efficiency falls apart.

As for allocation of capitol, as I have said before, you are exporting your wealth to foreign nations who will use it for whatever purposes they see fit, including nefarious ones... do you think China does not use the money they get from trade surplusses with the US to build their military might against us? Do you think if the Taliban were making money from the US that money would not have funded acts like those on 9/11? Or that N. Korea or other nations would not do the same? If your sole requirement is simply personal greed, and the costs to sovereignty are irrellevant, then yes, your argument has merit... but I do not agree with that assumption. Any economic move that infringes on national sovereignty ALWAYS has a cost far greater than any short term gain. Instead of lifting the world up via such blind free trade policies, we subsidize despots and sell our sovereignty away.

[Revelation 911]

Much of steel industry is a mess. We have many smaller facilities that are modern and extremely competitive, and we have lots of larger older uncompetitive facilities that should be allowed to fail. The average wage I'm told in these places is $38 per hour. There's no incentive for management to retool. There are estimates (maybe by Cato) that tariffs will cost more jobs across America than they will save in the steel industry.

Agreed - I buy leaded carbon steel rod from Canada- typically drawn from German billets. Yeah the U.S. stuff is great when you can get it - but typically the quality is inferior and lead times are much longer- frequently they will scrap billets for remake due to quality problems, nglecting to inform anyone in the chain - I cant service my customers like that - so i buy Canadian and have for 20 yrs. Bush's actions are too little too late - hes essentially cleaning up after Clintoon at this point.

[Cosmo]

This conversation is absolutely fascinating. One of the better threads I've seen at FR for a long time. What I want to know is how long can a foreign company dump and not deplete their share of the resource in question ?

[HamiltonJay]

This conversation is absolutely fascinating. One of the better threads I've seen at FR for a long time. What I want to know is how long can a foreign company dump and not deplete their share of the resource in question ?

Obviously this is not limitless, the answer would be as long as the government financially has the means to subsidize... in a depressed economy, it cannot go on forever, eventually the government will go broke if it has no revenues....

But in the free trade model, you don't even need a depressed economy... A nation with nefarious intent with a strong economy could intentionally supsidize an industry even if the industry did not need it, in order to drive domestic manufacturers of a percieved enemy out of business to weaken them economically and militarily. Blanket free trade is horrible policy.

[CWRWinger]

Mr. Bush should eliminate taxes on businesses and work on Right-to-Work for America. Unions are a real 'albatross' and a drag on the economy; they always have been.

[AGreatPer]

When this was announced this morning about 9:45, the dow was climbing. It is now down about 103.

This is a decent answer to the unions. Of course they will cry for more. As I said the other day, Bush did promise these people something, especially West Virginia.