Trump, don't sacrifice American steel on the altar of globalism
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President Trump’s promise to return jobs to America and prosperity to “flyover” country has hit a roadblock.  The pending, presidentially-ordered investigation into the U.S. steel industry has met stiff opposition.  There is now over-the-top whining coming from (surprise!) foreign governments, who want to continue to flood the U.S. market with their unfairly underpriced goods. Perhaps more alarmingly, many of Trump’s own aides are trying to block tough trade action.  

In April, with much fanfare, the president signed an Executive Order requiring investigation of the steel industry. He wanted to see if the unfair foreign trade practices harming it were impacting U.S. national security. The investigation is being carried out under a too-little used law, Section 232 of the 1962 Trade Act.  

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The benefit of 232 is that the inquiry can take place quickly, inside the Commerce Department, within a maximum of 270 days. In stark contrast, other trade laws require American companies to file lawsuits with the U.S. International Trade Commission, costing millions of dollars (that could better be invested in R&D or new U.S. plants) and taking many years.  Often the relief is too little, too late, arriving after the companies are fatally wounded.

Commerce Secretary Wilbur Ross started work immediately and stated the completed report would be sent to the White House by June 30.  A part of the investigation included extensive testimony and comments from steel producers and consumers, foreign and domestic.  But when the report was circulated for intra-U.S. government review, before going to the president, opponents of its pro-American steel recommendations emerged from the woodwork and went into overdrive to stymie effective presidential action.  

The essence of their objection to imposition of tariffs or quotas on foreign steel: Global harmony would be jeopardized!  These U.S. officials believe that steps to preserve the besieged American steel industry might displease effectively free-loading allies, foreign price-gougers, and even military rivals such as China and Russia, all intent on keeping their steel mills churning at the expense of American companies and workers.  

Further, domestic consumers of steel products are also complaining loudly that tariffs will lead to higher prices for them and their customers, and to layoffs in their industries, even if jobs increase in the steel mills themselves. But in fact, they don’t care if they buy all their steel from foreign producers, as long as they hit their profit targets. At issue, however, is whether the United States has a steel industry responsive to military demands, not the size of their profit margins. 

Critics also argue that only 1-2 percent of American steel industry production is defense-related. Thus tariffs and quotas imposed under 232 would be overkill.  However, who can know the extent and type of military steel capacity the U.S. might require in a widespread conflict — in the South China Sea, the Korean Peninsula, the Middle East, and Eastern Europe? If U.S. mills were reduced to a fraction of their current capacity or eliminated, our defense efforts might fail. The “Arsenal of Democracy,” which produced our WWII victory, was based on a vast American industrial infrastructure, and did not mobilize 1-2 percent of our capacity but used every square inch of factory floor available in the country.

Swirling both inside and outside the administration, there is additional nonsense talk that even the most minor U.S. action on steel will start a “global trade war” because the countries using the unfair trade practices will “retaliate.”  Of course, many countries in East Asia, Europe, and elsewhere have been waging mercantilist trade wars against the U.S. for decades. The president’s use of section 232 would be a prudent response to their incessant breaking of “trade rules.”

The European Union has actually advanced an objection that says if the U.S. takes action against Chinese steel in particular, China will simply divert the excess production to the EU.  And the EU does not want to have to deal with that situation, so the U.S. must take the hit economically, absorbing dumped products from China to preserve the EU’s economy.  

At this point what is now a budding steel crisis has become entangled in discussions among the G-20 nations.  Yet consultations between Trump and other national leaders on steel are likely to prove fruitless. Does anyone seriously believe that even one G-20 country will volunteer to give up its share of the U.S. steel market?   

Hopefully, the president will tire of special pleading and act decisively in America’s own best interests.  The U.S. cannot afford to sacrifice industry after industry to keep allies happy or the dangerously out-of-balance world trading system careening along. 

In the end, Trump will either stay the course of making American industry great again or he will be overwhelmed by internationalists, here and abroad.  He can protect American steel by using Section 232 or abandon it to predatory foreign competition. He can keep his campaign promise or renege. It’s that simple. 

Kevin L. Kearns is president of the U.S. Business and Industry Council, which has represented domestic American manufacturers since 1933. Follow him on Twitter @KevinLKearns.


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