March 4, 2002 | Commentary on Foreign Aid and Development
Just give it four years, says Sen. John Rockefeller,
Just four years of huge tariffs on imported steel, along with
other protectionist measures, and all will be well. The U.S. steel
industry will recover. Chronic overcapacity will be reduced.
Steel-makers will begin to invest in new technologies and become
more efficient. Four years from now, they'll be ready to take on
the world -- even if the world continues to dump steel here and
slap high tariffs on our exports.
It's not the same as agriculture, the protectionists say. We
grow enough corn and wheat and soybeans to survive even if we were
shut off from the rest of the world for centuries by war or other
tragedies. If we don't protect steel, we may not have enough to
build weaponry and meet domestic needs. This isn't a four-year
corporate welfare program, they say, it's a security issue.
We're hearing more of this argument, from Sen. Rockefeller and
others, now that President Bush is about to decide whether to raise
tariffs and take other steps to protect the domestic steel
industry. Approve the tariffs and other measures, Rockefeller says,
and "the future of our nation's steel industry, its national
security contributions and a critical portion of our manufacturing
economy will be secured." Otherwise, he says, "we may well lose
this essential domestic industry forever -- with grave
This would be an utterly convincing argument but for one tiny
problem -- it isn't true. Failure to cater to the steel lobby won't
render us vulnerable on the defense front and it won't kill the
industry. And anyone who believes that Sen. Rockefeller and his
allies won't be back in four years asking for more knows little of
the history of government giveaways.
A recent Commerce Department report found that U.S. steel-makers
are capable of producing three times the amount of steel we'd need
for national security purposes during war. And that's counting not
only military uses -- which make up just 0.1 percent of domestic
steel production capacity -- but also the steel needed to keep the
In fact, steel's problems have almost nothing to do with
protectionism or the world economic order and almost everything to
do with over-capacity. According to The Wall Street Journal,
the global steel industry produced 847 million tons of steel in
2000. Very impressive. Too bad demand totaled only about 807
This oversupply forces down the price of steel and causes
economic hardships for many U.S. steel manufacturers.
Unfortunately, more protection for the steel industry, even in the
name of national security, won't change that.
Why? Because the oversupply of steel worldwide isn't the only
problem. So-called "integrated" steel mills (which have a strong
union presence), have been losing market share to "mini-mills" for
some time now. These smaller facilities, which operate more
efficiently and can produce steel more cheaply, now control 50
percent of the market. That's up from 10 percent in the late 1970s.
Over the same period, imports have increased by only 10 percent.
More protection won't do anything to help the integrated steel
Besides, many of our trading partners complain about the way we
protect the steel industry today, and they retaliate when they
If the nations of the world want to help the steel industry,
they should eliminate protection and subsidies -- which merely
upset the balance of supply and demand -- and let the industry go
through the changes it needs to make.
That's what Big Steel needs: Someone who'll refuse the industry's latest shake-down attempt -- a protectionist plea masquerading as a patriotic defense issue. Unfortunately, that's not what it has asked for and, unless President Bush can stand up to the powerful interests led by Sen. Rockefeller, that's not what it's going to get.
Aaron Schavey is a policy analyst in the Center for International Trade and Economics at The Heritage Foundation.
Distributed nationally on the Knight-Ridder Tribune wire