There has been a surge in steel imports, as companies in other countries try to make up for low demand by selling steel in the US at below-market prices. This is putting hundreds of thousands of American jobs – and our steel industry – at risk. Our government needs to take steps to address this now.
A new report, Surging Steel Imports Put Up To Half a Million U.S. Jobs at Risk, co-authored by the Economic Policy Institute (EPI) and the Law Offices of Stewart and Stewart, says that, well, half a million jobs are at risk because of surging steel imports.
On a conference call Tuesday discussing the report, EPI’s Robert Scott provided some of the numbers. He said worldwide production overcapacity has plunged the US steel industry into an import crisis. Other countries are actually increasing production even as demand stagnates. As a result:
- Steel imports surged 12.3% from 2011 to 2013.
- Then in just the 1st two months of this year they increased another 24.5%!
- The price of imported steel has fallen 23.1% since 2011.
- Losses at American steel companies were $1.2B 2013, with the companies showing losses in 4 of last 5 years.
“Clear Evidence Of Cheating”
On the same call Sen. Sherrod Brown (D-Ohio) said that we have known for generations that our steel industry and workers built this country. He said we have already lost 5 million manufacturing jobs between 2000-2009, but there has been growth of 400,000 manufacturing jobs in the last five years as the boom in natural gas has provided domestic manufacturers with a low-cost and reliable energy source.
But gas and oil production uses “oil country tubular goods” (OCTG), Brown said, and this is now coming more and more from steel companies outside the U.S. This is a sign of the harm being done to the U.S. steel industry. Every steel job supports another seven positions in the supply chain. Sometimes industries never recover because of what happens when those jobs go overseas. Our government has to start doing something about these trade problems, Brown said.
Brown singled out Korea, saying it has one of the world’s largest steel industries but not one foot of the OCTG they make is sold in Korea. “This is clear evidence of cheating.”
U.S. Is “A Big Fat Market They Can Exploit When They Are In Trouble”
On the call Sen. Jeff Sessions (R-Ala.) said, “We have trading partners who sell billions to us and buy very little from us.” He said these trading partners “see us as a big fat market they can exploit when they are in trouble.”
This keeps their plants going and employees working, he said. “We have a clear national interest in insisting that all trade be fair and according to the rules and not subject us to dumping of products below cost, sending private companies under.” He added, “We have 15 million more people and 8 million more working age group, but fewer people working than in 2007.”
“We comply with international trading rules and we expect out trading partners to comply also,” Sessions said.
Doesn’t Cheating Make Goods Cost Less?
A reporter on the call asked, “Isn’t this steel cheaper, benefiting U.S. businesses that buy it?”
Brown responded first, saying this is “like arguing it’s OK to buy stolen TVs because they are cheaper.”
“We are not in a free market; about half of foreign steel production is a government-owned or controlled industry,” Sessions said. “Our people are struggling to get by in this competitive marketplace.”
“Our national security will not be advanced if we further hammer the steel industry and reduce it,” he went on to say. “The single overriding goal must not always be the lowest-price product. I don’t think we are going to be better off as a nation if our people are unfairly traded against.”
In response to another question Sessions pointed that businesses have financial and business goals – look at the bottom line. But governments also have social goals. The point of this comment is that while a business would close a factory and lay workers off so they don’t lose money, governments will step in and use their greater resources to keep the factory open by providing subsidies. They want the people working; they don’t make bottom-line business decisions.
Our Country’s Elites “Have Sold Us Short”
Brown said the problem is that many of our country’s elites, “from
both parties, tell us to practice trade according to an economics textbook that is 20 years out of print.” He said, “They don’t stand up for national industries,” and “it’s pretty clear to me that the people in charge too often in both parties have sold us short.”
Sessions added that “when the American economy was so dominant, these matters were given less attention by elites. But America’s steel industry has gone through tough times, they are far more productive. Every job is earned and legitimate and ought to be defended against unfair competition. If we do this right we lessen the amount of money we have to spend on welfare, we have more tax growth, more productivity, and maintain a healthy steel industry that will result in lower costs. But if we decimate our steel industry costs will not go down.”
The Bigger Picture
A simple equation: Since the Great Recession started worldwide demand for steel (and all kinds of other things) is down. But most countries want to keep their factories churning and people employed. So their governments are using various schemes to help their companies export what they make. In other words, they offload their own excess production onto the world market with various forms of government support.
This below-market “dumping” of OCTG and other steel products is hurting American workers and companies so much because so many other governments help their companies and industries and ours doesn’t. For example, our government doesn’t confront countries that cheat by doing things like manipulating their currency to bring the world price of their goods down. The result is that American companies have to shut American factories and lay off American workers.
Government-support schemes include:
- Currency manipulation to make everything made in their county cost less in world markets.
- Providing below-market loan rates
- Access to land
- Energy at below-market rates
- Direct grants and infusions
Some, even much of this government help is in clear violation of trade agreements. Our government can file complaints, but trade complaints can take years to resolve, and by then American jobs and companies and even entire industries are long gone.
Addressing Currency manipulation Is A Big, Wide-Reaching Solution
Our government could help American workers and companies in a faster and broader way by directly confronting overarching things like currency manipulation. Instead of using specific cases of dumping, filing a trade complaint and winning long after our companies have been damaged beyond repair, confronting currency would be an across-the-board solution. It would help every American company export, while reducing imports. We could create up to 5.8 million new jobs, reduce our trade deficits by up to $500 billion per year by 2015 and increase U.S. gross domestic product by up to $720 billion per year if we act to end global currency manipulation.
We can’t blame other countries for acting to protect and even expand their industries. We can’t blame them for trying to protect their working people. We can’t even blame them for breaking trade agreements and cheating – if we refuse to do anything about it. It’s just low-hanging fruit for them, until we start confronting them and pushing back.