Impact of Protectionism on the U.S Steel Industry

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In June 2001, the president of the Unites States, George W. Bush, announced his Steel Program. In March 2002, the president imposed tariff measures to help domestic producers compete with imported steel. These tariff and quota measures were not applicable to Canada, Mexico, Israel, and Jordan, US’s free trade partners. Most developing countries were also excluded from these measures provided their share of the total imports during 1996-97 was less than 3 percent. In August 2002, the government decided against imposing anti-dumping duties on cold-roll steel from five countries (Japan, Australia, India, Sweden, and Thailand).

This decision was based on the finding by the US International Trade Commission (USITC) that the import of cold-roll steel was not harming the domestic industry. Further, the government also announced that it would increase the number of steel products that were exempted from the tariffs imposed in March 2002 to 178. This decision came as a shock to the industry. Responding to the government decision against imposing anti-dumping duties on certain steel products, Thomas J. Usher, chairman and CEO, US Steel Corp., said, “The result of this ruling is that American business, American steel, and tens of thousands of workers will continue to be injured by illegal foreign trade.”

However, supporters of free trade and industries using steel hailed the decision saying that steel companies were already benefiting from higher prices because of the earlier announced tariffs. President Bush’s tariff measures to protect the domestic steel industry were hailed by supporters of protectionism but were vehemently criticized by proponents of free trade. Some analysts felt that the US steel industry should be protected not only because of the pride associated with it but also because of its key role in the US economy. The importance of steel as a commodity in the US economy was next only to oil.

Steel was a source of political and economic strength for the country. Some of these analysts added that major steel producing countries such as Japan and Korea were not dependable trading partners as they had in the past resorted to unfair trade practices such as dumping and predatory pricing. Thus it made sense for the US steel industry to be protected. Some analysts also believed that without protection, the US steel industry would find it difficult to reorganize and become more competitive. They argued that protection from foreign competition had allowed the industry in the1980s to cut down 60 percent of its workforce and to spend $23 billion on modernizing facilities. Because of protection, the industry was able to regain its leadership position in quality and productivity, and in 1991 experienced its highest level of exports since 1970.