When President George W. Bush decided to end tariffs on imported steel recently, many in the forging community probably felt like cheering. They no doubt hope that the prices they pay for steel will go down.
When the tariffs were put into place in March 2002, imposing duties of up to 30% on imported steel products, the prices forgers paid for steel did increase.
The domestic steel industry had been deluged by “low-priced imports” for several years before the tariffs were imposed. Some 40 steel company bankruptcies occurred as a result. The tariffs’ purpose was to restrict imports while U.S. producers restructured. From the start, the tariffs were designed to taper off over three years. In November, after an initial ruling and appeal, the World Trade Organization deteramined that the tariffs were illegal. The European Union was threatening to impose tariffs of could be used up to 100% on selected U.S. products unless the Bush Administration dropped the steel tariffs.
In addition to the tariffs, the domestic steel industry benefited from other global trends. A weaker dollar has raised the price of imported steel at least as much as any taxes. Also, China is showing a surging appetite for steel. Some analysts believe a global steel shortage is looming.
So the net result is that the end of steel tariffs probably won’t bring any noticeable reduction in the price forgers pay for steel.
However, how the steel tariffs were ended may be a harbinger of trouble for a forging industry concerned about the impact of “low-priced imports.” Here is how Elizabeth Sullivan, foreign affairs columnist of the Cleveland Plain Dealer summed up the situation recently: “In the steel case, we just let the European Union bully us with spurious math and outrageous interpretations of evolving World Trade Organization dispute settlement rules. We backed off without even the whisper of a challenge to the threatened $2.3 billion in sanctions, setting a precedent that could be used against us in future.
“Not only does this have implications for how world trading system rules could evolve, in a way unfriendly to U.S. interests, but it also narrows legal methods we should be using to safeguard our manufacturing sector as future powerhouses like China charge on to the scene.
“The loss of more than 2 million manufacturing jobs is not a partisan battle cry but a distress flag. We’re letting other countries set the rules for a trading system we still dominate.
“Our ‘tariffs’ are like the broad side of a barn. Their (other countries) sneaky billions in hidden subsidies, convoluted licensing systems, paperwork requirements, spurious health restrictions, etc., are far harder to ferret out and redress.”
We need to watch to see if our trade officials learned any lessons from the steel tariff situation about trade policy and its impact on American manufacturing.