The Use of Protectionism for the Steel Industry

Protectionism can visit many avenues and its value can have positive and negative effects on the American economy. Currently the headlines in the news pertain to the use of protectionism methods against imports regarding the steel industry. This paper will analyze the use of these strategies within the steel industry and the resulting positive effects of these policies.
The current crisis within the steel industry started in the last eighteen months. During this time, due to the difficulties in the Asian financial market, many foreign steel producers from that area of the world have been exporting large amounts of steel and steel products into the US. Many of these imports are subsidized by their governments giving them a definite advantage in cost and these foreign companies also are protected by trade barriers and private collusion. This illegal dumping of steel has caused the US steel industry to be at a disadvantage in competing with this influx and politicians and others involved with the steel industry are against this illegal trade practice. The steel dumping has directly affected the companies that the Iron Range taconite producers are connected to causing many layoffs and several bankruptcies. Without action taken against these imports it is only a matter of time before the crisis will be felt directly in the Northern Minnesota plants with devastating effects.

Unfair trade practices are not anything new. The United States declared antidumping laws as early as 1916 with the first law adopted in 1921. GATT (General Agreement of Tariffs and Trade) includes antidumping laws as well. Despite these laws, many countries of the world continue to break or disregard them. Since this fall, just the public mention by the Clinton administration of the awareness of these injustices, imports have slowed. The enforcement of laws we do possess is not happening and therefore new quotas must be placed. Predatory pricing needs to be lessened so that the US steel industry can be protected and antidumping duties must occur in order for our free trade market to be on a level playing field.
The use of protectionism for the steel industry will save and promote domestic jobs. Production and employment in the industry will rise. As a result of these saved jobs, the United States will also benefit. The individuals who are gainfully employed will continue to pay taxes and purchase goods. The companies involved will continue to profit making the surrounding communities viable. The need for unemployment and/or welfare will be saved from continued work. In addition, the emotional results of personal employment and its effects on self-esteem, relationships within the family, and stress will be avoided.
The use of protectionism also has several negative effects on the US economy. As a result of the barriers imposed, American consumers will pay more for products using steel, including cars and trucks, or large household appliances. (See Figure 1)

Figure 1 Effects of Import Quotas on Domestic Prices

Also affected will be any American industry that uses steel and/or its products in its production. Among these industries are transportation equipment, fabricated metal products, and industrial machinery and equipment. These industries will then be hurt by the protection of the steel industry resulting in many of the side-effects protectionism is trying to avoid for the steel industry. The cost of restricting foreign steel will be dispersed within our entire economy in visible and subtle ways.
The steel industry has changed a great deal in the last decade. The industries included within the steel industry have revised their work force, techniques, and methods. This effort has helped to revolutionize the industry and has increased production and lower costs. The effort has also caused the level of employment for steel workers to continue to
decline. (See Figure 2)

Figure 2

This result was necessary and needed to be able to compete with the world market. But we must also keep that market on an even playing field for the domestic steel producers. The use of government subsidies, government ownership, trade barriers, and collusion make the global steel market unfair. In order to compete, our government needs to impose quotas limiting the amount of imports. The steel industry is too big in this country to not help. Protectionism of the steel industry will be paid by