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Barack Obama, China, European Union, globalization, Japan, national security, Russia, steel, tariffs, The Washington Post, Trade, trade law, Trump, World Steel Organization, World Trade Organization, {What's Left of) Our Economy
The case for bold new Trump administration steps to ensure the U.S. steel industry’s continued viability is so clear that even opponents can’t help but (unwittingly) make it.
Thus this morning, The Washington Post editorial board praised – or at least seems to have praised – the Obama administration’s imposition of the tariffs on imports of Chinese steel because the world’s overwhelming source of overcapacity is China. The Post also urged the White House to remember that in order to avoid “international destabilization,” it’s critical to keep relying on “global institutions such as the World Trade Organization.”
Yet as the paper implicitly recognizes, none of these approaches has succeeded. What else can reasonably be concluded from its acknowledgment that the although the world’s “major governments, including President Barack Obama’s administration, have long recognized” the problem of Chinese fueled steel overcapacity,” the glut continues to create “unsustainable downward pressure on producers’ prices….” That’s “unsustainable” as in “can’t be sustained.” As in “if the downward pressure isn’t stopped, steel producers will start going under.”
The Post, however, has left out some crucial information. Specifically, the pressure on global steel producers has been far from uniformly felt. According to the latest (2015) figures from the World Steel Organization, which represents most of the global industry, the United States runs the world’s largest steel trade deficit by far measured in volume (which leaves out the distortions created by falling prices). At 26.5 million tons, it was nearly 80 percent greater than that of the world’s next biggest net steel importer (Vietnam, at 14.9 million tons), and nearly seven times greater than that of the European Union (3.9 million tons).
China, Japan, Russia, South Korea, and others are running surpluses, with China lapping the pack at 98.4 million tons and Japan, universally described as a staunch U.S. ally, coming in second at still-impressive 34.9 million tons.
These skewed trade patterns, moreover, are unmistakably affecting national steel output. For example, according to the World Steel Organization, in 2010, as the world’s recovery from the Great Recession was becoming established, the United States accounted for 7.46 percent of global steel output by volume. In 2016, its share had shrunk to 4.95 percent.
China clearly has been the big winner, with its share of world steel production rising from 42.62 percent to 50.16 percent during this period. Japan has boosted market share as well – albeit only from 6.49 percent to 6.60 percent. The European Union and Russia have lost ground – but the losses have been minimal. The former’s global market share has dipped from 11.54 percent to 10.43 percent. The latter’s is down from 4.48 percent to 4.45 percent.
Even weirder: America’s economic growth during this period has outstripped the recoveries of all these countries except China, and its manufacturing sector has recovered (though not completely) thanks largely to a rebound in the steel-intensive automotive industry.
In other words, according to the Post editorial board, due to global overcapacity, the U.S. steel industry is facing unsustainable (and largely artificial) pricing pressure, the worldwide statistics make clear that this pressure is in a class by itself…and the Trump administration is being advised to stick with responses that have been manifestly incapable of preventing this dangerous situation.
It’s perfectly respectable to oppose as a solution the kind of national security-focused tariffs that the Trump administration is considering – even though the advantages they offer (they need no Congressional approval and they can be implemented relatively quickly as well as flexibly) are substantial. But if critics – domestic and foreign – are genuinely interested in solving the longstanding world steel problem in a timely manner, they’ll start proposing alternatives that haven’t already failed.
