An article from WSJ: Steeling From Americans

31 December 2009

U.S. steel makers are cheering an International Trade Commission vote Wednesday to impose new duties on imports from China. U.S. consumers will want to hold their applause.

The case was filed in April by domestic steel manufacturers and the United Steelworkers union, which argued that they had been injured by imports of subsidized steel from China. The ruling allows the Commerce Department to impose countervailing duties ranging from 10% to 16% on future imports from China of "oil country tubular goods," which are the pipes used in the oil and gas industry.

In effect, the ITC vote means that few if any such pipes from China will now be entering the U.S. That’s good news for a domestic steel industry that wants less competition from international suppliers. But it’s bad news for the U.S. economy, and for consumers of steel products who could face higher prices for cars, appliances and other downstream goods.

Imports of the steel pipes have surged in recent years, as they typically do in the wake of an oil price hike, which swells demand for domestic drilling. In 2008, a year that featured $4 per gallon gas, the U.S. imported $2.8 billion worth of drill pipes from China, a three-fold increase over the previous year. That was enough for domestic suppliers to file an ITC complaint, ratcheting up a trade war that has resulted in U.S. companies and unions bringing about a dozen cases over subsidies and pricing against China this year.

The reality is that the domestic steel industry produces about two-thirds of what the U.S. consumes each year. The rest comes from foreign suppliers, and the competition results in products that would otherwise be more expensive. China is by far the world’s leading producer of drill pipes, and a Goldman Sachs analysis last month that anticipated the ITC decision says that it could result in a shortage of the pipes in the U.S. by the second half of next year. Never mind that making domestic gas-and-oil exploration more expensive would seem to be at cross purposes with making the U.S. less reliant on foreign energy.

By the way, the U.S. steel industry also made a fat profit of $3.9 billion from 2006 to 2008. China will no doubt respond to this latest protectionism with more tariffs of its own against U.S. products or investment, further increasing the cost of this protectionism.

U.S. trade laws aren’t about "fair trade" or "leveling the playing field," or the other cliches of protectionists. They have become tools of political income redistribution, protecting certain industries at the expense of others and the larger U.S. economy.


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