Concern about steel tariffs

March 19, 2002

Free Market Foundation

American economists and trade experts say President Bush’s decision to opt for tariff increases of up to 30 percent on imported steel is unjustified.

Domestic steel mills themselves import perhaps 25 to 30 percent of all steel that comes into U.S. ports; the American industry couldn’t function without imports.

U.S. steel makers have hardly been mistreated having received more than $17 billion in government subsidies in the last quarter century.

Since raising steel prices will push up the cost of cars, farm equipment, washing machines and every other product having steel components, it will cost the average U.S. family $200 or more per year.

While old steel makers have predicted doom without a tariff, newer and better-managed managed mills have flourished, and U.S. steel imports actually dropped 21 percent last year.

Tariff apologists claim that the domestic steel industry is the most efficient in the world. They cite statistics that show that the industry has spent $60 billion since 1980 to increase efficiency.

Why then, critics ask, does it need the artificial protections of higher tariffs to fend off foreign competition?

Sources: Greg Rushford (Rushford Report), Bush Steps in a Steel Trap, Wall Street Journal, March 6, 2002; Editorials, Industry Wins, Consumers Lose as Bush Imposes Steel Tariffs, and Rep. Peter J. Visclosky, Blame Foreign Dumping, both in USA Today, March 6, 2002.

For text (WSJ subscribers)
http://online.wsj.com/article/0,4286,SB1015380983791409320-gregrushford,00.htm
For USA Today text
http://www.usatoday.com/usatonline/20020306/3916157s.htm
For more on Tariffs and Other Trade Barriers http://www.ncpa.org/iss/tra

RSA Comment:
Local industries that are seeking protection will invariably quote figures for expected job losses if they do not get protection, or alternatively, the jobs they expect to create if they do get protection. They always neglect to mention the additional costs the protection will impose on consumers R2 400 per year on the average American family as described in the above bulletin. They definitely do not point out that if consumers are forced to spend more on protected products they will spend less on other things, which reduces jobs in other industries. Most importantly, they fail to mention that the additional costs invariably hit poor families hardest.

Eustace Davie, Director, FMF.

FMF Policy Bulletin\12 March 2002