Section 232: The last, best chance to restore sanity to the global steel market

Scott Paul, President for the Alliance for American ManufacturingBy Scott Paul
President, Alliance for American Manufacturing

When President Trump campaigned last year, promising to “bring back steel jobs,” there was a lot of eye-rolling. I’m a big booster of American steel and even I know the industry won’t ever look like it did in the 1960’s.

https://www.youtube.com/watch?v=FiVe15iuKZ0

But that doesn’t mean American steel needs to fade away in the 21st century. Even in this era of smartphones and drones, we’ll still need steel-made bridges, battleships, automobiles (even self-driving ones), dishwashers, and products still unimagined.

The only question is: Where will this steel be made?

Over the past 15 years that answer has increasingly been China. China, which now makes half the world’s steel. China, which has at least four times as many zombie steel mills — those making steel that no one wants or needs — than the United States has in overall steel capacity.

China, where the steel mills are mostly owned by their government, and don’t operate under any conditions that resemble a free and private market, like responding to supply and demand, or maintaining environmental controls, or paying for all of their energy inputs. Ever see pictures of the heavy smog in China?

That overproduction has had consequences here. American steel mills are operating at only around 75 percent of their capacity. More than 15,000 steelworkers were laid off over the past three years, even though virtually no one makes steel more efficiently or more responsibly than American steel mills.

So when Donald Trump said he would level the playing field for America’s steelworkers, that promise resonated in steel-making states like Indiana, Pennsylvania, Ohio, Michigan, and Alabama.

The industry cheered this April when President Trump announced a “Section 232” investigation into steel imports. A Section 232 is a part of U.S. trade law that gives the Commerce Secretary the ability to investigate whether certain import levels pose a national security threat. If a threat is found, the secretary can then recommend a potent remedy in the form of tariffs, import quotas, or both. Once it’s announced, the clock starts ticking – Commerce has 270 days to present the investigation’s findings to the president.

President Trump said it wouldn’t take that nearly that long, telling an Ohio crowd in early June, “Wait until you see what I’m going to do for steel and for your steel companies. We’re going to stop the dumping, and stop all of these wonderful other countries from coming in and killing our companies and our workers. You’ll be seeing that very soon.”

But the industry is still waiting for him to act. Steel imports are up 21 percent since April. And the administration is now in no rush to deliver on its overdue promise.

Some in manufacturing, mostly the consumers of steel, have been reluctant to embrace this 232 action, fearing price spikes or trade retaliation. Those concerns, while understandable, are easily addressed.

A Section 232 action won’t dramatically increase costs. Critics made this same argument when the U.S. temporarily protected its steel industry in 2002, but analysis showed no lasting harm done to steel consumers, while the steel industry was brought back from the dead. Ironically, Chinese overconsumption — not American tariffs — spiked prices for steel consumers two years later. Chinese overproduction and overconsumption both distort the world market price for steel, so any action to smooth those spikes out will promote price stability.

A Section 232 action won’t start a trade war. The United States is fully within its rights to use trade actions under the terms of the WTO agreement, which includes an exception for cases brought under national security concerns. And if a country tries to retaliate, the United States has been wildly successful at defending our targeted industries and products.

There is clear evidence the unfair trade of steel harms U.S. national security. Steel is used in everything from ships, tanks, and weapons to bridges, rail systems, and our energy infrastructure. If we allow our steel manufacturing capabilities to deteriorate further, we’ll be asking nations like China and Russia to supply this commodity – and it’s clear neither has America’s best interest at heart.

A Section 232 investigation that prompts President Trump to take tough enforcement actions may be the last, best hope to restore sanity to the global steel market, one that has been pitted by peaks and valleys for the 15 years since the Chinese government launched its own industry onto the global stage without any respect for the free market or trade rules.

American steel manufacturers and America’s steelworkers can supply our national defense and compete with anyone – but they can’t be expected to compete against foreign governments. They deserve a level playing field, and President Trump should provide it, now rather than later.