Political Lobbying on Steel Tariffs

February 19, 2020

Editors note: If the US doesn’t make decisions on the shape of our economy, other countries will. China picked winners and dominates future industries. We did nothing and are relegated to food service jobs.

Ten House Members oppose this exclusion request, but 14 favor it.

[The Editorial Board | February 18, 2020 | WSJ]

Fourteen Members of the House, pulling the opposite way, wrote Commerce Secretary Wilbur Ross in December. If the request is denied, they say, “ATI will be forced to close or scale back operations, which could lead to lost jobs, economic hardship for our constituents, and significant harm to our defense supply chain.” (As for that last part, they say ATI also produces “titanium for the Abrams tank armor.”)

What a sorry example of how tariffs have become another opportunity for government intervention based on political power, not business necessity. The 14 free traders mainly come from Pennsylvania, where ATI is headquartered. The 10 protectionists are from Alabama, Ohio and Kentucky, home to other steel makers. One side cites “7,200 ATI jobs across the country.” The other points to “more than 5,000 American jobs directly supported by the domestic stainless steel industry.”

The argument, like a fractal, looks no different if you zoom in. ATI wants a tariff exclusion for 150,000 tons of 60-inch stainless-steel slab from Indonesia, to be processed by workers in Pennsylvania. This product “is not reasonably available” domestically, the company’s petition argues, in part since each of the three U.S. producers is “a direct competitor.”

Those companies, naturally, object. “AK Steel has ample capacity to make all of the requested stainless slabs,” its filing says. “ATI has essentially admitted that it simply doesn’t want to pay domestic pricing nor does it want to pay Section 232 tariffs, in order to increase its profitability.”

ATI filed a rebuttal to the objection, saying that “the high pricing offered” precludes profitability. Further, ATI worries about the steadiness of supply. In a hot market, it says, companies like AK Steel no doubt would focus on the sale of finished products, not “the sale of semi-finished stainless slab to a direct competitor.”

AK Steel filed a rebuttal to the rebuttal: “Permitting ATI to purchase at these non-market prices, without being subject to the current 25% tariff, may allow ATI to prosper but would cause damage to all other domestic producers.” North American Stainless and Outokumpu Stainless USA offer similar arguments.

Now the Commerce Department will provide a thumbs up or down, like a Roman emperor in the Colosseum. As of December, about 94,000 steel exclusion requests had been filed, per the Mercatus Center. About 50% were approved and 14% denied. The rest remain pending. Remember when Republicans didn’t think the government should pick winners and losers?

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