The Trump administration is considering action under a rarely used provision of the U.S. trade laws — Section 232 of the Trade Expansion Act of 1962 — to address national security concerns related to steel and aluminum imports.
[STEPHEN KOPLAN | July 26, 2017 |The Hill]
Perhaps unsurprisingly, the prospect of higher tariffs on even a small share of overall U.S. imports has yet again triggered voices that forecast economic doom intended to stave off the United States from affirmatively addressing problems related to international trade.
But would tariffs really devastate downstream sectors of the U.S. economy that rely on steel and aluminum inputs? We have been here before, and the answer is no.
It is true that Section 232 gives the president significant discretion to “adjust imports” of steel and aluminum, if he determines that U.S. national security is at risk based on findings by the Commerce Department. The fact is that the most likely responses — tariffs, quotas, or some combination of the two — are commonly used by both the United States and its trading partners, despite dire predictions of the naysayers.
While Section 232 action has not been taken in the context of products like steel and aluminum, provisions that result in similar responses have been used. In 2002, President George W. Bush imposed temporary tariffs and quotas on a broad array of steel imports under the global safeguards provision at Section 201 of the Trade Act of 1974.
At the time, opponents would have us believe that steel prices would skyrocket and that downstream manufacturing industries would be undercut by foreign competitors who could buy cheaper steel inputs. According to a subsequent study by the nonpartisan U.S. International Trade Commission (ITC), which I chaired during the Section 201 steel investigation, nothing of the sort happened.
Some downstream manufacturers reported limited price increases or some impact on supply contracts. Many others reported no impact. The ITC could not determine with any degree of certainty whether these results were related to the Section 201 response or to broader macroeconomic factors. In terms of the U.S. economy as a whole, the effects of the Section 201 measures were negligible.
Downstream industries were not devastated by higher steel prices. Nor was the U.S. economy thrown into depression. The U.S. steel industry, however, earned a much-needed relief as the result of action taken by the president that allowed it to restructure and reinvest for the long term. In other words, the Section 201 measures worked as intended.
We are facing similar challenges again today, as countries like China and others are continuously overproducing steel and aluminum and flooding our market with unsustainably low-priced imports. Now, however, U.S. national security is at great risk if firm action is not taken immediately. The U.S. primary aluminum industry is on the verge of disappearing entirely, and the U.S. steel industry is not far behind.
Both metals are vital inputs for U.S. defense technologies and critical infrastructure. If these industries collapse in the United States, the government and the military will need to rely on sources that are either outright geopolitical foes or simply so far away from our shores that they would be unreliable in a time of crisis.
There is a critical urgency for action. Section 232 of the law provides the president with the solution. It is imperative for the United States to act decisively to solve it.
Predictions of disaster were wrong 15 years ago when I chaired the ITC, and they are wrong again today. Experience tells us that the benefits of remedial action — ensuring a reliable, domestic supply of vital materials — will vastly outweigh the costs and ensure our national security in this sector.
Stephen Koplan served as chairman of the U.S. International Trade Commission under Presidents Clinton and George W. Bush. He previously served as an attorney at the U.S. Department of Justice, the Small Business Administration, and the U.S. Senate Finance Committee, where he was responsible for tax and trade legislation.