Global Steel Overcapacity: Trade Remedy “Cure” Is Worse than the “Disease”

15/11/2016 12:00 - 958 total view

Antidumping and countervailing duty (AD/CVD) measures are unable to fix the low-price problem afflicting U.S. steel producers because they amount to no more than a band-aid that can’t heal the wound. Worse, such trade remedy measures do great harm to manufacturing companies by making steel in the United States higher in price than in most of the rest of the world. This tends to make downstream manufacturers less competitive, thus encouraging imports of steel-containing products from other countries.

A better approach would be to take advantage of an underlying economic reality: because the U.S. steel-consuming sector is so much more economically significant than the steel-producing sector, low-priced steel imports provide a substantial net benefit to the U.S. economy. China’s policies encourage the export of steel at artificially low prices, which has the effect of transferring wealth from China to the United States. The United States should change the dynamic of the debate by encouraging China to continue transferring wealth by selling all the low-priced steel it possibly can in this country. That approach is likely to get the attention of Chinese policymakers and hasten the downsizing and restructuring that is so badly needed in that country’s steel sector.