Buy American, Protectionism and Big Steel

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Ferrous Metals, Global Trade

If the “Buy American” clause in the stimulus package currently making its way through Congress wasn’t enough to scare you, this little headline quietly reported in Europe (and nowhere to be found here) ought to: “EU Slaps Anti-Dumping Duty on China Fastener.”

According to the article, for the next five years, screws and bolts coming from China to Europe will be subject to a 25.6 percent-to-85 percent duty. Ouch! Talk about a screwy ruling (pun intended).  I know of several fastener “producers” here in the States who heavily subsidize their product offerings with screws sourced from China. The article goes on to mention that one sixth of China’s fastener production goes to the European market. The industry in China employs some 2.5 million people. But China is unlikely to sit back without a protest. They will likely bring their case to the WTO.

Protectionist measures come in all shapes and sizes. Just as various metals producers used anti-dumping remedies (to deal with their own lack of competitiveness, I would argue), we also subsidize industries such as ethanol and agriculture as we reported last year. The price of steel becomes distorted (or at least demand from ethanol was the excuse the steel producers gave as to why metal was so hard to come by last summer). Another back-door policy of protectionism relates to the practice of “zeroing,” which has been tried and perfected here in the US. This practice has only been used by the US and yesterday was ruled [again] in violation of WTO practices. According to this Reuters article, “The anti-dumping duties are based on the difference between the price in the exporting and importing markets. The United States ignores, or treats as zero, examples where the price is actually higher in the United States than in the exporting country. Critics say that artificially inflates the anti-dumping duty, putting up a higher barrier to trade.” This specific case involved steel products. And whereas the US has dropped this zeroing practice for any new anti-dumping claims, it is arguing that it should be allowed in “review of any existing anti-dumping measures.”

From a political and economic perspective, we have much to lose from protectionist policies. Below are two recent MetalMiner articles on the subject:

And a guest columnist from the New York Times echoed our sentiments recently and actually walks through a great example of how steel used in the 1990s for the San Francisco-Oakland Bay Bridge cost taxpayers an extra $400 million because of “Buy American” provisions. But though the “Buy American” clause appears to be toned down, it still appears on both bills of the stimulus package.

Whether it is “Buy American,” more anti-dumping cases or distorted practices such as zeroing, Big Steel and related industries are working hard to undermine your export efforts. Can we all just say no?

–Lisa Reisman

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