Domestic Steel Rebar and Mexican Imports: That’s Our Jam

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What in the world? While joining my husband for a peaceful breakfast this morning, I caught the slogan on the jar of jam below, “Perfectly Sweetened with Fair Trade Cane Sugar.” I couldn’t help but chuckle, because as some may know, Americans can’t access sugar at the “world price” and must instead pay the inflated “US price.”

Domestic Sugar

We will come to how sugar markets relate to steel markets in a minute.

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First, we must explain the US sugar market. Simply put, the US does not produce sugar as cost-effectively as other warmer climates and geographies. The US government provides subsidies to US farmers and has put in place a tariff program that limits imports such that the US market must pay an inflated domestic sugar price. Hence the mass-market product substitution of that horrible product, high-fructose corn syrup!

But I digress.

What does sugar have to do with metals markets and steel?

Just three weeks ago, we reported on a quietly growing trade dispute between the US and Mexico over steel rebar. That trade dispute has now garnered additional press, namely some very public arguments back and forth between Philip Bell, President of the Steel Manufacturers Association on the US side,  Raul Gutierrez, co-CEO of Deacero, one of the named Mexican producers in the anti-dumping case, Tracy Porter, President of Commercial Metals USA Company’s Americas Division, one of the domestic companies who brought the trade case, along with Salvador Quesada Salinas, General Director of the Mexican iron and steel industry chamber, Canacero.

To their credit, the co-CEOs of Deacero have made a somewhat compelling case and certainly a public one – Mexican rebar imports total ‘only’ 4% of the US market, the Mexican steel industry as a whole runs a trade deficit with the US (meaning the trade balance between Mexico and the US runs in favor of the US) and steel and sugar represent the two most politically favored sectors and both have filed anti-dumping cases against Mexican producers.

Steel vs. Sugar

However, the steel market in the US looks nothing like the sugar market (see above). For example, the US openly accepts steel imports of all sorts from a broad range of countries. Second, to our knowledge, no tariff programs or subsidies go to US steel producers. Finally, the scrap used to make rebar mostly comes from the US, and US steel mills are, indeed, some of the most efficient in the world – a very different situation from US sugar producers.

Comparing steel with sugar hardly enlightens the discussion.

Rather, US producers have failed to publicly discuss the real issue at hand that we identified in our May 1 story as follows: Back in September 2013, the Mexican trade group that governs the steel industry, Canacero, announced that its government would implement new import rules on 113 types of steel and steel products to minimize illegal imports.

More detailed specifics on the 113 products in question and the specific requirements appear here. Examining documents on the Canacero website reveals Mexico has faced its own share of steel dumping, including materials of Chinese, Korean and Russian origin.

Alternatives to Duties and Tariffs

A suspension agreement (which would essentially suspend any trade proceedings around the dumping case) would not serve anyone’s purpose but Mexican producers’. I’d vote instead for a bilateral facilitated discussion between the two industry trade groups to discuss the “real” underlying issues involving market access for both countries’ goods.

In the meantime, I might grab myself a high-fructose-corn-syrup-laden PB&J sandwich!

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