Conventional trade methods haven’t worked to address global over-capacity and foreign dumping. Unfortunately, we’ve seen that when you put a tariff on steel coming from one country, such as China, producers simply go around the law by routing the product through countries like Vietnam.
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This trend is shown by the historically high level of imports we have faced. Last year, foreign steel imports increased by 15 percent over the previous year, and captured 27 percent of the U.S. market share. Yet about one fourth of domestic steel capacity is not being utilized today.
This is why we support the Administration’s recommendations that the Section 232 remedy must be broad based and global as proposed — and needs to be enacted immediately. While there has been some progress on the trade front in recent years, it has been extraordinarily slow and ineffective, and has come at high cost to the steel industry.
Some claim that the proposed 232 action will dramatically increase the cost of consumer goods; that is simply unfounded. During consideration of a similar action on steel in 2002, the U.S. International Trade Commission found that the action had no discernible economy-wide effects.
Consider consumer costs. In automobiles, for example, software actually accounts for a much larger share of a vehicle cost than steel. The average price of an automobile in 2017 was about $36,000. With an average of one ton of steel per vehicle, priced at $1,000 per ton, a 25 percent tariff would raise the price of the car a fraction of 1 percent.
You’ve likely also heard the hype that this will lead to a trade war and foreign countries will retaliate. But we have been in a trade war in steel and other industries for over a decade — and while we may win a few battles, we are losing the trade war. In fact, the electrical steel market conditions show why the Administration’s actions are necessary.
When it comes to electrical steel, AK Steel is the sole remaining domestic supplier of this critical material for the electrical grid. The electrical steel market has been volatile, with dumped and subsidized foreign imports nearly doubling in 2017 versus 2016.
Electrical steel is a critical component of electrical transformers that are vital to our nation’s electric grid.
Almost a decade ago, AK Steel exported electrical steel to China because China did not have the ability to produce it. China then brought an illegal trade action against us and other producers. By the time that illegal action by China was overturned by the World Trade Organization, China had developed massive electrical steel capacity and was flooding markets around the world. This excess electrical steel capacity created by China resulted in a surge of low-priced imports into the United States, and the only other U.S. producer of electrical steel exited the business.
For years, certain countries have targeted U.S. industries with unfair trade practices and policies — at a great cost to American jobs. Many other countries already impose trade restrictions on U.S. steel exports, prohibiting us from even entering their markets. While the steel industry is being injured today, if the U.S. does not stand up for our domestic industries, it will be other American industries tomorrow.
We should defend affected industries and aggressively use and enforce our trade laws, such as the Section 232 provisions. We support the Administration’s work to do this.
Roger Newport is the Chief Executive Officer of AK Steel, headquartered in West Chester Twp.
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