The U.S. steel industry wants any government stimulus package to require the purchase of American-made steel, a clause The Wall Street Journal warns risks a damaging long-term trade war and end up costing American taxpayers too much money.
In an editorial titled “How to Turn a Recession into a Depression,” the newspaper's editors warn against letting protectionism return to U.S. trade policy, despite the dire economic scenario at hand.
First off, the editors say, U.S. producers don’t make enough steel to supply the expected $775 billion in new public spending, a large part of which will be on steel-hungry projects like bridge and energy plant construction.
As it is, we import up to quarter of our steel consumption now, without the added spending.
Consolidation of the domestic industry, too, means fewer steel producers, which gives them pricing power that can only hurt taxpayers who will be shelling out billions on new projects.
Importantly, too, the United States has led the world in pushing down trade barriers abroad, to the benefit of exporters of American-made goods.
Reversing that philosophy now is bad for the country long term, the newspaper warned.
Steel industry analyst Charles Bradford told National Public radio that such a clause would be “hypocritical” because U.S. producers loudly complain about protectionist policies abroad.
“The same companies that have been asking for protection are the ones who just a few months ago were bragging about how profitable they were and were showing figures that they were twice as profitable as the average American company,” Bradford said.
It seems clearer than ever that public spending might be the only thing propping up any number of basic materials industries — cement, petroleum, metals and the like — for some time to come.
Global steel companies already face a huge decline in demand, down at least 10 percent in 2009, reports the Financial Times, the biggest annual decline in more than 60 years.
Some analysts say it could be four years before steel output returns to the levels of 2007.
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