Trump Takes Action to Protect U.S. Steel Industry

President targets unfair 'dumping' with little invoked national security power

by Brendan Kirby | Updated 21 Apr 2017 at 6:21 AM

President Donald Trump’s order on Thursday to investigate whether trade practices unfairly undermine the U.S. steel industry and hamper national security could have a significant long-term impact, according to experts on trade policy.

The president invoked Section 232 of the Trade Expansion Act of 1962, which is designed to protect critical industries needed for defense.

“Steel is critical to both our economy and our military. This is not an area where we can afford to become dependent on foreign countries.”

“Maintaining the production of American steel is extremely important to our national security and our defense industrial base,” Trump said Thursday in the Oval Office. “Steel is critical to both our economy and our military. This is not an area where we can afford to become dependent on foreign countries.”

The memo Trump signed directs Commerce Secretary Wilbur Ross to make a report with recommendations to take action against imports that are undermining American steel.

“It’s pretty important,” said Kevin Kearns, president of the U.S. Business and Industry Council. “Section 232 is a trade tool that combines trade cheating with national security … It is not often used.”

Complaints of unfair trade practices by the steel industry are nothing new. The U.S. has placed more than 150 anti-dumping and countervailing duty orders on steel products. The failure of those actions highlights the reality that the current trade-law regime is slow-moving, reactive, and case by case, said Alan Tonelson, an economic policy analyst who favors tighter trade restrictions.

Steel Imports/Exports*
2014$42.7 billion$15.9 billion
2013$33.1 billion$16.2 billion
2012$39.6 billion$17.1 billion
2011$36.4 billion$16.9 billion
2010$27.5 billion$14.3 billion
*Steel and iron and ferroalloy
Source: Census Bureau

Ross noted that Chinese steel now accounts for 26 percent of the U.S. market and that exports have increased even amid a worldwide glut in steel.

According to census data, the United States in 2014 had a $26.8 billion trade deficit in steel, iron and ferroalloy.

Tonelson, who writes about the economy for the RealityChek blog, said it is another example of Trump using the tools at his disposal to change trade policy without congressional action.

“It could be a big deal if nothing else about U.S. trade law changes,” he said.

Leo Gerard, president of the United Steelworkers union, praised the action. He said in a statement that trading partners for decades have stolen market share and undercut the U.S. steel industry through unfair and illegal actions.

“Steel is the backbone of our country, our infrastructure, and our military,” Gerard stated. “The president’s action today will reveal to policymakers in Washington what every American already knows: We must have a strong steel sector to be a strong country.”

Kearns said tying unfair trade practices to national security is a way to bypass the normal, lengthy route through the World Trade Organization.

“Using Section 232 could be a powerful tool, especially for industries that are in extremis, which too many are,” he said.

Tonelson said an advantage of using Section 232 is that any challenges by foreign powers in the World Trade Organization likely would have little chance of success since that body has granted deference to national security interests of member nations.

And, Tonelson added, the normal course of dealing with dumping concerns has not worked very well. He noted that the United States has won dozens of steel-related trade disputes.

“And yet the American steel industry … is still under enormous predatory trade pressure,” he said.

Tonelson said a more fundamental overhaul of U.S. trade law is needed. Trump's move on Thursday, he said, "is no substitute for that kind of sweeping trade policy overhaul."

That may require Congress to pass new laws, Tonelson said. But he added that the president has wide authority to renegotiate trade deals.

"It really is up to the Trump administration here to push the envelope and, not to put too fine a point on it, see what he can get away with," he said.

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