Barriers? A steel trap?

Published on Thursday, 6 July 2017 19:45
Written by

The Washington Post

As the Friday start of the Group of 20 economic summit in Hamburg approaches, the Trump administration represents one of the chief sources of uncertainty in global trade. It has been just over two months since President Donald Trump ordered a review of how steel imports affect American national security, which could usher in protectionist measures on a wide range of products from a wide range of countries. The results of the review are due any day now; the United States’ trading partners are right to fret about where it might lead, and despite the “America first” rhetoric surrounding Trump’s move, Americans should be nervous, too.

It’s not that all is well in the global market for steel. To the contrary, major governments, including President Barack Obama’s administration, have long recognized that global overcapacity is creating unsustainable downward pressure on producers’ prices and that China’s bloated state-run industry is the locus of that overcapacity. Hence, the Obama administration imposed trade barriers on Chinese steel, which is one reason China’s share of the U.S. market has been declining of late - though Chinese exporters are suspected of diverting some through cutout firms in Vietnam.

The question is whether a unilateral American invocation of the president’s rarely used power to create national security exceptions to normal trade law is the right way to deal with this situation. Probably not. Given China’s relatively small U.S. market share, and the fact that anti-dumping and countervailing measures already apply to China, it is not clear what could be accomplished through new barriers to imports - unless they were applied to other steel exporters. And applying trade barriers to those other countries makes no sense, in national security terms, because most of them are at worst not hostile to the United States and in many cases are close U.S. allies. In fact, of the top 10 foreign steel suppliers, of which Canada is the largest, six are tied to the United States through NATO, NAFTA or bilateral defense treaties; two others, Taiwan and Brazil, are old U.S. friends.

In addition to being intellectually dishonest, asserting that steel imports pose a threat to U.S. national security could be internationally destabilizing. Global institutions such as the World Trade Organization are premised on the concept that trade is in their members’ mutual interest and that they will therefore rarely, if ever, seek exceptions to the rules based on subjective individual claims such as national security - as opposed to measurable violations such as dumping goods below production cost.

If the United States departs from that, other countries will be tempted to follow suit, potentially setting off spiraling global protectionism. Many U.S. exporters - such as those in agribusiness - would be vulnerable if that happened; so, too, would industries, such as auto manufacturing, that depend on a global supply chain. That is why steel- consuming companies in the United States, and many of his own more prudent advisers, are urging Trump not to act as if the U.S. national interest were equivalent to the narrow interests of the protection-craving steel industry. When it comes to trade policy, it’s easy to shout “America first,” but hard to define exactly what you mean by “America.”

Posted in The Bristol Press, Column on Thursday, 6 July 2017 19:45. Updated: Thursday, 6 July 2017 19:48.