04 Mar Leo Gerard: American Aluminum and Steel Workers Are in Jeopardy
In preservation attempts, conservation groups pull at heartstrings and purse strings with photos of threatened animals – adorable baby elephants, majestic Amur leopards, sentient Sumatran orangutans. A less photogenic endangered species, the American aluminum and steel worker, received vital aid toward survival this week from the White House.
President Trump announced he would place tariffs of 25 percent on imported steel and 10 percent on imported aluminum. This followed investigations by the U.S. Commerce Department that determined unfairly traded imports of both metals have killed off American mills and jobs, threatening national security.
American aluminum and steel manufacturers and their workers have railed for decades against the trade regulation scofflaws that bankrupted U.S. mills and destroyed U.S. jobs. American manufacturers and workers are willing and able to compete on a level playing field. But countries like China deliberately distort that surface to their favor by defying trade rules.
China has conducted a trade war against the United States since the day in 2001 that the World Trade Organization granted the Asian giant membership. That’s how the U.S. trade deficit with China has exploded, reaching a record $375.2 billion last year, a figure that represents more than half the total U.S. deficit.
The terrible result is economic war zones – shuttered U.S. factories, furloughed manufacturing workers and devastated towns. University of Maryland economists Katharine Abraham and Melissa Kearney showed in recently published research that cheap Chinese imports rendered more Americans unemployed since 2001 than any other factor. The cost to U.S. workers was 2.65 million jobs. Automation also killed jobs, but by less than half of what Chinese trade cheating did.
The Commerce Department investigations into the effects of steel and aluminum imports on national security demonstrated that China flooded the international market with artificially cheap metals, depressing prices and annihilating American mills – mills that are among the most efficient and least polluting in the world.
Steel employment in the United States has declined 35 percent since 2000. Aluminum jobs plummeted even further – crashing down 58 percent in just three years, between 2013 and 2016. That amounts to tens of thousands of high-skill, family-supporting jobs lost.
In 2000, 105 companies produced raw steel at 144 U.S. locations. Now, 38 companies forge at 93 locations. In 2000, 13 companies operated integrated mills with an average of 35 blast furnaces running continuously. Now, three companies operate 13 blast furnaces.
The declines in U.S. steel and aluminum production occurred despite increased domestic demand for both.
American aluminum production sank even more sharply than steel. Over the past six years, six smelters permanently closed. Just five remain, with only two operating at full capacity. One of the five smelts the high-purity aluminum required for critical infrastructure and defense aerospace needs. If that mill closes too, the United States would have no domestic supplier of the metal crucial to national security. The only two other high-volume producers of this aluminum are located in the United Arab Emirates and China.
In 2016, the United States imported five times as much primary aluminum as it made. That year, it produced about half of what it did the year before. Production dropped even further in 2017.
Most of the aluminum imported into the United States comes from Canada, a country that respects trade regulations and operates a market economy, just like the United States. As a result, Canada should be exempted from the steel or aluminum tariffs.
By contrast, China flouts trade rules and operates a communist economy. The Chinese government owns some aluminum and steel mills, which means they need not operate economically. The Chinese government provides financial support for select industries, including loans that don’t have to be repaid and underpriced or free raw materials.
China continues to produce steel and aluminum even when that means massive excesses. It dumps that glut on the international market, often at prices lower than production cost. All that government-subsidized, underpriced steel and aluminum forces producers outside of China to cut their prices. Too often that means they suffer losses, or go bankrupt.
China’s defiance of international trade law has destroyed market-based mills across the United States and the European Union.
Repeatedly over the past decade, delegations from countries suffering these losses have negotiated with Chinese officials in attempts to persuade them to observe international trade laws. Repeatedly the Chinese have said they would, promising to reduce production capacity, particularly by closing older, highly polluting mills.
Repeatedly, the Chinese have, instead, continued running dangerous and environmentally toxic mills and constructed new ones, further increasing overcapacity. In 2016, for example, China increased its steel-making capacity by 36.5 million tons. That increase is almost half of the U.S. output for 2016 and twice Britain’s.
Part of China’s cheating is theft of intellectual property. In 2014, the United States charged five members of China’s People’s Liberation Army with economic espionage for hacking into computers belonging to the United Steelworkers and five American corporations, including U.S. Steel, and stealing trade secrets and other information. The charges were mainly a symbolic action since these thieves, safely in China, never stood trial.
In recent years, the United States has imposed 164 trade penalties on unfairly traded steel imports, mostly from China, and it is considering another 20. The steel industry has spent hundreds of millions pursuing these cases, which represent a 60 percent increase since the turn of the century.
China aggressively evades these penalties. One dodge is shipping its steel first to a country like Vietnam or Malaysia or Sri Lanka, where labels are switched so it looks like the steel originated there. This is so common it’s got a name – transshipping. U.S. Steel investigated this scam and filed a trade case against China after proving it.
These are just a few of the offensive tactics perpetrated by China in its trade war against the rest of the world. China refuses to cut its excess production, scoffs at trade laws, and flagrantly cheats to subvert tariffs imposed because of its violations.
The United States could capitulate and simply allow China to seize the entire world market. Or it could do what the Trump administration announced this week – impose tariffs intended to stop China from illegally subsidizing its exported metals and transshipping them.
The tariffs give U.S. aluminum and steel producers time to recover. This is essential because the United States can’t assure its own national security if its steel and aluminum mills and its skilled mill workers are extinct.