Domestic Steel vs. Imported Steel: Which Benefits Consumers?

Steel Making
“Many thousands of men and women whose livelihoods depend on the steel supply chain will be hurt by increased, unwarranted restrictions on trade in steel.” – Trade-group executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

From Bloomberg.com: “Steelmakers Seek to Change the Rules in Import Battle

NEW YORK — Struggling U.S. steelmakers are trying to change the rules in their fight against cheap foreign imports.

[Disclosure: This blogger previously worked in the steel fabrication industry, and, thus, knows something about the effect that steel prices has on manufacturing production costs.]

Steel-dependent manufacturers benefit when the price of steel is low, because the manufacturers are able to save money on manufacturing costs. As a result, the manufacturers can pass the savings on to their customers in the form of lower prices for goods made out of steel.

Lower prices for steel goods end up benefiting the general public as a whole. For example, low steel prices result in the lowering of the cost to make automobiles, which in turn results in the lowering of the price for new automobiles. The same is true for the production of major appliances and anything else sold to the general public that contains steel.

Also, when manufacturing costs are lower, manufacturers are able to hire more workers and/or increase wages for workers.

Yet, if steel-dependent manufacturers are buying foreign-made steel in order to save money, then domestic steel-makers experience a loss of profits, resulting in a reduction of their workforce.

From that above-mentioned Bloomberg story: “Regulators now look largely at profit levels in deciding on action. Steelmakers [in the USA] want to show that earnings come at the expense of lost jobs and production, threatening long-term competitiveness.”

DISCUSSION QUESTIONS:

1. Do domestic steel-makers have a legitimate gripe about foreign-made steel, or are they simply griping because they can’t compete in a global market?

2. If foreign-made steel is just as good as domestic-made steel, then should the U.S. government protect domestic steel-makers from foreign competition?

3. Domestic steel-makers are heavily unionized. Could it be that such unionization is partly responsible for the difficulties that domestic steel-makers are having?

By the way, some of that foreign steel comes from Canada.

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