Pennsylvania Steel Industry: Target of Global Economic Warfare
Pennsylvania has a robust steel industry history, as we truly were and should again be the steel capital of the entire world. Steel from our commonwealth has built some of the most notable landmarks in our modern history from the locks of the Panama Canal, to the beams of the George Washington Bridge, to the foundations of the Empire State building. The value added because of the steel industry drove Pennsylvania’s industrial renaissance and with it, unmatched American economic prosperity. That’s because steel is foundational to economic dynamism as it is the primary raw component that creates the most durable and valuable assets in our society.
Today, that dynamism is threatened by the actions of foreign governments, which are outside the bounds of legitimate market competition.
Foreign countries are actively waging economic warfare against our nation in the form of predatory pricing in economic trade. More commonly known as “steel dumping,” foreign governments massively subsidize steel manufacturers in their respective nations; therefore allowing those manufacturers to price steel in the American economy well below market value and in many instances below the cost of production. This practice has been perpetuated by countries including: China, India, the Philippines, Saudi Arabia, South Korea, Taiwan, Thailand, Turkey, Ukraine, and Vietnam. International trade law is not being properly enforced and American manufacturers are paying the price for the federal government’s inaction. The harms of this inaction are definite, as according to the American Iron and Steel Institute there were 12,000 layoffs in 2015.
Currently, the overcapacity production of steel in China is four times the total capacity of the United States. The ONLY conceivable reason that the government of China would subsidize this gross over production is simple: their goal is to bankrupt our steel companies and dominate the international market. Please remember, the steel production capacity that exists in Pennsylvania today represents many decades of investment at the cost of untold billions of dollars. If we allow predatory practices by foreign competitors to shut down our plants, they will never re-open. Once domestic competition has been suppressed to the point of bankruptcy, American consumers will be at the mercy of an under-competitive market and thus, skyrocketing prices.
There are three main offenses that China is currently engaged in: First, they are illegally fixing prices. Second, they are engaging in cyber espionage to obtain trade secrets of our domestic steel producers. And third, they are frequently shipping steel to other countries that then send the steel to the United States to avoid tariffs and taxation, an illegal scheme called trans shipments. It is the responsibility of the United States Department of Commerce to enforce trade agreements by imposing antidumping penalties and countervailing duties when foreign governments subsidize a foreign competitor’s production. We urge the U.S. Department of Commerce to maintain China’s “non-market economy” status to preserve the ability of U.S. companies and workers to access domestic trade law remedies. This is particularly important because it is true and the dictatorship in Beijing should not be rewarded when its economy remains under the control of the central government, the Communist Party, and the People’s Liberation Army.
On the surface, the explosion in global steel capacity over the past ten years would indicate the world’s economy is growing at a staggering rate. Today, China has the capacity to produce one billion tons of steel a year. Ten years ago, the nation could produce only one tenth of their current capacity. Unfortunately, it’s more than supply and demand economics driving the growth; it’s what trade experts call a beggar-thy-neighbor policy. One country attempts to remedy its economic problems by worsening the economies of other countries. Worse yet, it’s government subsidization that’s paving their path to market dominance.
The Alliance for American Manufacturing says that overall imports from the nine countries in question more than doubled from 850,000 tons in 2010 to 1.8 million tons in 2012, a 113 percent increase, with South Korea accounting for half that amount. In that same time period, domestic industry operating margins have dropped from 13.6% to 9.8% with foreign imports often sold at hundreds of dollars per ton less than domestic oil country tubular goods.
This situation is uniquely critical for Pennsylvania as we can and should play a major role in both energy production and the manufacturing of the domestic oil country tubular goods.
The market for oil country tubular goods has expanded rapidly with the onset of drilling in the Marcellus Shale and other newly accessible gas and oil plays. This makes business leaders doubly concerned that the influx of artificially underpriced goods is working against America’s long-sought and now attainable goal of energy independence and global energy supply leadership. Essentially, under the current unfair competitive conditions, America is simply exchanging one form of dependence for another if foreign energy is replaced by a domestic energy infrastructure built with products from other parts of the world.
Inequitable trade practices stifle American economic dynamism as this directly undermines American energy leadership for the benefit of our global allies. We ought to be a leader in the world, powering our allies in Europe and other parts of the world with clean burning American energy that is pulled through pipes manufactured inside of our borders.
The artificial subsidization of steel by foreign countries allows them to thwart our domestic producers by enabling the sale of the product at prices far, far below the market value. This is not free trade; this is theft, this is foreign bolstering of their domestic economies at our expense, and this is essentially economic warfare. It’s a direct attack on America’s corporate citizens, our hard working employees, and on the Pennsylvania communities that depend on the continued success of their manufacturing industries for their prosperity and quality of life.
Please do not misunderstand us. We know that American manufacturers must compete to win in the global marketplace through continuous improvement and innovation. We understand that we must work to open up new overseas markets for American-made goods. We believe in the mutual benefit of international trade with our allies and other law-abiding nations. But we will not tolerate these predatory trade practices, especially not from hostile foreign powers.
We at the Pennsylvania Manufacturers’ Association encourage the General Assembly and state government as a whole to support policies and initiatives that will protect and support the growth of the domestic steel industry. America is losing jobs today, and we must pursue global cheaters with the determination put forth by President Reagan, who said: “We will vigorously pursue our policy of promoting free and open markets in this country and around the world. We will insist that all nations face up to their responsibilities of preserving and enhancing free trade everywhere. But let no one mistake our resolve to oppose any and all unfair trading practices.”