- The Washington Times - Wednesday, March 6, 2002

Just give it four years, says Sen. John Rockefeller, West Virginia Democrat.Just four years of huge tariffs on imported steel, along with other protectionist measures, and all will be well. The U.S. steel industry will recover. Chronic overcapacity will be reduced. Steelmakers will begin to invest in new technologies and become more efficient. Four years from now, they'll be ready to take on the world.

It's not the same as agriculture, the protectionists say. We grow enough corn and wheat and soybeans to survive even if we were shut off from the rest of the world for centuries by war or other tragedies. If we don't protect steel, they say, we may not have enough to build weaponry and meet domestic needs. This isn't a four-year corporate welfare program, they say, it's a security issue.

We heard this argument a lot, from Mr. Rockefeller and others, in the days before President Bush decided to raise tariffs and take other steps to protect the domestic steel industry. Approve the tariffs and other measures, Mr. Rockefeller said, and "the future of our nation's steel industry, its national security contributions and a critical portion of our manufacturing economy will be secured." Otherwise, "we may well lose this essential domestic industry forever with grave consequences."

This would be an utterly convincing argument but for one tiny problem: It isn't true. Catering to the steel lobby won't make us less vulnerable on the defense front, and it won't save the industry. And anyone who believes Mr. Rockefeller and his allies won't be back in four years asking for more knows little of the history of government giveaways.

A recent Commerce Department report found U.S. steelmakers are capable of producing 3 times the amount of steel we would need for national security purposes during war. And that's counting not only military uses which make up just 0.1 percent of domestic steel production capacity but also the steel needed to keep the economy purring.

In fact, steel's problems have almost nothing to do with protectionism or the world economic order and almost everything to do with overcapacity.

According to the Wall Street Journal, the global steel industry produced 847 million tons of steel in 2000. Very impressive. Too bad demand totaled only about 807 million tons.

This oversupply forces down the price of steel and causes economic hardships for many U.S. steel manufacturers. Unfortunately, more protection for the steel industry, even in the name of national security, won't change that.

Why? Because the oversupply of steel worldwide isn't the only problem. So-called integrated steel mills (which have a strong union presence), have been losing market share to "minimills" for some time. These smaller facilities, which operate more efficiently and can produce steel more cheaply, now control 50 percent of the market. That's up from 10 percent in the late 1970s. Over the same period, imports have increased by only 10 percent. More protection won't do anything to help the integrated steel mills.

Besides, many of our trading partners complain about the way we protect the steel industry today, and they retaliate when they can.

If the nations of the world want to help the steel industry, they should eliminate protection and subsidies which merely upset the balance of supply and demand and let the industry go through the changes it needs to make.

That's what Big Steel needed: Someone who would have refused the industry's latest shakedown attempt, a protectionist plea masquerading as a patriotic defense issue. Unfortunately, that's not what it asked for, and that's not what it's going to get. See you in 2006, Mr. Rockefeller.

Aaron Schavey is a policy analyst in the Center for International Trade and Economics at the Heritage Foundation.

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