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Estimated Economic Effects of Proposed Import Relief
Remedies for Steel
Executive Summary
I. Introduction
II. How Did We Get Here?
III. Estimated Impacts of the Proposed Remedies
Appendixes
Technical Appendix
Executive
Summary
As part of the Section 201 Investigation on steel imports
initiated by the Bush Administration, each of the six U.S. International
Trade Commission (ITC) Commissioners recommended on December 7,
2001 that the President impose a range of tariffs and quotas on
steel imports into the United States. The covered imports amount
to approximately 74 percent of total volume of steel imports. Steel-consuming
industries have predicted that the recommended tariffs and quotas
would force many of them out of business and others to lay off manufacturing
and other workers in an economy that can ill-afford more job losses.
They predict the recommended remedies would result in far more harm
than benefit to the economy.
At the request of The Consuming Industries Trade Action Coalition
(CITAC), Trade Partnership Worldwide, LLC analyzed the potential
impact of the ITC recommendations on steel-producing, steel-consuming
and other sectors of the U.S. economy. The study estimated the effects
of two scenarios: (1) imposition of weighted average tariff recommendations
of 9.2 percent on imports other than Canada and Mexico of
the products on which the ITC found injury (low tariff scenario);
and (2) imposition of average tariffs, weighted by the value of
imports, of 20.7 percent on those imports (high tariff scenario).
The results are as follows:
• Steel-consuming workers have
every reason to be concerned about their future. Higher costs of
steel inputs and greater competition from imports of steel-containing
products resulting from the proposed remedies would lead to a loss
(across all sectors in the United States) of between 36,200 jobs
(low tariff scenario) and 74,500 jobs (high tariff scenario). Losses
of steel-consuming sector jobs would range from 15,300 to 30,600.
• Under either scenario, eight jobs would be lost for
every steel job protected.
• Every state loses out under the proposed remedy recommendations,
including states in the “Steel Belt.”
• As draconian as these remedy recommendations are, they
would not restore the U.S. steel industry to profitability. Despite
the large drops in imports from the tariff increases, the tariff
restrictions affect the volume of domestic production to a much
greater extent than price. Under the low tariff scenario, domestic
steel prices would rise just 0.2 percent as volume of output increases
2.9 percent; under the high-tariff scenario, domestic steel prices
would increase 0.4 percent and volume of output, 5.9 percent.
• The remedy recommendations
would not help steel workers very much either. The proposed remedies
would protect between 4,375 steel jobs (low tariff scenario) and
8,900 steel jobs (high tariff scenario), at a cost to American consumers
every year of $439,485 to $451,509 per steel job protected.
• The proposed remedies would slash imports. Import
volumes would decline by 18.5 percent under the low tariff scenario
and by 35.9 percent under the high-tariff scenario. Import prices
would increase by 9.1 percent to 20.6 percent, respectively.
• Higher prices and other inefficiencies imposed by the
proposed remedies would force consumers to pay a total of between
$1.9 billion and $4.0 billion a year, and decrease U.S. national
income by $500 million to $1.4 billion a year at a time when policy
makers are looking for every way possible to boost national income
growth.
• Steel-consuming industries would face greater competition
from foreign manufacturers, as foreign manufacturers would have
access to more competitively-priced steel inputs than U.S. steel
users. The high tariffs imposed on steel imports would raise the
price of these inputs for U.S. steel-using manufacturers but would
not raise prices for foreign manufacturers of steel-containing products.
As a result, imports of finished steel products, like electric motors,
construction materials, appliances and autos, would increase.
About the Authors
Dr. Joseph F. Francois, Managing Director of Trade Partnership
Worldwide, LLC, specializes in assessing the economic effects of
trade policy. This includes broad-based bilateral, regional, and
multilateral trade liberalization, as well as more product specific
policies such as the imposition of antidumping or countervailing
duty orders, safeguard actions, and the quotas resulting from the
rules governing trade in agricultural goods and textiles and clothing
of the World Trade Organization (WTO). He co-authored the U.S.
International Trade Commission’s COMPAS model during his tenure
at the ITC’s Office of Economics, and ran the WTO’s economic modeling
team during the Uruguay Round. Francois holds a Ph.D. in economics
from the University of Maryland (1988). He can be reached by e-mail
at .
Laura M. Baughman is President of Trade
Partnership Worldwide, LLC, a trade policy research firm. She follows
closely the impacts, both prospective and actual, of trade policies
and programs on the U.S. economy and the trade flows of U.S. trading
partners. The firm produces detailed economic assessments of these
policies and programs based on traditional economic modeling. It
also follows closely the U.S. trade policy formulation process in
order to assist clients in providing input to that process. Ms.
Baughman holds a Masters Degree in Economics from Columbia University
(1978). She can be reached by e-mail at
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