History and Section 232: The Numbers Don’t Lie

Filed under: Featured News,Labor |

Steel Imports are a great commodity that has kept the United States at the forefront of industry.

Amid growing tensions, the process of implementing the Section 232 tariffs on steel and aluminum imports is now moving forward. Section 232 of the Trade Expansion Act of 1962 directs the Secretary of Commerce to submit a report to the president advising whether any article “is being imported to the United States in such quantities or under such circumstances as to threaten to impair the national security.”

Maritime professionals believe the new steel and aluminum import restrictions, recommended under the guise of national security, will wreak havoc not only on seaports, but also on downstream businesses dependent on steel and aluminum imports. Uncertainty over exactly which countries and products will experience the greatest effects is mounting.

“This lack of clarity is jeopardizing normal business operations in our seaports and extending throughout the entire steel supply chain,” said Robert Palaima, president of Delaware River Stevedores.

In late April, Caterpillar Inc. stock tumbled despite positive quarterly earnings after the company forecast that the steel tariffs would drive revenues down for the remainder of the year. Caterpillar, which manufactures construction and mining equipment, diesel and natural-gas engines, industrial gas turbines, and diesel-electric locomotives, said steel costs in the equipment industry were up about 15% for the quarter.

“As measured by vessel calls in 2017, vessels that carried over 4 million tons of steel cargo, steel is currently the fourth-largest import cargo arriving at Delaware River ports,” according to Maritime Exchange President Dennis Rochford. “The direct impact on the regional port is all-encompassing. Ship agents, dockworkers, tug boat operators, pilots, warehouse workers, truckers, and others involved in the transportation chain are all under duress due to the imposition of these tariffs and the anxiety surrounding their implementation.”

Similar uncertainty characterized steel imports in the early 2000s as well, when President George H. Bush imposed tariffs under Section 201 of the trade act.

An important new analysis recently released by Martin Associates offers compelling data highlighting the downward effect of tariffs on steel capacity utilization. Specifically, the study finds no direct relationship between steel imports and domestic steel-industry capacity utilization. In particular, Martin’s data show that the capacity utilization of the U.S. steel industry actually declined during the imposition of the Section 201 import tariffs during March 2002 through December 2003.

The Trade Partnership, in a report released last March, predicted across-the-board 232 tariffs would cost six times as many jobs throughout the economy as compared to jobs created in the domestic steel industry. “While the report projected the creation of 33,000 steel and aluminum jobs, of concern is the concurrent loss of 180,000 jobs in the services sector, trade and distribution, construction and business, and professional services,” Rochford said.

“This is the real economic story behind the Section 232 tariffs the president wants to impose,” said Richard Chriss, executive director of the American Institute for International Steel. “The issues the president is attempting to address with these tariffs are better dealt with at the World Trade Organization, where the U.S. won nearly 86% of the cases it has brought before this organization since 1995.”

It is also clear that imposing the tariffs will invite retaliation by other countries against U.S. exports. A likely first casualty in this trade war is the U.S. agriculture sector, including potential new tariffs against U.S. corn, soybeans, wheat, livestock, dairy, and other goods.

Even where farmers might not directly export products overseas, many crops and livestock grown and raised in the U.S. are contained in food products shipped elsewhere. In a March 9 Philadelphia Inquirer article, Rick Ebert of the Pennsylvania Farm Bureau was quoted as saying, “higher tariffs make our products more expensive and less competitive, which opens the door for other countries to replace the U.S. as a supplier of food overseas.”

“Job-killing restrictions on steel imports today will not enhance the nation’s economic well-being any more than they did under Section 201,” Rochford said. “Rather, the imposition of steel tariffs and the retaliation sure to follow set the stage to once again handicap the U.S. economy and its workforce.”

Reprinted courtesy of the Maritime Exchange Beacon.

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