The US government response to steel industry and union efforts to win protection from imports Essays

The US government response to steel industry and union efforts to win protection from imports Essays The US government response to steel industry and union efforts to win protection from imports Essay The US government response to steel industry and union efforts to win protection from imports Essay This case was the response of the US government to the domestic Steel Industry which had been facing downturns as a result of the falling profits, reduced prices, several bankruptcies and several thousands of jobs losses which has been affecting the industry since the year 1998, even though before 1998 also the condition of the US steel industry had started to decline. This state of the industry has been affecting the US governments headed by Bill Clinton as well as the Bush administration when it came into the White House in 2001. Such a trend in the domestic steel industry has been the result of the foreign imports which had been unfairly priced. In order to make the industry back to its normal position of profit-making, the representatives of the steel industry put forward before the Clinton   administration for Section 201 action, which is a trade ruling, which if proved to be successful would permit the President to bring about a steel quota or other me thods of far-reaching relief for the industry. However various critics of such relief measures stated that such measures would lead to misplacement as well as unjustified relief. Various analysts of the steel industry stated that such a situation of the US steel firms were because of the increased supply capacity present throughout the world and in US and also because various economists and consumers of steel had pointed out that cheap foreign steel was in fact good for US and the provision of quotas would affect trade retaliation. There was opinions as of the nature that if steel quotas was imposed by the US government it would tend to affect the export of steel from other countries which were actually depending on steel exports for the progress of their economy and would only be advantageous to the steel industry affecting the broader US economy. The foreign steel makers were of the view that the situation of the US steel industry was as a result of increased competition among the domestic firms and also because of an absence of consolidation. As the Clinton administration left without bringing about the case for Section 201 and the Bush administration was pressurized to bring about a comprehensive 201 trade investigation, the decisions of the Bush administration was expected to have wide-ranging effects for the steel industry of the country, for the entire US economy and for the country’s link with other foreign partners. When Bush administration came into power in 2001, even though the Steel Workers Union and Congressional Steel Caucus did not attempt to establish relationship with the President, they made all efforts in order to bring about protection for the industry. However it was expected that there would be attempts at promoting policies for free trade and that Bush would not allow for section 201 for protection of the steel industry. By March 2001, a broad-based coalition of steel associations emphasized for a comprehensive relief package for the declining steel industry and started to request the administration to bring about the case for section 201 or to find other measures which were compatible with the WTO regulations to tighten the imports into the country. There was a great demand for implementing section 201 as other measures of dumping cases was not proving to be effective. Even though it was expected that Bush administration would not implement the case for section 201, on 5 June, 2001, President Bush to the surprise of all and go by going against the free trade principles of the Republican Party, announced that his administration would bring out a case of section 201 for 33 kinds of steel imports. However this attempt of bringing about a case of section 201 was being criticized as being yielding into the pressure of the unions and industry. There was also criticism that such a move for section 201 would affect US consumers as well as steel consuming industries by putting a restriction on importing steel.   Critics argued that subsidies and protection would not create facilities for competitive industries. There was criticism that Bush was implementing the policy so as to garner support before the November mid-term elections and positioning Bush for the 2004 presidential elections. Such a move for section 201 also created dissatisfaction with the for eign trading partners, especially, EU. However Bush administration knew very well that the case for section 201 would ultimately violate the provisions of WTO law. And as a result the WTO dispute panel in May 2003 ruled that the safeguards being put forward by the US in all of the 10 types of steel imports were considered to be illegal. Later this ruling was also upheld by the appellate body of the WTO and this created appeals from foreign trade experts, members of the Congress, steel makers as well as steel union representatives. But Bush administration stood silent on the issue. However when the EU started its moves of retaliation, Bush administration was forced to terminate section 201, after a 20-month long period of tariffs against steel import. Such a move was considered to have brought an end to efforts of consolidation of the steel industry by the steel unions and on the other hand was the decision was upheld by the critics of section 201 that it would pave a way for free-trade efforts to promote the steel industry to be competitive. This case study shows the attempts at protecting the steel industry by the US government with measures at curtailing steel imports such as dumping which when proved ineffective being altered with the measure of section 201 so as to promote the domestic steel industry. These measures had to be adopted as the steel industry was badly hit by declining prices, falling profits and increased imports, and the Government had to intervene in order to protect and promote the domestic steel industry.