Dumping Of Steel Essays - Trade Policy, International Trade

Dumping Of Steel INTRODUCTION Foreign steel producers plague the U.S. steel industry with unfair competitive practices. This practice is referred to as dumping. Dumping of foreign steel has been a problem throughout the history of the U.S. steel industry. In the 1990s dumping has become more of a problem, due to the breakdown of the Russian economy and its transition from Capitalism to a free-market economy. According to Microsoft Encarta 98 (1998), Free-Market Economy, is an economic system in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions. In addition, the Asian financial crisis has led to another round of dumping into the U.S. markets by many Asian countries. The effects of dumping have a positive as well as a negative impact on the health of the overall U.S. economy. On the positive side, steel-using industries enjoy lower prices for steel used in the manufacture of their products. Turning to the negative side, the U.S. steel industry has suffered tremendously through layoffs and a collapse of a number of steel makers. Should the U.S. Government provide protection against dumping? The debate on protectionism has gone on for years. Protection of one industry by the U.S. Government has come at the cost of another including the U.S. consumer. BREIF HISTORY OF THE STEEL INDUSTRY The steel industry grew out of the need for stronger and more easily produced metals. During the last half of the 19th century, many technological advances in steelmaking played an important role in creating modern economies. These economies depended on the steel industry to supply rails, autos, girders, bridges, and many other steel products. Iron making can be traced as far back as 3,500 b.c. in Armenia. The Bessemer process, created independently by Henry Bessemer in England and William Kelly in the United States during the 1850s, allowed the mass production of low-cost steel; the open hearth process, first introduced in the United States in 1888, made it easier to use domestic iron ores. By the 1880s, the growing demand for steel rails made the United States the world's largest producer. The open-hearth process dominated the steel industry between 1910 and 1960, when it converted to the oxygen process, which produces steel faster, and the electric furnace process, which makes it easier to produce alloys such as stainless steel. After World War II, the U.S. steel industry faced increased competition from Japanese and European producers, who rebuilt and modernized their industries. Later, many Third World countries such as Brazil built their own steel industries and large U.S. steelmakers faced increased competition from smaller, nonunion mills. The U.S. produced about half of the world's steel in 1945; by 1991 it was the third largest producer, with only 11% of the world market, behind the former Soviet Union and Japan. Since the 1970s, growing competition and the increasing availability of alternative materials, such as plastic, slowed steel industry growth; employment in the United States steel industry dropped from 2.5 million in 1974 to 1.6 million in 1991. Global production stood at 736 million tons in1991, down from 786million tons in 1988 (The Columbia Encyclopedia, 1993). DUMPING Columbia Encyclopedia, (1993) defined dumping as the selling of goods at less than normal price, usually as exports in international trade. It may be done by a producer, a group of producers, or a nation. However, dumping is usually done to drive competitors off the market and secure a monopoly, and/or to hinder foreign competition. Nations, in an effort to counterbalance international dumping, often resorted to flexible tariffs. International trade through acute competition from foreign producers often leads to dumping infractions of law. A policy regarding dumping, depends on its effectiveness in maintaining separate domestic and foreign markets, the monopolistic mechanism that influences the stability of high prices in the home market, on export bounties, or on low import duties in the foreign market help maintain economic balance. Dumping disturbs those markets that receive dumped goods and it may drive local producers out of business. Governments may condone, even sponsor, dumpi ng in other markets for political reasons and/or to achieve more favorable balance of payments. In the late 19th century, dumping became part of the trade policy of great European cartels, especially German cartels. Britain, France,