#MetalMatters: International Trade Policy

“No party holds the privilege of dictating to me how I shall vote. If loyalty to party is a form of patriotism, I am no patriot.” – Mark Twain

I recently attended my Culver Military Academy 50th class reunion. With an intense focus on values-based leadership, Culver is special. One of its most esteemed alumni, the actor Hal Holbrook, said, “Culver is where I fought, and died, and lived again. And from all that I found myself.” Every Culver grad remembers this quotation. I certainly learned a lot through debate in the classroom. I also learned to live a values-based life, and to understand civics and patriotism.

Holbrook, as you may recall, once portrayed Mark Twain, so I tried to conjure what advice the humorist might have for this election year. Based on the quotation above, I hope Twain would agree with my first quarter column: as business leaders, we must help reverse the extreme partisanship that infects our politics.

Ideas matter too much not to open our ears to all sides.

As I also noted in that column, MSCI does not endorse candidates. But through our free webinars, Connecting the Dots, and in-person conferences like the upcoming Economic Summit, we do explore the policy issues that affect member companies, their customers, and employees. This election year, I also wanted to use my quarterly columns to reiterate MSCI’s stances on important issues and to highlight some of what we are hearing from presidential candidates.

Once more: MSCI will not endorse candidates, but I do hope these columns will spur civil conversations and encourage you to press candidates and leaders for substantive solutions rather than rabid rhetoric. So, let’s get started with an issue that is crucial for the industrial metals community: international trade.

MSCI’s Views On International Trade

Opening new markets and building supply and sourcing opportunities is vital to the competitiveness and growth of the North American manufacturing economy.  Ninety-six percent of the world’s consumers live outside the United States. Trade with foreign nations breeds economic growth, creates well-paying jobs at home, and raises workers’ standard of living — as long as there is a level playing field.

From both parties we must demand fair and free trade.

Failure to confront countries that violate trade rules damages workers, businesses, consumers, and our national security.

Here are some principles that guide how MSCI evaluates trade policies. We ask whether they:

• Open new markets to North American products;
• Enforce and strengthen current laws and agreements that are meant to prevent and combat unfair trade practices, including currency manipulation; and
• Address unfair trade practices through legal action when necessary.

How has MSCI applied these principles? In 2017, when the United States was contemplating Section 232 tariffs on steel and aluminum imports, MSCI argued that global overcapacity and other unfair trading practices, particularly by China, have harmed the U.S. steel and aluminum markets. To address this circumvention, we advised federal officials to provide relief for producers up and down the supply chain and to consider the consequences of any new trade policy, including: the economic impact of global overcapacity on the entire domestic metals supply chain; transition times and implementation rules to any new policy; availability of domestic metals to meet U.S. national security needs, as well as general industrial and consumer demand; and trade flows under current free trade agreements. MSCI also asked that Canada and Mexico be excluded from any trade penalties.

We need a vibrant and healthy North American source of supply and a vibrant and healthy North American source of demand. Both are equally important to the industrial metals supply chain.

MSCI has never wavered from that stance and it is just a relevant today since these penalties are still being debated in Washington, including by the 2024 presidential candidates.

The 2024 Presidential Candidates Stances’ On International Trade

Regarding the Section 232 tariffs, there does not seem to be a lot of daylight between the two major party candidates. Former President Donald Trump’s administration implemented the penalties, of course, and President Joe Biden’s team has kept them in place. The Biden administration also has been working with federal lawmakers and the Mexican government to address a surge in metals imports from that country that are originating in China. (Read more about that matter in Connecting the Dots here, here, and in the future.)

The candidates have offered new ideas about how combat unfair trade practices as well. MSCI has not taken a position on any of them, so I only offer this information as food for thought and discussion.

Trump campaign officials have, for example, suggested the former commander in chief might impose penalties, including tariffs, export controls, and currency manipulation charges, on countries that stop pegging their currency to the dollar. Trump also has said he might impose a blanket 10 percent tariff on all goods coming into the United States, a 100 percent tariff on imported automobiles, and a 60 percent tariff on all products from China.

Biden, meanwhile, has raised tariffs on a dozens of Chinese products — read Connecting the Dots’ coverage here — and his administration is ramping up rhetoric on Chinese overcapacity. As Politico reported, Biden’s National Economic Advisor Lael Brainard accused China of “investing in significant industrial overcapacity” and of “flooding global markets with artificially cheap exports.” Treasury Secretary Janet Yellen called for G7 nations to present a “united front” against Chinese overcapacity.

As The Wall Street Journal recently explained, China is still playing games when it comes to trade. The stakes in this debate are, undoubtedly, high. All the more reason for our community to model Twain’s patriotism by carefully listening to all candidates carefully and questioning all parties.

Simple answers and partisan rhetoric will not help our industry tackle the problem of unfair trade.

Culver’s values-based leadership taught me, like Hal Holbrook and many others, to follow our true north. Frank Batten, Sr., founder of the Weather Channel and a member of Culver Class of 1945, said, “Never has there been a greater need for … enlightened and ethical leaders who leave grounds prepared for public life—in their communities, in their professions, in the world at large.”

No truer words were ever spoken.