MSCI Submits More Comments To U.S. Trade Representative On Global Steel Supply Situation
Last Wednesday, the Metals Service Center Institute (MSCI) filed post-hearing comments concerning policy recommendations on the global steel industry situation with the United States Trade Representative (USTR). These comments follow the testimony of Richard A. Robinson, president of Norfolk Iron and Metal and chairman of the Metals Service Center Institute (MSCI), given on behalf of MSCI at a USTR public hearing on this issue on April 12.
In its most recent comments, MSCI responded to questions raised in the April 12 hearing by Marisa Lago, Assistant Secretary for International Markets and Development at the U.S. Department of the Treasury. Assistant Secretary Lago had asked how the current global steel industry situation, and its impact on U.S. steel industry and market, is different today compared to the past and what can the federal government do about it?
In its submission, MSCI argued much has changed in both the global steel industry and the U.S. steel industry since the 2008 recession. While MSCI recognizes that the steel industry is cyclical and is generally tied to periods of economic downturn and periods of economic recovery, unlike past cycles, the U.S. steel industry has not fully recovered from its lowest point nearly a decade ago. Indeed, steel shipments from MSCI member companies in 2015 were barely 65 percent of peak shipments before the 2008 recession. Additionally, the anemic recovery has taken more than twice as long as the average recovery period following previous recessions. The inescapable conclusion is that something more than classic, free market forces are at work in global steel markets.
As to what the federal government can do about the situation, MSCI again recommended that U.S. trade policy be guided by three core principles and objectives:
- First, U.S. trade negotiators should immediately engage in negotiations—both bilaterally and multilaterally—with our trading partners to address excess capacity resulting from foreign government-sponsored market distorting policies. Failure to negotiate reductions by a certain percentage over a specified period should trigger offsetting trade sanctions under the Government’s safeguard authority, such as countervailing tariffs and/or import licenses.
- If the United States were to impose additional tariffs on imported steel, then—to avoid unintended damage to the U.S. manufacturers that utilize steel in their finished products—the United States should impose a corresponding and offsetting tariff on imported steel- containing products. The products to be subject to the tariff should be identified by USTR in consultation with domestic steel consuming companies; the tariff should be based upon, and proportional to, the additional tariff imposed on the imported steel itself.
- Take the long-overdue step of declaring that the Chinese government is a currency manipulator. China’s substantially undervalued currency makes all Chinese exports to the U.S., not just steel, cheaper and hurts U.S. producers, manufacturers, service centers, and the broader economy. Currency manipulation is one of the major reasons for the growing merchandise trade deficit with China, which last year exceeded $366 billion.
MSCI members can read the comments in their entirety by clicking here.