Daniel Pearson: Steel Import Restrictions Harm U.S. National Security

Section 232 National Security Investigation of Imports of Steel
Department of Commerce

This statement will acknowledge that much equipment used by the U.S. military requires steel.  The question is how best to obtain the specific types of steel needed for various national-security applications.

Most steel used in military applications likely comes from domestic suppliers, or from countries with which the United States has amicable relations.  Little or no essential steel comes from countries that would be considered adversaries.  Keeping the U.S. market open to steel imports will assure that the military has access to steel needed to maintain national security.

If some specific qualities of steel are deemed not to be freely available from the global market, the U.S. military could ensure that U.S. producers remain in business by establishing long-term contracts with them.

Economists have understood since the work of David Ricardo that it is unwise to try to be self-sufficient when others are able to provide products at lower costs.  Import restrictions intended to increase national self-sufficiency will cause resources to be used inefficiently, thus lowering national economic welfare.

U.S. steel imports already are restricted by approximately 200 antidumping and countervailing duty orders.  These restrictions have negative consequences for the U.S. economy.  This is easily understood when comparing the relative sizes of the steel-producing and steel-using sectors.  Data available from BEA/DOC indicates that steel mills employed roughly 140,000 workers and produced economic value added of $36 billion in 2015.  On the other side of the equation, manufacturers that utilize steel as an input employed 6.5 million people and produced economic value added of $1.04 trillion.  So steel users employ 46 times more workers and add 29 times more value to the economy.  

Any action to impose additional steel restrictions stands to raise prices further and to do even more harm to U.S. manufacturers.  It’s not only Carrier that could lower its costs by moving to Mexico.  Many companies may simply find it uneconomic to produce in the United States due to the artificially high price of steel.

Maintaining a vibrant and growing economy is essential to U.S. national security.  That is why restricting steel imports creates a genuine threat to economic growth and prosperity.

The DOC should recommend removal of all U.S. import restrictions on steel.  In order to help the domestic steel industry adjust to an open market, consideration should be given to providing economic adjustment assistance to steel companies and their workers.