Effects Of Trade Tariffs: Government Protection

Effects of Trade Tariffs Institution Affiliation Date Effects of Trade Tariffs Traditionally, steel has been an important industry across the world. Additionally, steel is an important element of the economy. To protect this important element and industry, governments across the world have been and are willing to protect their industry. The global consumption of steel has been increasing throughout the years. America is one of the world’s leaders in the production and consumption of steel, but the sector is crippled by the cheap steel imports from competitor countries. Throughout the American history, different regimes have used the law to protect the sector with the aim of raising domestic prices and boosting the industry. Without the protection, the producers and consumers of steel face risks of job reduction, stiff competition from foreign rivals. The imposition of tariffs on steel imports violates the World Trade Organization guidelines. Although the tariffs are aimed at reviving the industry, they may cause more harm to the economy than their intended objectives. After WWII, the United States steel industry continued with its leadership which it had enjoyed maintained for decades. The country was not importing steel since producing firms in countries such as Japan and Germany did not survive the war. The United States’ steel exports increased significantly. However, in the 1950s, the destroyed companies in Japan and Europe recovered and begun to export steel to the United States of America. Although records indicate that the domestic steel production increased by more than 45% between the 1950s and the beginning of the 21st century, the amount of imports increased by more than 30,000 percent. The leadership position of the U.S steel industry was threatened in the 1970s and local consumers begun to depend on cheap imports.[Coffin A Donald, The state of steel, Indiana Business Review, Spring 2003, Vol. 78, No. 1] Government Protection The protection of the U.S Steel industry is nothing new in its history. During the late 1960s, the US Steel industry begun to request for protection against foreign players and subsidies to enable them solve their problems. In the 1980s, quotas were imposed by the government which limited the amount of imports to 18.5% of the domestic market. Additionally, the industry was further protected by voluntary restraint agreements. During the 1990s, the industry also received protection of 12% from the Clinton administration against Japanese Steel. In the late 90s all industry players joined hands to support the curbing of imports into the country. George Becker, the president of the United Steelworkers of America stated that the industry was suffering due to economic failures in foreign countries such as Russia, Brazil and Japan. Due to pressure from the industry players and the Congress, Clinton was compelled to impose quotas based on Section 232 in 1969. Another attempt to protect the steel industry was made by President Jimmy Carter by imposing a price floor for imported steel. Technically, this was not a tariff but it forced foreign steel producers maintain their prices at certain levels that does not undercut local producers.[Pearson Education. American Steel Quotas. Higher Education. https://w...