Steel And The Politics Of Free Trade


IS AMERICAN steel a rust-belt relic or a pillar of the U.S. economy? Should organized labor support high tariffs in an effort to defend steel jobs and manufacturing employment overall? These questions came to the fore last week after the World Trade Organization (WTO) announced that the U.S. had violated WTO rules by placing tariffs on imported steel.

Based on a complaint filed by the European Union (EU), the ruling clears the way for European countries to impose $2.2 billion worth of retaliatory tariffs on U.S. goods–most targeted at industries in states that Bush needs for re-election, such as Harley Davidson motorcycles in Wisconsin and citrus fruits from Florida. The news came on the eve of a summit in Miami in which the U.S. will attempt to create a Free Trade Area of the Americas (FTAA) in 34 countries of the Western Hemisphere, excluding Cuba.

So even as the U.S. bashes China over “unfair” trade and tries to strong-arm Latin American countries into the FTAA, Washington was caught for using trade barriers to protect its own steel industry. As a Washington Post headline put it: “No One Policy Fits All; U.S. Trade Positions Shift According to Geography.”

In fact, Washington’s underlying trade strategy is consistent, even if its policies and rhetoric aren’t. That’s because the FTAA is aimed at competing with U.S. rivals in Europe and Asia–by creating a trade bloc that gives Washington favorable treatment at the expense of its competitors.

The FTAA was envisioned a decade ago as an extension of the North American Free Trade Agreement (NAFTA), which reduced trade and investment barriers between the U.S., Mexico and Canada. The spur for NAFTA and the FTAA was the expansion of the EU in the 1990s after the fall of the Berlin Wall.

Recent years have seen a rise in trade conflicts between the EU and the U.S., over issues ranging from beef and bananas to U.S. tax subsidies for major exporters like Boeing. When the WTO penalties were announced, Boeing’s mouthpiece, John Douglass of the Aerospace Industries Association, accused Europe of “economic belligerence.”

“Our government gives equal treatment to [European aircraft maker] Airbus, and they reap huge economic benefit from the U.S. market, at the same time as [France and Germany] fight us in the United Nations and around the world,” Douglass said. “If that continues, don’t you think trade would be affected by that, and sooner or later, we could say we are not going to give them access?”

This rhetoric highlights the changes since the Cold War, when the U.S. tolerated European economic development to create a bulwark against the supposedly “communist” Eastern bloc run by the old USSR. Steel played a crucial role from the beginning.

The formation of what is now the EU began after the Second World War with a common market for coal and steel. From Washington’s perspective, European economic development was seen as a necessary condition for creating a military counterbalance to the USSR–and a steel industry is a requirement for the creation of a powerful military with imperial reach.

The U.S., however, protected its own steel industry with increasing frequency after the 1960s, with duties imposed on foreign imports supposedly “dumped” at below-market prices. The spread of steelmaking to newly industrializing countries such as Brazil, South Korea and others led to a glut of steel industry capacity on a world scale by the 1970s–and economic stagnation made the overcapacity even worse.

The economic opening of Eastern Europe and the former USSR in the 1990s added to the world steel glut. The last two decades have therefore seen a continual restructuring of the steel industry worldwide, with older producers in the U.S. and Europe shutting down many outdated mills at the cost of hundreds of thousands of jobs.

Today, there are only about 160,000 steelworkers in the U.S.–down from more than 800,000 in the 1960s. In 1999, the United Steelworkers of America (USWA) launched a “Stand Up for Steel” campaign alongside steel bosses to press for greater import controls in a bid to save the remaining jobs. They succeeded in May 2002, when George W. Bush imposed steel tariffs as high as 30 percent on some imports.

Yet steel duties haven’t saved jobs–because cheap imports are far from the whole story. New technology has allowed the creation of nonunion “mini-mills,” which use scrap metal, to grab nearly half the steel market in the U.S.–while employing only about as third as much labor as the old integrated steel mills.

Overall, productivity in the U.S. steel industry has improved dramatically. Since 1980, the number of person-hours needed to produce a ton of steel in the U.S. has dropped from 10 hours to four hours. According to Business Week, the value of steel output in the U.S. rose from about $167 billion in 1995 to $178 billion in 2000, even as industry-wide employment declined by 50,000.

Yet since the steel tariffs were imposed in 2002, several thousand more steel jobs were lost–many with the agreement of USWA President Leo Gerard. “He is allowing the merged companies to dump most of the enormous pension and retiree health-care costs that weigh down an industry with 600,000 retirees–and only 124,000 active workers,” wrote Business Week. “It’s the ultimate irony that after a long history of bitter clashes with management, it has taken a labor leader to salvage what’s left of Big Steel.”

The cost of Gerard’s deal is that decades of union gains have been sacrificed–and the lives of hundreds of thousands of steel retirees have been devastated. Yet International Steel Group, created through the buyout of LTV and other bankrupt steel producers, now claims to be the lowest-cost steel producer in the U.S.–below even Nucor, the leading nonunion mini-mill company.

In the end, steel tariffs have only protected the profits of steel employers who continued to restructure through job cuts and speedups–and preserved a steel industry that is large enough to supply the world’s only military superpower. If the USWA went along with all this, it is because the union accepts that its interests are served by collaborating with management to maintain profits–which means pushing for higher tariffs and accepting concessions.

Moreover, higher steel tariffs will ripple through steel-buying industries, leading to job cuts in other parts of the economy. And steel tariffs in the U.S. hurt steelworkers in Brazil or Ukraine–which undermines the USWA’s efforts in recent years to forge international solidarity with unions around the world.

The only way to defend jobs in the steel industry–or anywhere else–is to challenge the logic of profit itself. This could include government programs to produce steel to rebuild crumbling schools and impoverished urban areas–even the nationalization of the steel industry itself. Some may dismiss this as far-fetched–as if the present strategy of eliminating some jobs to try to save others is a realistic way of defending steelworkers’ interests.

If labor is right to oppose trade agreements like the FTAA that would give big corporations vast new powers, it can’t line up alongside those same employers when they seek to limit free trade in order to serve their own interests. There are no shortcuts. Solidarity and struggle–not alliances with employers–is the only way to defend jobs.

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