American Politics and Steel Industry

American Politics and Steel Industry

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American Politics and Steel Industry Abstract This research paper is an attempt to explore and understand the relationship between American politics and Steel industry during the past six decades or so, from the Truman administration to the current Obama Administration. It appears that the steel industry has always remained the centre of attention and focus of the American presidents and their administrations because of its political, economic and social significance. There have been intense episodes such as when President Truman tried to seize control of the industry; President Kennedy threatened the steelmakers to take back price increases, Steel Strike of 1959 and innovation of Taft Harley Act and others. Other administrations tried to protect the industry from foreign competition but at the same time ensuring that the industry could become competitive. Clean Water Act, Clean Air Act, VRA, TPM and others were the few steps that American policymakers took to provide sustainability to the industry. However, it appears that in general, the impact of American politics on the steel industry has been negative since it has not allowed the market forces to determine the rational supply and demand.

American Politics and Steel Industry Introduction The history of Steel industry in the US can be traced back to the year 1647 when the first iron works began in the US state of Massachusetts. However, the operation was shut down after a few months because of the low efficiency of the fuel. It was in the early 1800s, after the discovery of charcoal and understanding its utility that larger level steel operations became possible. Furthermore, that was also the period when US was going through an industrial revolution, therefore, for years, the demand kept on increasing. The sector quickly became the largest employer of the country providing thousands of blue collar jobs to workers. Due to the importance and magnitude of the output that the industry was delivering, it soon became the centre of attention of policymakers1. During the late 1800s and much of the 1900s, the government ensured that it protects the steel industry from all foreign players and outside competitors so that the new born industry could grow and prosper. The number of workers that it employed and its powerful unions, on the other hand, forced the policymakers to balance the demands of the labors with the benefits provided to their management. During this period, US Steel Corporation, founded by renowned businessmen such as Andrew Carnegie, J.P. Morgan, Charles Schwab and Elbert Gary, supplied as much as 70 percent of the total steel used within the country and emerged as the most influential player in the market. During the 1970s, the industry employed almost 0.5 million people, whereas, today, it employs around 0.15 million people, primarily because output has not increased significantly and the manufacturing process has been greatly automated. Also, since that period, the industry became net importer of steel and today, the imports are double the size of the net exports of the country2. US Steel industry has always occupied an important position in the economy. It has provided jobs to millions of workers, it has boosted the national GDP, provided steel for construction of rails, roads, homes and other and manufacturing of electronics, automobiles and other manufacturing items. Much of the economic growth and industrialization that Americans have witnessed during the past couple of centuries, the steel industry of the US played an imperative role in the same3.
1

John P. Hoerr. And the wolf finally came: the decline of the American steel industry. (University of Pittsburgh,

1988), pp. 220-221

2

Ray Hudson, David Sadler. The international steel industry: restructuring, state policies, and localities .

(Routledge, 1989), p. 446-448

3

Anthony P. D'Costa. The global restructuring of the steel industry: innovations, institutions, and industrial

change. (Routledge, 1999), pp. 610-615

American Politics and Steel Industry The relationship between American policymakers and steel industry has been somewhat of a nontraditional and unique love story, the one where the couple has gone through all ups and downs, yet they depend on each other greatly and want their relationship to grow and improve. From seizing control to threatening each other, from asking for help to dictating terms, from lending favors to intervening each others matters, American policymakers and steel industry have gone through it all4. This paper is an attempt gain a better understanding of how policymakers have impacted the US Steel industry for the past six decades or so, from the Truman administration to the current administration. The paper would present the important development, laws and bills passed during each administration and reactions from the industry on the same including its impact. Discussion Harry Truman Administration It is imperative to shed some light over the events that took place in the preceding decades concerning the US steel industry in order to have a better understanding of the events that took place in during the Truman administration. The period starting from the early 1990s till the mid 1990s was difficult for the US economy and the global economy as well because of the two World Wars and Great Depression. The steel industry also shared the pain and so did it workers. Right after the Second World War, the US steel industry, trying to make up for the lost revenues, started increasing wages and prices at the end of every year. Statistics indicate that the wages increased by 5.2 percent during the period of 1947-1957, whereas, the annual average price increase was just over 7 percent. It was an open secret that the steel manufacturers had some sort of a backdoor engagement where they were increasing the prices every year, which were more than the wage increases, thus allowing them to share the profits5. More importantly, this constant increase in the prices meant that the steel industry, being an important input for many other products, was increasing the general cost of living in the industry. It became apparent that soon the administration would react; however, it did not intervene until the 1952 Steel Strike which was the highlight of Truman administration has its relations with the steel industry. When the steelmakers rejected the demands of United Steel Workers of America of wage increases to a certain level and creation of union shop and all negotiations concerning
4 5

Daniel Madar. Big Steel: Technology, Trade, and Survival in a Global Market. (UBC Press, 2009), pp. 42-43 John P. Hoerr. And the wolf finally came: the decline of the American steel industry. (University of Pittsburgh,

1988), pp. 220-221

American Politics and Steel Industry the same failed, the workers decided to go on strike against ten different steel companies6. This strike was not only a disaster for the economy but also for the national defense and security since US was at war with Korea and also highly involved in the Cold War. The weapons were mostly made from steel and any decline in output would have created serious problems. Even when the Wage Stabilization Board failed and workers threatened a nationwide strike, on April 8, 1952 President Truman, with the Executive Order # 10340 decided to take control of the entire US steel industry, with the intentions to avoid the situation from getting any worse. This was just a few hours before the workers had decided to go on a nationwide strike. Workers could not go on a strike against the government. Interestingly, twenty seven minutes after the conclusion of President Speech, representatives from Republic Steel and Youngstown Sheet & Tube Company filled a restraining order against the Truman administration. The case reached to the Supreme Court in May 1952 where on June 2, 1952, the Court ruled that the President did not have the authority to take control of the Steel Companies7. More importantly, the economic impact of the strike was becoming apparent. The economic costs were calculated to be somewhere near 4 billion US dollars. The industrial output dropped to the 1949 levels and 1.5 million were pushed to unemployment. Furthermore, many other businesses that used steel were their raw material had to close their operations or work in smaller shifts. With the arbitration of Truman, an agreement was finally reached were most of the demand of the workers were agreed upon. More importantly, intervention of the government into the issue just made matters worse and delayed the inevitable thus impacting the industry adversely8. Important here to note is that before seizing the steel companies, President Truman had another option with the Taft-Hartley Act which he vetoed five years earlier. Taft-Hartley Act, formally the labour management relations act was passed in the year 1947 by the American Congress. Amongst various other provisions such as outlawing closed shops, union shops, giving 80 days notice before strike to employer and government, more importantly, the law also had a provision which allowed the US president to intervene in any strike or

6 7

Kenneth Warren. Bethlehem Steel: Builder and Arsenal of America. (University of Pittsburgh, 2010), p. 187 Judith Stein. Running steel, running America: race, economic policy and the decline of Liberalism . (Univ of

North Carolina Press, 1998), pp. 52-56

8

Christopher G. L. Hall. Steel phoenix: the fall and rise of the U.S. steel industry. (Palgrave Macmillan, 1997),

pp. 106-107

American Politics and Steel Industry potential strike which poses any threat to the national security. However, if the President would have used this act then several days of productivity would have lost9. Dwight D. Eisenhower Administration It was during the Eisenhower administration that the infamous steel strike of 1959 took place which was one of the longest and largest in the US steel industry and the government intervened directly in the steel industry as a consequence of that strike. More than 0.5 million workers in the US steel industry went on strike, which meant that almost all of the steel production in the country was shut down10. The dispute between the management and workers was centered on workers not willing to give up the Section 2(B) of the unions national master contract, which was putting a lid on the on the ability of the management to reassign workers on different tasks, reduced the number of workers to different tasks, change rules, introduce new machinery and others. Management felt that this was leading to the featherbedding within the steel companies, eliminating which could lead to higher productivity and even higher gains11. Actually, that clause was putting as lid on the ability of the management to reassign workers on different tasks, reduced the number of workers to different tasks, change rules, introduce new machinery and others. Management felt that this was leading to the featherbedding within the steel companies, eliminating which could lead to higher productivity and even higher gains. However, unions viewed these suggestions with great skepticism and publicly announced that this proposal was an attempt of the management to the break the union12. When negitations failed, workers went on strike. Not only that strike impacted the GDP of the economy but at the same time, the department of defense started raising concerns that in an event of war, the country would face shortage or arms and other equipment, thus putting the defense of the country at stake. The automobile industry also laid several workers and threatened to lay off thousands other because they did not have steel to continue their operations.

Anthony P. D'Costa. The global restructuring of the steel industry: innovations, institutions, and industrial

change. (Routledge, 1999), pp. 610-615

10

Carolyn Rhodes. Reciprocity, U.S. trade policy, and the GATT regime. (Cornell University Press, 1993), p.

39
11

Anthony P. D'Costa. The global restructuring of the steel industry: innovations, institutions, and industrial

change. (Routledge, 1999), pp. 610-615

12

Robert W. Crandall, Brookings Institution. The U.S. steel industry in recurrent crisis: policy options in a

competitive world. (Brookings Institution Press, 1981), p. 328

American Politics and Steel Industry One of the biggest and the most serious implication of the strike was in form of the fact that for the first time, different companies in the US started importing steel from Japan and South Korea, a trend which the policymakers and US steel industry failed to reverse in the long term. During 1950-1958, the average annual import of steel to US was around 1.5 million tons. It rose to 4.4 million tons in 1959, after which it went never back to the pre 1959 levels. In fact, for the year 1971, the imports were almost 20 million tons. In fact, as mentioned earlier that currently the imports are double the size of US exports, something which started happening after this strike13. Finally, during the third week of October, President Eisenhower used the powers given to him by the Taft Harley Act. The workers challenged the act in the court demanding that the Act is unconstitutional14. They lost the appeal and on November 7-1959, all the workers were back to work. However, the productivity was extremely poor due to the drift between management and workers. The management was still supposed to make one last proposal to the union. The management was still not ready to provide the workers with their desired demands. This was the time when the Vice President, Richard Nixon intervened, trying to gain the support of the labors, since he was planning to run for the office in the year 196015. Nixon somehow convinced the steelmakers to strike an agreement with the workers because if the situation would any worse, Democratic or Republic government would back the workers because of their numbers and winning their votes for the elections. Nevertheless, the strike lasted for 116 days and the union was only able to get a small proportion of wage increases which were initially proposed by them16. John F. Kennedy Administration Although, President Kennedy served the office for a little less than three years, this period was eventful for the steel industry, primarily because President Kennedy was extremely concerned about the economy which had suffered two recessions in less than three years, one while Kennedy was in office as well. The idea was to put an end to the tight fiscal policy, loosen up the monetary policy by keeping the interest rates down and increase public expenditure even if it means a budget deficit. One side effect of such an approach is that
13

Ray Hudson, David Sadler. The international steel industry: restructuring, state policies, and localities .

(Routledge, 1989), p. 446-448

14

Robert W. Crandall, Brookings Institution. The U.S. steel industry in recurrent crisis: policy options in a

competitive world. (Brookings Institution Press, 1981), p. 328

15 16

Kenneth Warren. Bethlehem Steel: Builder and Arsenal of America. (University of Pittsburgh, 2010), p. 187 William Thomas Hogan. Global steel in the 1990s: growth or decline. (Lexington Books, 1991), p. 298

American Politics and Steel Industry inflation is always supposed to rise with low interest rates and increased money supply, something which the Kennedy administration was actively suppressing with strong involvement of government in all sectors. This was the reason why the economy expanded with an annual average of 5.5 percent during 1961-1963, while inflation remained at only 1 percent17. Kennedy administration turned their focus on steel industry when in April 1962, just after negotiating a 2.5 percent wage increase with the workers; ten out of eleven major steel companies announced an increase in price of steel by 3.5 percent. Although, there was never an agreement between the government and steel companies to hold the prices to a certain level but President Kennedy was enraged when he got the news and decided to take immediate actions. Kennedy administration felt the need to react quickly because an increase in the steel prices meant that all the other industries which depended on steel greatly as their raw material, the construction industry, automotive industry and other manufacturing industries, would also have to increase spiral thus creating a never ending cycle of inflation. In an attempt to send a strong message to all the steel companies which raised their prices, the government cancelled their contracts with all companies that were increasing prices. Important here to note is that on an average 9 percent of the overall business of steel companies came from the US government and the government decided to take away the business and give to the companies which were acting in compliance. At the same time, the FBI officials barged into the offices and homes of steel executives and demanded information about all of the operations and expenses so that the government could find out whether or not these price increases were a part of price fixing. Finally, all of the companies, one after another had to step back from the decision to increase prices. Commentators and experts agree that Kennedy averted what could have been a disaster for the economy but in doing so, he undertook some questionable methods to pressurize the big businesses and infringed on civil liberties18. Lyndon B. Johnson Administration It was under the Administration of Lyndon Johnson that the Congress passed Clean Air Act of 1963. It was in the year 1955 when the first version of such an act titled Air Pollution Control Act of 1955 was passed by the Federal government. In the coming years, in
17

Christopher G. L. Hall. Steel phoenix: the fall and rise of the U.S. steel industry. (Palgrave Macmillan, 1997),

pp. 106-107
18

Judith Stein. Running steel, running America: race, economic policy and the decline of Liberalism. (Univ of

North Carolina Press, 1998), pp. 52-56

American Politics and Steel Industry the year 1970, year 1977 and year 1990, amendments were made to the law. The law basically focused on stationary sources of pollution such as power plants, steel mills and others industries19. With every amendment, the focus has been to address all possible issues. With the advent of Clear Air Act, it was expected that Steel industry would have a hard time breathing in terms of altering many of its operational procedures but the fact is over the years, the steel industry, based on its ability to lobby with the Congress, has been able to secure important exemptions from the policymakers for implementation of all the guidelines. For example, regarding the air toxics section of the Act in 1990, the steel companies were able to buy time for over 30 years for their implementation, which is the greatest deadline given to any industry20. However, the same does not mean that the industry has not strived to make the changes. In fact, in the process of making these changes, the industry also faced increased costs of operations as well, which they were not really able to pass on to their customers thus shrinking their profits. Only by the end of 1984, the US steelmakers had been reported to spend over 6 billion US dollars on controlling pollution. In a typical year, the industrys 15 percent of the investment can be classified as capital investment aiming to meet the requirement of environmental laws. Furthermore, it was calculated that till the 2000s, these regulations, in terms of operating costs, were costing the industry 10-20 US dollars per ton of steel shipped21. As mentioned earlier, after the 1959 steel strike steel imports were becoming an important issue and it became important for the government to protect the steelmakers from foreign competitors in order to ensure their sustainability and future. Therefore, President Johnsons Administration initiated Voluntary Restraint Agreements (VRA) and signed the same with Japan and European Community in the year 1969 to restrict their imports of steel to US at levels of 5.4 million tons. Korea and many other countries did not accept such a proposal but the imports did decrease during the 1969 and 1970. This mechanism was used for the coming few years during other administrations as well22. Richard Nixon Administration
19

Jeffrey A. Hart. Rival capitalists: international competitiveness in the United States, Japan, and Western

Europe. (Cornell University Press, 1992), p. 279

20

Christopher G. L. Hall. Steel phoenix: the fall and rise of the U.S. steel industry. (Palgrave Macmillan, 1997),

p. 261
21 22

Jack Metzgar. Striking steel: solidarity remembered. (Temple University Press, 2002), pp. 96-98 William Thomas Hogan. Global steel in the 1990s: growth or decline. (Lexington Books, 1991), p. 298

American Politics and Steel Industry From his early days, it was reported that President Nixon did not approve of the growing wages in the US steel industry and even formed a committee to investigate this matter. More importantly, it was during the Nixon administration that for the first time, a law to address water pollution was passed by the Congress, Clean Water Act. The iron and steel industry was the centre of attention with this Act because they are the ones that create the most toxic wastes due to their operations. Nevertheless, when the bill was passed, it was of greater concern for the steel companies because they knew that the cost of compliance would be very high23. Furthermore, amendments were made in the year 1987 as well which increased the cost of compliance. Important here is to view all these happenings in totality. On one side, when the cost of operations was increasing due to these regulations, other countries were actively engaged in cost cutting and their low cost labor provided them with a competitive advantage in the international market24. Gerald Ford Administration Critics believe that much of the problems that President Carter faced when he took the office were inherited because of the unwise policies of Ford administration. Inflation was soaring, which forced President Ford to place limits on the wages and prices of steel products25. More importantly, it was during President Fords administration that the steel industry was able to get its own set of regulations with strict anti dumping laws, Trade Act of 1974. VRAs from the previous administration were revived which ended up creating a lack of trust amongst the trading partners of US. Jimmy Carter Administration President Cater took control of the office in the year 1977. This was the very same year when the US steel industry was going through an important turning point. The recovery from the 1974-75 recession was yet far from complete that two major steel producers started closing multiple plants and a small company closed their operations altogether26. It appeared that the advantage of modern equipment and technology which the US steel industry had was becoming obsolete and the foreign players appeared more and more powerful.
23

Robert W. Crandall, Brookings Institution. The U.S. steel industry in recurrent crisis: policy options in a

competitive world. (Brookings Institution Press, 1981), p. 328

24

Kenneth Warren. Big Steel: The First Century of the United States Steel Corporation 1901-2001. (University

of Pittsburgh, 2001), p. 23
25 26

Daniel Madar. Big Steel: Technology, Trade, and Survival in a Global Market. (UBC Press, 2009), pp. 42-43 Robert W. Crandall, Brookings Institution. The U.S. steel industry in recurrent crisis: policy options in a

competitive world. (Brookings Institution Press, 1981), p. 328

10

American Politics and Steel Industry President Carters administration was also concerned with the growing imports of steel and their impact on the US steel industry. Rather than going for VRAs as the preceding presidents did, Carter administration came up with a new method, which they called Trigger Price Mechanism (TPM). Based on the weaknesses of the customs and department of commerce, which overlooked the fact that over 40 percent of the steel imports in the country during the 1971-1976. This figure of dumped imports was six times larger than what the customs was able to identify. The idea was that if an import from, for example, Japan was coming at a price less than the average cost of production in Japan plus eight percent profit then it would lead to dumping investigations without any company filling for dumping investigations. The fall of imports during 1979-1981 is believed to be a result of TPM. However, the policy was suspended in the year 198227. Ronald Reagan Administration During the Reagan Administration, there was a rash in the dumping complaints and in order to find a permanent solution to the problem, the Reagan administration decided to revert back to the VRA but this time, the approach was different. US government asked the European Community to keep its share of steel in the US market at less than 5.44 percent28. Japan did not get a quota but political pressure in the coming years forced the imports from Japan to drop as well. Nevertheless, it is important here to note that many other countries were able to dump their imports to US thus minimizing the impact of limiting the share of EU and Japans import29. Important here to note is the fact that President Reagan was amongst those who believed in free markets and lesser government intervention. It meant that the industry would receive relaxation in terms environmental regulations, decreased taxes, freedom regarding setting their prices and the government would help in implementing strong antidumping measures30. This was one of the reasons that President Carter lost the election when he was rerunning for the post and Reagan won because he allowed the industry to breathe with freedom. However, the steel industry failed to realize that whatever growth and development
27

Kenneth Warren. Big Steel: The First Century of the United States Steel Corporation 1901-2001. (University

of Pittsburgh, 2001), p. 23
28

Roger S. Ahlbrandt, R. J. Fruehan, Frank Giarratani. The renaissance of American steel: lessons for

managers in competitive industries. (Oxford University Press. 1996), pp. 336-337

29 30

Stephen Cooney. Current issues in the steel industry. (Novinka Books, 2003), pp. 520-523 Anthony P. D'Costa. The global restructuring of the steel industry: innovations, institutions, and industrial

change. (Routledge, 1999), pp. 610-615

11

American Politics and Steel Industry that they had achieved, the government had played an imperative role in the same and taking the government out of the equation would mean that steel industry, which was still the governments baby, would be left alone in the harsh and competitive world. The result was that during the period of 1982-1986, the industry lost an estimated sum of over 12 bullion US dollars31. Imports increased and even went on to touch the level of 25 percent of the total market production. 25 different steel companies, including some big ones, filed for bankruptcy and it was calculated that steelmakers were losing almost 18 US dollars for every ton shipped. In order to avert the disaster, Reagan administration even went on to use strict import quota but it did not solve the problem for the steel industry32. George H. W. Bush Administration Served as the Vice President of President Nixon, President Bush decided to follow many of the policies of the Nixon administration concerning the steel industry. However, with the passage of time, Bush administration took serious U turns as well. For example, rather than promoting free market, they felt the need of closely protecting the steel industry. The steel industry which was burdened by new environmental legislations was pressurizing protections or else they would increase the prices since their cost had risen due to the cost of compliance33. Important here to note is that the protectionist policies which the Bush administration continued, ended up proving disastrous for the steel industry in the long term. When the US policymakers were distorting the market with subsidies, relaxations, tariffs, quotas and all sorts of government protection, most of the European and Asian governments were limiting the government intervention in their steel industries and allowing the market forces to decide that which steel producers are not capable to survive the shocks of international competition. When the free markets are allowed to work without any government intervention, the weaker opponents either leave the markets, merge with competitors or they are acquired by them thus decreasing the rivalry and restoring the equilibrium. However, with the never ending nurturing and care from Washington to the steel industry, many weaker companies that should have left ago are still holding on. Worse, steelmakers have no strong incentive to be

31

Jeffrey A. Hart. Rival capitalists: international competitiveness in the United States, Japan, and Western

Europe. (Cornell University Press, 1992), p. 279

32

Roger S. Ahlbrandt, R. J. Fruehan, Frank Giarratani. The renaissance of American steel: lessons for

managers in competitive industries. (Oxford University Press. 1996), pp. 336-337

33

Kenneth Warren. Bethlehem Steel: Builder and Arsenal of America. (University of Pittsburgh, 2010), p. 187

12

American Politics and Steel Industry more competitive for facing international competition since they know that their powerful lobby in the political arena will ensure that they never have to face any competition. Bill Clinton Administration Despite the fact that during the start of his first term, President Clinton enacted NAFTA but during the rest of his both terms, Clinton engaged in policies measures which forced many to remember him as a protectionist, at least, when it came to the steel industry. Furthermore, it was during the presidency of Clinton that the problem of dumping became even more serious and imports reached the level of 50 percent in the year 1999 from the level of 20 percent in the year 1996. The prime reason of the problem was rooted in the Asian Financial Crisis of 1997 which meant that many of Asian producers of steel did not have enough demand of steel within their domestic steels, thus, encouraging them to dump large quantities of steel in the US market, with prices which were even less than their operational costs. As a result, layoffs in the steel industry became a common sight, thus creating negative sentiments in the labors and workers who voted for Bill Clinton34. Nevertheless, the signing of NAFTA had mostly positive long term impacts on the industry. In fact, many experts in the industry associate the survival and performance of the US steel industry even in the midst of competitive pressures and crises to NAFTA. NAFTA opened the Mexican and Canadian market for the US steel makers, which was quickly booming, thus provided an excellent opportunity. For example, the steel exports increased by almost 19 percent in the year 2011 primarily because of the free exports to Mexico and Canada due to NAFTA. Furthermore, in the year 2010, NAFTA steel industry accounted for almost 110.6 million metric tons with a value of over 86 billion US dollars35. The problem of dumping was also far from year which forced the Clinton administration to adopt the Byrd Amendment that was aimed at putting strict penalties on foreign companies that were engaged in dumping and then allowing the affected US companies to use the finances from tariffs. For the time being, the law had the support from steelmakers but as the retaliation from other trade partners increased, the law had to be repealed36. George W. Bush Administration After deliberations and negotiations of months with industry experts and stakeholders, President Bush announced in the year 2002 that the government was imposing 8-30 percent
34 35 36

Jack Metzgar. Striking steel: solidarity remembered. (Temple University Press, 2002), pp. 96-98 Daniel Madar. Big Steel: Technology, Trade, and Survival in a Global Market. (UBC Press, 2009), pp. 42-43 Stephen Cooney. Current issues in the steel industry. (Novinka Books, 2003), pp. 520-523

13

American Politics and Steel Industry tariff on different steel imports. The same was done by invoking the Section 201 of the Trade Act of 1974 which allows the President to assist the domestic industry by blocking imports if the imports are causing substantial harm or injury to the domestic industry. The decision was well received by the steel companies and labours, much to the delight of the President since he wanted to win the support of blue collar workers and corporations from Ohio and West Virginia in the midterm elections37. In fact, many experts thought that tariffs on imports became a necessity if the policymakers wanted to see the steel industry of the US to survive. During the period of 1998-2001, more than 18 different steelmakers filed for bankruptcy, including LTV Steel the third biggest steel company. The Bush Administration faced great pressures for imposing these tariffs and in the short term it did help the steel industry, however, it is an open secret that in the long run, it will negatively impact all the stakeholders. This was give an incentive to the steelmakers for not increasing the level of their competitiveness, which means that in any time in the future, when the US is forced to open its borders for international competitors with a level playing field, the local steelmakers would not be able to compete. The recent performance of the steel industry suggests that the same has happened. Furthermore, with the tariffs, the price of steel increased in the American market which also increased the cost of production for the industries which rely on steel from outside. Quite understandably, all the producers that decided not to absorb the increased cost of production and pass it on the end consumers, contributed to the increased inflation and cost of living. However, the implication of this decision also went on to strain the relations between EU and US greatly. EU even went on to file a complaint with the WTO. Furthermore, representatives from many other sectors of US also started asking for similar protection, something which the President could not afford38. Although, President Bush may have received applause from the industry but towards the end of day, the administration with this protectionist policy only delayed the inevitable. There are no doubts in the fact that many different countries in the past have gone to great lengths to protect their steel industries, considering its importance but when compared with developed countries like US, many of them after being a part of WTO have up on the protectionist policies in order to instill competitiveness in their industries. Barack Obama Administration It is troublesome to comment on the policies of the Obama administration and its impact on the steel industry since the same would become clear once the term of the
37 38

Stephen Cooney. Steel industry: price and policy issues. (Nova Science Publishers, 2008), p. 110 Robert P. Rogers. An economic history of the American steel industry. (Routledge, 2009), p. 247

14

American Politics and Steel Industry administration is over. Nevertheless, when President Obama took over the office, America was suffering with a serious recession. Subprime mortgages, burst of housing bubble, decreasing consumer confidence and credit crunch meant that the automobile, construction and other customers of the steel industry had no new demands39. The steel industry was suffering badly and in order to give them a new hope, in the American Recovery and Reinvestment Act of 2009, had a provision called Buy American. This provision was meant to ensure that steel, iron and other raw materials for construction related to public works could use products from American companies. Soon enough Canada expressed its dissatisfaction since Canadian steel companies were relying in American contracts greatly. Finally, the administration had to include Canadian companies from the Buy American provision40. Obamas administration also tried to pass American Clean Energy and Security Act which could have unleashed a new era of regulations and compliance costs for the industry but the Act died in Senate. Not only the Act had forced the steelmakers to increase their dependence on renewable energy sources but at the same time, they would had to significantly decrease their emissions of greenhouse emissions, something which is not possible without shooting up the costs 41. Conclusion As suggested earlier, the love affair between American politics and steel industry has gone through many different phases and considering their interdependence, it will continue for coming many decades. Much of the growth and development that took place in the steel industry can be attributed to the decisions of policymakers; however, many other decisions of the government have turned out to be very costly for the steel industry as well. Nevertheless, it surprising to see that even in a country like US, where capitalism, free market and liberty are the ideals, every administration has interfered in the steel industry, in one or another. It is troublesome to decide which policy actions have benefited the industry and which ones have not proven worthy because at a given time, there are a variety of factors, international, economic, social, legal, cultural, internal and other impacting on the steel industry and

39

Stephen Cooney, Brent D. Yacobucci. U.S. automotive industry: policy overview and recent history. (Nova

Publishers, 2007), p. 56-58

40

Deborah Rudacille. Roots of steel: boom and bust in an American mill town. (Pantheon Books, 2010), pp.

475-476
41

Robert P. Rogers. An economic history of the American steel industry. (Routledge, 2009), p. 247

15

American Politics and Steel Industry deciding the result. These factors and their interferences are difficult to separate thus leaving the analysis with great deal of uncertainty42. More importantly, it has become imperative that the governments ends this love affair with the steel industry and allow the market forces to take charge for ending over capacity, rationalize pricing and increase competitiveness in the industry. There are so many instances which clearly prove that the continuous interference of the US policymakers in the steel industry has not done any good to the industry; in fact, it has made the industry more fearful and less able to face the competition.

Works Cited Ahlbrandt, Roger S., Fruehan, R. J., & Giarratani, Frank. The renaissance of American steel: lessons for managers in competitive industries. Oxford University Press, 1996 Cooney, Stephen. Current issues in the steel industry. Novinka Books, 2003 Cooney, Stephen. Steel industry: price and policy issues. Nova Science Publishers, 2008 Cooney, Stephen., & Yacobucci, Brent D. U.S. automotive industry: policy overview and recent history. Nova Publishers, 2007 Crandall, Robert W., & Brookings Institution. The U.S. steel industry in recurrent crisis: policy options in a competitive world. Brookings Institution Press, 1981 D'Costa, Anthony P. The global restructuring of the steel industry: innovations, institutions, and industrial change. Routledge, 1999 Hall, Christopher G. L. Steel phoenix: the fall and rise of the U.S. steel industry. Palgrave Macmillan, 1997
42

Deborah Rudacille. Roots of steel: boom and bust in an American mill town. (Pantheon Books, 2010), pp.

475-476

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