Automakers Hypocrisy about Steel Protection

By Prof. Peter Morici

Today in the Wall Street Journal, executives from the domestic Big Three and Japanese automakers with substantial production facilities in the United States railed against U.S. antidumping duties on anticorrosive steel. What seems to go unaddressed is the rationale for these duties, and that automakers are silent about the protection on automobiles they enjoy from Mercedes Benz cars and other brands. World Trade Organization law provides for anti-dumping orders to guard against countries exporting unemployment by exporting products below their fair market value--either exporting at prices below those prevailing in their home market or below their cost of production. Without this safeguard against beggar-thy-neighbor trade, the profound increase in trade facilitated by eight rounds of WTO trade negotiations would not have been possible--tariff cuts would have been impossible to sell to domestic industries around the globe.

Under the dumping orders administered by the Department of Commerce, exporters from six affected countries need not pay duties at all, if they export into the U.S. market at the fair market value in their home markets. Importantly, the Commerce Department, currently run by a pro-market Republican administration, has concluded that dumping would be resumed in the absence of these administrative reviews.

Moreover, corrossive resistant steel is low profit business, and manufacturers that ship mostly this kind of steel are earning returns below their cost of capital. Hence, they would be devistated by a renewal of dumping.

Moreover, since 1963, U.S.-based producers have enjoyed a 25 percent tariff on trucks imported from Japan, Korea and other countries outside of the North American Free Trade area. That provides a margin of protection equal to more than $5000 per vehicle or about $40 billion a year. Automakers have strenuously defended this tariff through the Tokyo, Uruguay and Doha Round negotiations, making their pleadings on steel tariffs awfully hypocritical.

Peter Morici is a professor at the Smith School of Business, University of
Maryland School, and former Chief Economist at the U.S. International Trade