Foreign nations target U.S. steel: steel is the backbone and sinews of modern society. Without a robust domestic steel industry, we will not prosper in peace--or survive in war.

Kim Haws is the kind of entrepreneur who Republicans and Democrats both hold up as the exemplar of the American inventor-manufacturer we want to keep in this country. Mr. Haws is the owner of Agri-Trac manufacturing in Mesa, Washington, a small rural town near the Columbia River in the state's southeastern corner. Haws developed an ingenious hexagonal steel boot, the Agri-Trac, for the tires of center pivot irrigation systems. The Agri-Trac provides five times as much ground surface area as unshod tires and can reduce wheel rut depths by 80 percent. This means the farmers' rotating sprinkler systems are far less likely to get stuck in the mud.

The Agri-Trac has been a smashing success. Haws manufactures the Agri-Trac in his six-man shop in Mesa for customers all over the United States. He even has a growing international market. In other words, he's an exporter, helping in his small way to subtract from our massive trade deficit. But like many other American manufacturers, Kiln Haws has a major problem: his product is made of steel. And steel prices and availability have been very volatile over the past few years. When we spoke to him in March, he had orders for Agri-Trac waiting, but no steel with which to fabricate them.

"It's been pretty amazing," he told THE NEW AMERICAN. "I used to have steel suppliers calling me all the time trying to sell me steel, now I can't get any anywhere. When I ask what's happened to the supply, they all say, 'It's going to China.'"

Now, the supply is still tight, but Haws says at least he can get it: "I have to scramble and spend a lot of time calling around to find steel and pay two and a half times what I used to for it." A load of plate steel that he could buy a year and a half ago for $8,000 now costs him $18-20,000.

Mr. Haws' experience can be multiplied many thousands of times. Virtually every manufacturer and every contractor who uses construction steel has been whipsawed by critical steel shortages and radical price spikes. The U.S. steel industry has been on a wild ride over the past several years. Prices have fluctuated spectacularly, as has availability of this basic must-have commodity. And the bruising roller coaster ride is far from over. It will continue to dramatically impact virtually all other American industries, as well as every American consumer. It is not an exaggeration to suggest that the outcome of this ride will determine whether the United States will continue as a great power, or go the way of other has-been societies and civilizations.

Steel Is King

Yes, steel is an old "smokestack" industry, one supposedly without of microchips, nanotechnology, information technology, But the "New Economy" we keep hearing about still runs on fossil fuels and is built on (and out of) steel. Plastics, acrylics, composites, aluminum, and other materials have their important niches, but steel is still king. You can't have cars, trucks, trains, boats, airplanes, bridges, railways, power plants, commercial buildings, appliances, refineries, water treatment and distribution systems, and thousands of other essentials of modern society without it. Not to mention weapons of war, which, like it or not, are still very essential. September 11, 2001 and various looming threats and potential threats around the world should provide sufficient proof of that.

The looming question is this: will the United States, once the preeminent steel producer of the world, remain capable of producing this invaluable commodity to meet our critical needs, or will we soon be fatally dependent on foreign sources, sources that may be controlled by our enemies? The answer to that question will be decided by the action (or inaction) of President Bush and the Congress regarding U.S. policies on trade, taxes, regulation, labor, and energy. Those are the factors that have already caused devastation of the American steel industry in the past few years, with dozens of U.S. steel companies going into bankruptcy, dozens of steel communities dying, and tens of thousands of steel jobs going away for good.

At the end of World War II, the United States was the undisputed global steel power, producing over half of the world's steel. The U.S. share of the world market was bound to decline, as the production capacities of war-ravaged countries ramped up and developing nations joined the steel-producers club. But America's market share has dropped more rapidly and precipitously than almost anyone anticipated. In the 1970s, U.S. energy producers (coal, oil, natural gas, nuclear) were shackled with a welter of environmental restrictions and regulations. As a consequence, domestic energy costs soared, domestic production dived, and foreign energy supplies poured in. As one of the largest consumers of energy in the manufacturing sector, the U.S. steel industry has been hammered by decades of artificially high energy costs caused by these environmental regulations. By the 1980s we were producing just a little over 15 percent of the world total and importing millions of tons of steel for our own domestic manufacturing and construction.

In addition to the energy costs imposed by government, the U.S. steel industry has been ravaged even more seriously by U.S. trade policies, which have allowed foreign producers that are heavily subsidized by their governments to undercut America's private producers. The three year period of 1998 2000 saw the three highest steel import years (of carbon steel and alloy steel) in U.S. history, with imports of 40.5, 34.6, and 36.8 million net tons, respectively. This was against a backdrop of U.S. domestic production that hovered fairly steadily around 100 million tons annually.

In 1998 steel producers and steel workers sought relief under Section 201 of the Trade Act of 1974, filing anti-dumping petitions with the U.S. Commerce Department against steel imports from Japan, Russia, Brazil, and Korea. This was followed a few months later with more petitions against imports from France, India, Indonesia, Macedonia, and the Czech Republic. Pursuant to the petitions, the U.S. International Trade Commission (ITC) launched an investigation and determined that many of the countries were indeed engaged in illegal dumping practices, with the government of Japan, for instance, subsidizing the cost of various steel products in margins ranging from 25 to 68 percent. Russia's subsidy margins ranged from 71 to 218 percent.

According to Alan Tonelson, a Research Fellow at the U.S. Business and Industry Educational Foundation and the author of The Race to the Bottom, extravagant subsidies of this sort are the norm, not the exception. "Most of the competition that American steel producers face is very heavily subsidized, and it has been that way for a long time," he told THE NEW AMERICAN. "That is why there is all this [excess global steel production]," says Tonelson, "because all of these governments are dumping billions of dollars worth of subsidies into their steel companies, and the companies, in turn, are dumping their steel on the U.S. market. We're the biggest market and everyone targets us. I believe in a vigorous free market, but it's critical to understand that this enormous subsidization is not the free market in operation and it's terribly unfair to American producers to allow these devastating dumping practices. Our critics decry using tariffs against these violators as 'protectionism.' But it is important to note that this is not a case of protecting an inefficient domestic industry against the stiff" winds of legitimate competition. The U.S. steel industry is very lean, efficient and competitive, but it can't compete head-on forever against less efficient foreign competitors who can offer subsidized steel prices at below the cost of U.S. produced steel."

In March 2002--after a lengthy ITC investigation showed that foreign steel dumping was causing serious injury to the domestic steel industry--President Bush finally acted. Citing Sec. 201 of the Trade Act, he imposed temporary tariffs ranging from 8 to 30 percent on 10 categories of steel products. By that time, some 30 U.S. steel companies had already filed for bankruptcy. The steel tariffs were scheduled to be in effect until March 6, 2005. President Bush said this would give U.S. companies time to restructure, consolidate and become more competitive. However, on December 4, 2003, 16 months before the tariffs were set to expire, the president capitulated to the threats of the European Union and the World Trade Organization and dropped the tariffs.

Defense vs. Opulence

America's internationalist foreign policy elites applauded, of course; they had sided with the EU and WTO from the start. Elizabeth C. Economy, director of Asia studies at the Council on Foreign Relations (CFR), provided the typical one-world perspective on the matter. In an article for the International Herald Tribune (published jointly by the New York Times and Washington Post), Economy charged that the U.S. had been guilty of "flagrantly violating WTO obligations by levying tariffs on steel imports." According to the twisted view of the CFR globalists, following U.S. laws and exercising sovereign power in the national interest is a form of lawlessness, while, on the other hand, kowtowing to WTO bureaucrats is a mark of reverence for the "rule of law."

Even many political conservatives who do not share the CFR's anti-nationalist viewpoint nevertheless echo the group's tirades against all tariffs. After all, these conservatives argue, tariffs violate the dogma of "free trade," which violation, according to Adam Smith, is a Cardinal Sin. Right?

Wrong. Most "free traders" who cite Adam Smith, have never read the 18th-century political economist's works. True, Smith did argue forcefully against protective tariffs--but not in all cases. Most particularly, he excepted those cases where national defense is counterpoised to commercial "opulence."

In Book IV, Chapter 2 of his 1776 magnum opus The Wealth of Nations, Smith wrote:

   There seem, however, to be two cases in which
   it will generally be advantageous to lay some
   burden upon foreign for the encouragement of
   domestic industry.

   The first is, when some particular sort of
   industry is necessary for the defense of the
   country. The defense of Great Britain, for example,
   depends very much upon the number
   of its sailors and shipping. The Act of Navigation,
   therefore, very properly endeavors to
   give the sailors and shipping of Great Britain
   the monopoly of the trade of their own country,
   in some cases by absolute prohibitions and in
   others by heavy burdens upon the shipping of
   foreign countries....

   The Act of Navigation is not favorable to
   foreign commerce, or to the growth of that opulence
   which can arise from it.... As defense,
   however, is of much more importance than
   opulence, the Act of Navigation is,
   perhaps, the wisest of all commercial
   regulations of England....

Thus, contrary to the claims of Adam Smith's presumptive heirs, free trade does not trump every other consideration, even for Mr. Smith. Were he alive today, Adam Smith almost certainly would find himself compelled to endorse U.S. steel tariffs as a case of defense vs. opulence. After all, steel is arguably every bit as essential to U.S. security as shipping was to imperial England. And the temporary U.S. steel tariff's were not nearly as onerous as the absolute prohibitions Smith championed in the Act of Navigation.

Smith offered another case for tariffs. lie opined that, at times, "it will generally be advantageous to lay some burden" upon foreign industry "for the encouragement of domestic industry." He was referring particularly to "when some tax is imposed at home upon the produce" of domestic industry. "In this case," he said, "it seems reasonable that an equal tax should be imposed upon the like produce" of the foreign producer. Makes sense, no? Why tax into oblivion our own producers--who provide jobs, necessary products, and taxes--and allow foreign competitors a free ride? According to Adam Smith, imposing a commensurate tax (a tariff) upon the foreign manufacturer "would leave the competition between foreign and domestic industry, after the tax, as nearly as possible upon the same footing as before it."

Would Smith consider the regulatory costs and government-created energy costs imposed on the industry as a tax worthy of relief through tariffs? Perhaps. But there is no question that we must consider the dramatic impact of these costs, if we are to work out any lasting remedies.

But let's return to the defense issue. When the USS Cole was severely damaged in a terrorist attack in Yemen on October 12, 2000, it required 500 tons of steel to repair its hull. Perhaps we could have run out and bought that steel on the global market, but are we going to gamble the lives of our soldiers and sailors--and ultimately, our national survival--on such an iffy proposition?

Our Nimitz-class aircraft carriers contain more than 50,000 tons of steel plate. The USS Ronald Reagan, which was commissioned in 2003, used 70,000 tons of steel. There are 22 tons of plate in each Abrams tank. The Bradley Fighting Vehicle has six tons of steel plate per vehicle. Steel makes up about 20 percent of the materials used in the F18 and F22 military aircraft. It is essential to rifles, artillery pieces, Patriot and Stinger missiles, fighter jets and bombers, Humvees, trucks, bayonets, grenades, munitions, helicopters, containers, medical instruments, and thousands of other military necessities and cannot be replaced with any other material.

Losing Local Control

The U.S. steel industry already is undergoing the most radical consolidation and restructuring in decades. A number of landmark acquisitions, totaling in the billions of dollars, have occurred. Among these are International Steel Group's (ISG) purchase of the assets of Acme Steel, Bethlehem Steel, LTV, Weirton, and Georgetown Steel; U.S. Steel's acquisition of National Steel; and Nucor's purchase of Birmingham Steel, Trico Steel, Auburn Steel, parts of North Star Steel, and Corus Tuscaloosa.

The formation of the Mittal Steel Company, announced on October 25, represents the biggest steel takeover thus far. The $17.8 billion deal includes a $4.5 billion buyout of ISG by Lakshmi Mittal, the Indian-born steel magnate whose Dutch-based Ispat International and LNM Holdings include steel plants in Europe, Africa, Asia, and the United States.

According to unnamed "analysts" in a Reuters report on October 25 about the Mittal-ISG merger, "such deals are needed to keep the U.S. steel market healthy." Such deals may indeed keep the doors of some American steel plants open, but is it really "healthy" to put U.S. steel companies in the predicament of having to be bought up by a foreign conglomerate in order to continue producing the steel we need here?

Incredibly, agencies of the federal government actually have been sending U.S. taxpayer dollars to foreign companies that have been dumping their steel on the U.S. market. In August 2001, for instance, it was revealed that the U.S. Export-Import Bank, a U.S. government agency, had made low-interest loans to Benxi Iron and Steel Company of China for the purchase of modern American technology for their plants. This allowed Benxi, which is owned by the Communist government of China, to expand and further depress prices in the struggling domestic steel market. To make matters worse, at the time of the loan, Benxi was being investigated by the U.S. Department of Commerce for dumping steel in the United States. In the end, it was shown that Benxi had illegally undercut the price of steel for export to the U.S. by 67 percent, the highest of all the companies being investigated at that the time.

What can President Bush and the new Congress do to help guarantee a strong, vibrant, domestic steel industry?

* Reimpose Sec. 201 tariffs. The WTO will scream, as will the globalist Free Trade chorus. Tariffs are blunt instruments and should not be used promiscuously to protect every domestic producer of widgets, winkets, and doodads, nor should they be allowed to stay in place forever. However, as temporary measures to offset predatory policies of foreign countries and industries, they should not be rejected out of hand. As we reported above, the 2002 tariffs were imposed by President Bush. However, the Constitution (Article I, Sec. 8) gives Congress, not the President, power to "regulate commerce with foreign nations." Congress has no authority to delegate this power to the president. Yet that is what it has done. As in other important areas--allowing the president to wage war without a congressional declaration, allowing federal judges to write their own laws--Congress is abdicating responsibility and allowing the executive and judicial branches to usurp legislative powers. Congress must be held responsible.

* Unshackle our energy resources and producers. This would help not only the steel industry, but all of our struggling American producers, as well as relieve our dangerous dependency on foreign sources of oil and gas. Tariffs can provide temporary relief, but ultimately, will be self-defeating unless our energy production is unleashed so that American producers, which have shown they can still lead the world, are allowed to compete without both arms tied behind their backs.

* Stop funding our competitors and enemies. The Export-Import Bank anecdote above can be multiplied many times. U.S. funding of the International Monetary Fund, the World Bank, the Asian Development Bank, and other multilateral institutions has enabled the financing of the foreign steel industries and many of the other industries that are flooding our markets. We are financing our own destruction.

The record voter turnout in the recent elections showed that millions of Americans still care enough about their country to go to the polls. However, the real test of our patriotic commitment is whether we follow through after the elections by regularly contacting our elected officials to let them know our position on issues and by monitoring their votes and holding them accountable.

RELATED ARTICLE: Ruining America to build China.

by William F. Jasper

The policies that have made America dependent upon foreign sources for energy, minerals, and manufactured goods, and that are driving our nation into total dependency and bankruptcy, have not come about by happenstance. For more than three decades, the U.S. has been under non-stop attack by a radical environmentalist lobby funded and promoted by major tax-exempt foundations and corporate one-world elites.

This "movement" was launched in earnest in 1970 with Earth Day, funded principally by the Ford and Rockefeller Foundations. The new Green extremists demanded federal oversight for, and drastic slashing of, production by all the basic industries (mining, energy, steel wood products, agriculture). These radical socialist demands were given respectability by a host of foundation-funded studies, such as The Unfinished Agenda by the Rockefeller Brothers Fund.

The Unfinished Agenda became the blueprint for the Carter administration's destructive energy and environmental policies. The author of the energy section of the study was Amory Lovins, an Oxford dropout and British spokesman for the fanatical Friends of the Earth, who has been transformed into a "world renowned physicist" by the Council on Foreign Relations (CFR). Lovins was catapulted to fame by an October 1976 essay entitled. "Energy Strategy: The Road Not Taken?" in the CFR's journal, Foreign Affairs. That much-cited article, which has become almost a sacred text to environmentalists, blasted "hard" energy sources, especially coal and nuclear, and called for conversion to "soft" energy: solar, wind, geothermal, biomass, etc.

These CFR-prompted proposals became policy and soon U.S. energy producers were shackled with a Welter of restrictions and regulations. As planned, domestic energy costs soared, domestic production dived, and foreign energy supplies poured in. As one of the largest consumers of energy in the manufacturing sector, the U.S. steel industry has been hammered by decades of artificially high energy costs caused by these regulations.

At the same time, the CFR has been promoting massive transfers of capital and technology to Communist China. On August 30. 1982. for example, President Reagan (advised by CFR veterans George Bush the elder and George Shultz) determined that "it is in the national interest for the Export-Import Bank of the United States to extend a credit and guarantee in the aggregate amount of $68,425,000 to the People's Republic of China in connection with its purchase of steel making equipment and related services."

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