Ed Huntress wrote:



The fab industry doesn't give a damn what happens to the US steel industry,
as long as they can get steel from somewhere. The US steel industry doesn't
give a damn what happens to the fab industry, as long as there's somebody,
like the car manufacturers, who need to buy steel.

All that either of them care about is their own wallets.





Sad as it is, It's the American Way.






--

Mark

N.E. Ohio


Never argue with a fool, a bystander can't tell you apart. (S. Clemens,
A.K.A. Mark Twain)

When in doubt hit the throttle. It may not help but it sure ends the
suspense. (Gaz, r.moto)

On Sun, 7 Dec 2003 10:20:36 -0800, "Charles A. Peavey" wrote:
Are you guys aware that the steel fabricating industry lobbied long and
harde to have the tarriffs removed. It appears that there is not enough
steel produced in the US to allow processors a continuous flow at reasonable
prices. I don't know I am only regurgitating reports from steel fabricators
press releases as they congratulte themselves for their own victory. The
trade groups went so far as to put a fab line on the capitol steps to
demontrate their point.

Well, there are certainly a lot more jobs at stake in the steel using industries
than there are in the steel making industry. Those jobs are mostly higher value
added too. The tariff resulted in a de facto 30% price increase for steel using
industries, with no corresponding protection of markets or jobs in those
industries.

Forbes said that the tariff contributed to the loss of 200,000 jobs in steel
using industries over the last 2 years. That's more jobs than the entire US
steel industry has.

If the US government wants to retain a domestic steel making capacity, and
there are defense reasons for wanting to do so, then a targeted tax *cut/credit*
for the domestic industry would have been less harmful to the economy than a
tariff. (Note, however, that such a subsidy would also have been challengeable
under WTO rules, see the current row over agricultural subsidies.)

The root of the domestic steel industry's problems lies in promises it made
to its union workers years ago which it is struggling to meet today. In other
words, it has a huge *unfunded* pension and benefit liability that is becoming
increasingly difficult to pay out of current operating funds due to today's more
competitive environment, and the shrinking share of the steel market that
US companies control.

When there was little foreign competition, the steel industry expected that
it could set its prices high enough to cover those unfunded liabilities as they
became due, rather than funding an actuarially sound pension plan at the
time they assumed those liabilities. Thus they knuckled under to union
demands, figuring the associated costs were far down the road, and a
problem to be worried about another day.

But in today's world, they aren't free to raise prices. They no longer have
monopoly power. Their customers can simply switch to another supplier
offering a lower price. So that accounting trick of deferring liabilities until
they are due is costing them dearly now.

This is not too unlike the dilemma of another unfunded benefit program,
Social Security, with the difference that the steel industry doesn't have
the power to go out and coerce money from other people to pay for it.
They have to beg the government to do the coercion for them.

Gary