Cato's Colin Grabow On Why We Don't Need Steel Tariffs For National Defense

See Freedom, Not Protectionism, Is America’s Greatest Achievement.

"Well, that was fast. Only a day after I said that we are likely to see increasing calls for protectionism citing alleged national security concerns, Scott N. Paul took to the pages of The New York Times to urge the imposition of new restrictions on steel imports based on this same justification. Long on attempted tugs at emotional and patriotic heartstrings, the piece is strikingly short on data suggesting U.S. national security has been imperiled by foreign imports. Indeed, to the extent Paul, who serves as president of the Alliance for American Manufacturing, even attempts to make this case it is through the following:

Even in this digital age, steel undergirds our military power, not to mention critical infrastructure. Tanks, aircraft carriers and the energy grid all rely on high-strength, lightweight steel. That steel has been made in America for generations.

The security of our own steel industry, though, has been in doubt for a long time. Domestic steel production peaked in 1973. The industry is now operating at less than three-fourths of its capacity. Thousands of steelworkers have been laid off since 2015, and those still working know their jobs are under constant threat. Only one American company makes essential electrical steel, and only one other supplies the type of steel needed to make Virginia-class submarines, the generation of attack submarines that are expected to be in production until 2043.

This is thin gruel, with little on offer besides the banal point that steel is used in the manufacture of many defense platforms. Paul’s observation that steel production reached its apex 45 years ago, meanwhile, actually undermines his implication that a decline in steel production has been to the detriment of U.S. national security. After all, despite the steel industry operating below its production peak the United States has managed in the years since to conduct a massive defense buildup during the 1980s and engage in major conflicts in Kuwait, Iraq, and Afghanistan along with numerous other smaller-scale actions. And lest one think the steel industry has been in perpetual decline since 1973, a quick look at production statistics reveals current output to be rather unremarkable in the context of the last 30 years:

Furthermore, as Clark Packard and Megan Reiss of the R Street Institute note, such production easily satisfies U.S. defense requirements with “only about 3 percent of steel shipped domestically in 2016 used for national defense and homeland security.” And while Paul appears to imply that one American company for electrical steel and one for the steel used in the production of a particular type of submarine are insufficient, he makes no mention of why this is a problem or what a more appropriate number might be. Moreover, should the United States experience a shortfall or inability to produce the product domestically there is no reason why it couldn’t fill this gap via imports. The United States, Packard and Reiss point out, does not lack for viable options should foreign sources be needed:

The United States also has a number of options to source steel from allies and non-hostile trading partners. In fact, of the top ten exporters of steel to the United States in 2016, only China could be considered a potential threat. Moreover, that threat becomes far less pressing when one considers how small a share China has of overall U.S. steel imports. China is only the source of 3 percent of American steel imports. Otherwise, 60 percent of imported steel mill products come from six other countries, none of which could plausibly be considered a threat to national security. According to the most recent available data from the International Trade Administration, between January and October 2017, the top exporter of steel to the United States is Canada, which accounted for 16 percent of imports during this period; Brazil, which accounted for 13 percent; South Korea, which accounted for 10 percent; Mexico, which accounted for 9 percent; Turkey, which accounted for 6 percent; and Japan, which accounted for 5 percent. 

Following his unconvincing case for steel tariffs on national security grounds, Paul then offers the following odd commentary:

Industry has been one of America’s greatest achievements. This is the nation that transformed itself into the arsenal of democracy, and with it won the last world war. Industry powered the country into a golden age of wealth and was a foundation of middle class prosperity.
Today America too often outsources the material to manufacture its prestigious projects, like the San Francisco-Oakland Bay Bridge, in a quest for savings. Half of the steel used in our energy pipelines is imported.
…Steel is our nation’s strength. Mr. Trump should remember that.

Both practically and philosophically this falls short. If one considers industry writ large to be one of this country’s greatest achievements then the fact that far more American workers are found in industries which consume steel rather than produce it—roughly 147,000 in steel production versus 6.5 million in domestic manufacturers that use steel in the production process according to Tori K. Whiting of the Heritage Foundation—is an excellent reason to eschew import restrictions. And why is the use of outsourcing to reduce infrastructure construction costs, thus saving taxpayer dollars and freeing up resources to be used elsewhere, presented as a cause for worry?

More importantly, while industry has indeed proven to be an important source of American wealth and prosperity, it should be remembered that the foundation of such economic might firmly rests on this country’s commitment to individual liberty and freedom. It is this freedom, including to trade with those we wish, that is the country’s foremost triumph and that from which all other achievements have been realized. No country has barricaded its way to greatness, nor surrendered its freedom in exchange for prosperity. This is what President Trump should truly remember."