Protectionism Ruined U.S. Steel

By ERIC BOEHM of Reason. Excerpts:

"More government intervention is not going to save U.S. Steel. Indeed, decades of protectionist policies seem to have contributed to its downfall.

"Arguably, US Steel has been a disappointment since the day it was formed," writes Brian Potter, a senior infrastructure fellow at the Institute for Progress, in his Construction Physics Substack newsletter. "The company's large size made it unwieldy to manage, and it was late to every major advance in steelmaking technology of the last 100 years, from continuous rolling to the basic oxygen furnace to the minimill….As far as I can tell, no major steelmaking technology over the last century came out of US Steel."

Though U.S. Steel enjoyed global dominance in the aftermath of World War II, in no small part because the war had wrecked large portions of Europe's and Japan's industrial bases, it was already on the decline by the 1960s and early 1970s. After Nippon—the company now poised to buy out what remains of U.S. Steel—surpassed it as the world's largest steel company in 1971, U.S. Steel responded "not by trying to improve their operations, but by demanding government protection from 'unfair' foreign trade practices," writes Potter.

Thus began a 50-plus-year effort by the federal government to prop up U.S. Steel. Those interventions have taken many forms, including "hundreds of import restrictions; tens of billions of dollars in state, local and federal subsidies and bailouts; exemptions from environmental regulations; special 'Buy American' rules just for integrated steelmakers like U.S. Steel; and federal pension benefit guarantees," wrote Scott Lincicome, vice president of the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies, in a 2021 rundown on how protectionism had failed American steel companies and their employees. Even before President Donald Trump slapped 25 percent tariffs on nearly all imported steel, about half of all anti-dumping tariffs imposed by the federal government were aimed at various types of foreign-made steel, according to Lincicome.

What has all that government aid done for U.S. Steel? Today, the company makes about one-third as much steel as it did in the mid-1950s and employs about 10 percent as many people as it did during its heyday. U.S. Steel was dropped from the S&P 500 in 2014 and ranked as the 690th most valuable company based in the United States before the Nippon purchase was announced."

"As for lobbying, it is no secret that U.S. Steel has long maintained a powerful presence in Washington. That goes all the way back to the company's more successful early days, when it used its sheer size in the market "to bully other steelmakers and extract money from consumers," writes Potter. "When this stopped working, it used its political influence to prevent consumers from buying low-cost foreign steel. Improving the efficiency of its operations was something it did as a last resort when left with no other options."

Like people, companies get better at the things they work to improve on. Long ago, U.S. Steel decided that it didn't need to innovate to compete more successfully in a global marketplace if it could instead extract benefits from the political process. Ironically, that same political process could now be the thing that prevents U.S. Steel from being acquired by a more successful firm."