Dumping Of Steel Essay Research Paper INTRODUCTIONForeign

Dumping Of Steel Essay, Research Paper

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Foreign steel manufacturers plague the U.S. steel industry with unjust competitory patterns. This pattern is referred to as & # 8220 ; dumping & # 8221 ; . Dumping of foreign steel has been a job throughout the history of the U.S. steel industry. In the 1990s dumping has become more of a job, due to the dislocation of the Russian economic system and its passage from Capitalism to a free-market economic system. Harmonizing to Microsoft Encarta 98 ( 1998 ) , Free-Market Economy, is an economic system in which persons, instead than authorities, make the bulk of determinations sing economic activities and minutess. In add-on, the Asiatic fiscal crisis has led to another unit of ammunition of dumping into the U.S. markets by many Asiatic states.

The effects of dumping have a positive every bit good as a negative impact on the wellness of the overall U.S. economic system. On the positive side, steel-using industries enjoy lower monetary values for steel used in the industry of their merchandises. Turning to the negative side, the U.S. steel industry has suffered enormously through layoffs and a prostration of a figure of steel shapers.

Should the U.S. Government supply protection against dumping? The argument on protectionism has gone on for old ages. Protection of one industry by the U.S. Government has come at the cost of another including the U.S. consumer.


The steel industry grew out of the demand for stronger and more easy produced metals. During the last half of the nineteenth century, many technological progresss in steelmaking played an of import function in making modern economic systems. These economic systems depended on the steel industry to provide tracks, cars, girders, Bridgess, and many other steel merchandises. Iron devising can be traced as far back as 3,500 b.c. in Armenia. The Bessemer procedure, created independently by Henry Bessemer in England and William Kelly in the United States during the 1850s, allowed the mass production of low-priced steel ; the unfastened fireplace procedure, foremost introduced in the United States in 1888, made it easier to utilize domestic Fe ores. By the 1880s, the turning demand for steel tracks made the United States the universe & # 8217 ; s largest manufacturer. The open-hearth procedure dominated the steel industry between 1910 and 1960, when it converted to the O procedure, which produces steel faster, and the electric furnace procedure, which makes it easier to bring forth metals such as unstained steel. After World War II, the U.S. steel industry faced increased competition from Nipponese and European manufacturers, who rebuilt and modernized their industries. Later, many Third World states such as Brazil built their ain steel industries and big U.S. steelworkers faced increased competition from smaller, nonunion Millss. The U.S. produced about

half of the universe & # 8217 ; s steel in 1945 ; by 1991 it was the 3rd largest manufacturer, with merely 11 % of the universe market, behind the former Soviet Union and Japan. Since the 1970s, turning competition and the increasing handiness of alternate stuffs, such as plastic, slowed steel industry growing ; employment in the United States steel industry dropped from 2.5 million in 1974 to 1.6 million in 1991. Global production stood at 736 million dozenss in1991, down from 786million dozenss in 1988 ( The Columbia Encyclopedia, 1993 ) .


Columbia Encyclopedia, ( 1993 ) defined dumping as the merchandising of goods at less than normal monetary value, normally as exports in international trade. It may be done by a manufacturer, a group of manufacturers, or a state. However, dumping is normally done to drive rivals off the market and procure a monopoly, and/or to impede foreign competition. States, in an attempt to compensate international dumping, frequently resorted to flexible duties. International trade through acute competition from foreign manufacturers frequently leads to dumping misdemeanors of jurisprudence. A policy sing dumping, depends on its effectivity in keeping separate domestic and foreign markets, the monopolistic mechanism that influences the stableness of high monetary values in the place market, on export premiums, or on low import responsibilities in the foreign market aid keep economic balance. Dumping disturbs those markets that receive dumped goods and it may drive local manufacturers out of concern. Governments may excuse, even patron, dumping in other markets for political grounds and/or to accomplish more favourable balance of payments. In the late nineteenth century, dumping became portion of the trade policy of great European trusts, particularly German trusts. Britain, France, Japan, and the United States have besides practiced dumping. Canada foremost passed antidumping statute law in 1904. The United States in an attempt to deter dumping, imposed assorted duty Acts of the Apostless that dealt with different types of dumping ; in peculiar the Emergency Tariff Act of 1921, imposed particular responsibilities on goods imported for sale at less than their just value or cost of production. It was amended by the Customs Simplification Act of 1954. The General Agreement on Tariffs and Trade ( GATT ) prohibits dumping and provides for increased import responsibilities to battle the pattern ( Columbia Encyclopedia, 1993 ) .

Dumping IN THE 1990s

The dumping of steel merchandises into the U.S. market has been traveling on throughout history. However, it has become more prevailing during the 1990s. Harmonizing To Robert J.Grow ( 1998 ) , the first major daze of the 1990s came from the close entire prostration of steel home base demand in the former Soviet Union and a attendant rush in exports to the U.S. Fortunately, U.S. manufacturers successfully challenged the dumping of home base into the U.S. market with trade instances filed in Nov. 1996. After findings of monolithic dumping borders and affirmatory findings of hurt, the authoritiess of Russia, Ukraine, and China reached suspension understandings that will cut down imports from these states by 70 per centum from 1996 degrees of over 1 million dozenss. These states basically had non shipped to the U.S. market before 1993.

The full U.S. steel industry is trying to get the better of the 2nd major daze of the 1990s the Asiatic fiscal crisis. The Asiatic fiscal crisis has meant fall ining currencies for many Asiatic states, International Monetary Fund ( IMF ) bailouts for several of these states, surging domestic involvement rates, bankruptcy filings, and significantly reduced home-market demand in Asiatic states ( Grow, 1998 ) . This crisis has forced many Asiatic states to fall back to dumping steel on the U.S. market due to low demand at place.

THE Cause

For old ages, the Asiatic theoretical account involved government-directed loaning within a closed fiscal system to favored companies and industries in export-targeted sectors like steel despite the creditworthiness of the endeavors having the funding. Long-run capital outgos were financed with short-run debt, and increased capacity was used to fuel higher exports and additions in the criterions of life for workers. Workers in Korea were granted lifetime employment. Net incomes or the deficiency thereof, was non of import ; alternatively, market portion and increased exports were emphasized. When the posting kid of these Asiatic fiscal maltreatments, Hanbo Steel, filed for bankruptcy in Jan. 1997, the dominoes began to fall. Incredibly, at the clip of the bankruptcy, Hanbo had received $ 5.8 billion in loans, led by the Korean-government-owned Korea Development Bank. Since the bankruptcy, Hanbo has been managed by Pohang Iron and Steel, now the universe & # 8217 ; s largest steel manufacturer and still 36-percent-owned and controlled by the Korean authorities ( Grow, 1998 ) .

Because of the deficiency of demand for steel merchandises in many Asiatic states coupled with subsidized over capacity the U.S. has witnessed an influx of steel merchandises into the state. Korea has exported record Numberss of steel pipe to the U.S. Besides, increased exports of home base from Korea and Indonesia, and increased imports of hot-rolled sheet from Japan, among other states in the part. Harmonizing to American Metal Market ( 1999 ) ,

By June of 1999, the list of states allegedly dumping steel has grown to include Argentina ( 28 per centum ) , Brazil ( 32 per centum to 63 per centum ) , China ( 27 per centum ) ,

Japan ( 49 per centum to 53 per centum ) , Russia ( 76 per centum to 100 per centum ) , South Africa

( 17 per centum ) , Slovakia ( 35 per centum to 44 per centum ) , Taiwan ( 38 per centum to 59

per centum ) , Thailand ( 94 per centum to 122 per centum ) , Turkey ( 33 per centum and Venezuela

( 25 per centum to 56 per centum ) . Cold-rolled imports from these states totaled

2,283,710 dozenss in 1998, accounting for 13.7 per centum of the entire U.S. domestic

market and 63.2 per centum of all cold-rolled imports.


The dumping of foreign steel into the U.S. market can hold a positive consequence on the economic system ; However, dumping can consequence the economic system in a negative manner as good.

First lets look at the positive effects dumping has on the economic system. The dumping of steel by foreign states has caused the monetary value of trade good grade sheet steel to drop to every bit small as $ 220 a ton, down from around $ 300 a ton. The lower monetary values due to steel imports have been a blessing to steel-using industries, from car manufacturers to lawnmower

makers. Companies are ever looking for ways to cut costs and increase their entire net income. Companies that use steel in the industry of their merchandises will profit from the usage of replacements that the foreign steel companies provide through lower priced steel. This will let the steel-using industries to keep the line on monetary value additions of their merchandises, leting the American consumer to profit from lower monetary values due to dumping. In 1998, the demand for steel was so great that domestic producer’s were themselves taking advantage of inexpensive foreign produced steel. A figure of domestic steel manufacturers were purchasing inexpensive slabs from foreign manufacturers to run through their Millss. Domestic manufacturers found that it was cheaper to purchase slabs from foreign Millss than to do the slabs themselves ( Robertson, 1998 ) .

For the U.S. steel industry, the negative effects of dumping out-weigh any positive effects. Demand for steel in the U.S. has been absolutely inelastic for much of the 1990s significance that whatever the steel shapers could bring forth the market would absorb no affair what the monetary value. If demand is inelastic, a monetary value rise leads to an addition in entire gross, and a monetary value autumn leads to a lessening in entire gross ( Arnold, 1998 ) . Dumping leads to take down monetary values, although demand is the same, entire gross decreases. Since 1997, The U.S. steel fabrication industry has been enduring from the record degree of steel imports that have been deluging the state. The state of affairs has caused the prostration of a figure of steelworkers, a decrease in operating degrees and the layoff of 1000s of workers. Before 1998, the peak degree of U.S. steel imports was 27 million dozenss. Steel imports, in 1998 reached an all-time high of 41.5 million dozenss, a 54-percent addition over the old record degree ( Garvey, 1999 ) . U.S. Steel manufacturers blame more than 10,000 layoffs in late 1998 and the bankruptcies of three steel companies in 1999 on the rush in steel imports.


The illegal dumping of foreign steel merchandises in the U.S. is dejecting the steel-manufacturing sector in the U.S. America & # 8217 ; s steel industry wants particular protection from falling monetary values in the planetary market place. Should this come at the disbursal of our state & # 8217 ; s overall economic wellness?

U.S. steelworkers and their brotherhoods have banded together and petitioned for protection against illicitly dumped foreign steel. This run & # 8220 ; Stand Up For Steel & # 8221 ; has worked by seting the force per unit area on politicians in Washington to & # 8220 ; make something. & # 8221 ; Making something, peculiarly when it comes to a political heavy batter like steel agencies trusting on anti-dumping legislative acts. Anti-dumping Torahs, which penalize companies for selling their merchandises for less than production cost, have been a utile screen from planetary competition for the steel industry: one out of three anti-dumping actions in the past 20 old ages was directed at imported steel ( Morrissey, 1999 ) . The U.S. anti-dumping jurisprudence is stacked in favour of domestic manufacturers, virtually vouching that a dumping border will be found. The Commerce Department upholds more than 95 per centum of all dumping charges. In add-on, U.S. jurisprudence punishes foreign manufacturers for prosecuting in patterns that are legal, and common, in the domestic U.S. economic system, where fighting companies frequently sell at a loss to clear stock list and screen fixed costs ( Griswold, 1998 ) .

In March of 1999, the House of Representatives voted overpoweringly, ( 289-141 ) , to slap quotas on dumped steel imports. The quota measure would be the private sector about $ 900 million over the following three old ages, harmonizing to a Congressional Budget Office study ( Morrissey, 1999 ) . The quota measure would drive up domestic steel monetary values ; this would be a blessing to the comparatively little steel-producing sector but a load to far larger steel-using industries. Higher steel monetary values will drive up costs and depress gross revenues and employment in steel-using sectors such as cars, building, place contraptions and nutrient packaging. For Example, the mean five-passenger saloon contains $ 700 worth of steel, a fact that has prompted General Motors to register a brief this autumn with the U.S. International Trade Commission pressing cautiousness about steel dumping responsibilities. Caterpillar Inc. , a major exporter of building equipment, buys 600,000 dozenss of steel a twelvemonth. General Electric uses 750,000 dozenss a twelvemonth in place contraptions and a scope of other merchandises. Overall, the major steel-consuming sectors of the U.S. economic system transit equipment, fabricated metal merchandises, and industrial machinery and equipment employ 3.4 million production workers, compared to 175,000 employed by the basic steel industry ( Griswold, 1998, p.2 ) .

For every steelmaker whose occupation is made more unafraid by protection, about 20 workers in steel-using industries will be made less unafraid ( Griswold, 1998, p.2 ) . Prop uping up steel monetary values will hearten brotherhoods and shareholders of domestic steel, but will ache far more legion Americans who buy and make steel merchandises. Most steel companies posted net incomes in late 1998 and all of 1999. Lower monetary values will potentially drive some of the less efficient U.S. manufacturers out of concern, but the more efficient among them, will last and boom, go forthing the U.S. industry more competitory overall.


The U.S. steel industry can look frontward to a comfortable twelvemonth 2000 and beyond. Kenneth Hoffman, steel industry analyst with Prudential Securities, .New York, predicted hot-rolled sheet monetary values would be in the scope of $ 365 per ton to $ 400 per ton. Hoffman besides predicted monetary values for cold-rolled sheet would be in the scope of $ 425 per ton to $ 465 per ton ( up, from current monetary values of around $ 410 per ton ) and galvanized sheet up to $ 525 per ton to $ 600 per ton from current monetary values of around $ 420 per ton. & # 8220 ; I think U.S. monetary values will travel nuts next twelvemonth, & # 8221 ; Hoffman said. & # 8220 ; Asia right now is a roar or broke economic system. It is the U.S. of 100 old ages ago, and it will be significantly stronger following twelvemonth. That strength will assist control the high degrees of imports that came from Asia to the U.S. in the 2nd half of 1998 and early 1999 & # 8243 ; ( Robertson, 1999 ) . This will do less dumping into the U.S. market, thereby leting domestic steelworkers to raise their monetary values. Furthermore, supply will diminish as demand rises. Therefore increasing entire gross for most steel companies.


Dumping is a worldwide job, the dislocation of the Russian economic system and the Asiatic fiscal crisis were jobs during the 1990s. Finding ways to cover with dumping is one of the major issues confronting U.S. steel shapers in the new millenium. Should the U.S. Government protect the steel industry at the disbursal of the remainder of the U.S. economic system? Furthermore, at the opportunity that foreign states will revenge due to punishment levied against them because of dumping. As planetary enlargement continues, U.S. steelworkers will hold to go more aggressive in happening ways to vie in the planetary market place. This will hold to be done through modernisation of old Millss and the usage of new engineerings to do a better merchandise at lower costs. Dumping will ever be a menace to the U.S. steel industry. Finding the manner to contend it will be the large challenge confronting the U.S. steel industry in the twenty-first century.


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