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Smith Faculty
Opinion Article |
December 14,
2006 |
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By Dr. Peter Morici, Professor of
International Business
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WEB SITE |
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Automakers Hypocrisy about Steel
Protection
Today in the Wall Street Journal,
executives from the domestic Big Three
and Japanese automakers with substantial
production facilities in the United
States railed against U.S. antidumping
duties on anticorrosive steel. What
seems to go unaddressed is the rationale
for these duties, and that automakers
are silent about the protection on
automobiles they enjoy.
World Trade Organization law provides
for anti-dumping orders to guard against
countries exporting unemployment by
exporting products below their fair
market value--either exporting at prices
below those prevailing in their home
market or below their cost of
production. Without this safeguard
against beggar-thy-neighbor trade, the
profound increase in trade facilitated
by eight rounds of WTO trade
negotiations would not have been
possible--tariff cuts would have been
impossible to sell to domestic
industries around the globe.
Under the dumping orders administered
by the Department of Commerce, exporters
from six affected countries need not pay
duties at all, if they export into the
U.S. market at the fair market value in
their home markets. Importantly, the
Commerce Department, currently run by a
pro-market Republican administration,
has concluded that dumping would be
resumed in the absence of these
administrative reviews.
Moreover, corrosive resistant steel
is low profit business, and
manufacturers that ship mostly this kind
of steel are earning returns below their
cost of capital. Hence, they would be
devastated by a renewal of dumping.
Moreover, since 1963, U.S.-based
producers have enjoyed a 25 percent
tariff on trucks imported from Japan,
Korea and other countries outside of the
North American Free Trade area. That
provides a margin of protection equal to
more than $5000 per vehicle or about $40
billion a year. Automakers have
strenuously defended this tariff through
the Tokyo, Uruguay and Doha Round
negotiations, making their pleadings on
steel tariffs awfully hypocritical.
Peter Morici is a professor at the
University of Maryland School of Business
and former Chief Economist at the U.S.
International Trade Commission.
