Contemporary Protectionism: South Korean Tubular Steel

This past Saturday, Mark Perry commented on US tariffs on South Korean tubular steel. As he often does, he argues (a la Frederic Bastiat) that concerns about cheap steel imports reflect the interests of US steel producers at the expense of US steel consumers, the latter of which are actually more important to the society.

As Perry puts it:

If the viewpoint of the consumer, i.e. mankind, were seriously considered in the case of imported steel from Korea, there would be no question about the outcome – no government protection for the U.S. steel industry. And to get the lowest possible steel price for American consumers, we should welcome the Koreans to engage in as much “dumping” as they are willing to…. the lower the price they offer us, the better…. even if it’s below their cost of production… And if that’s really the case and they’re selling steel and steel pipe at a loss, we should gladly accept their generous gift of foreign aid to America, and stop complaining….

Of course, there is more than just consumers versus producers at stake. There is also the overall efficiency of the economy, which Perry argues is negatively impacted:

Economic trade theory and mountains of empirical evidence on protectionist trade policy confirm conclusively that there is almost always a net loss of economic efficiency from protectionist trade policies. Reason? Protectionist trade policies generate costs to domestic consumers in the form of higher prices and reduced trading activity that outweigh the benefits to protected domestic industries, often by a factor of 2-to-1. In other words, protectionist trade policies always makes the country imposing them worse off on net, not better off, when considering all of the costs and benefits.

Media Bias?

Perry also notes  that the WSJ's coverage of the issue displays "... the usual media bias of presenting protectionist trade policy completely from the viewpoint of the protected domestic industry." He then edits the WSJ article to reflect an emphasis on consumers

Typical of such reporting is this LA Times article by Don Lee which does seem to emphasize the effect on producers over that on consumers (despite mentioning a surge in demand for tubular steel due to fracking) and accepts the charge of "unfair" prices at face value. However, if you get deeper into the article, Lee does point out that US prices are out of line with the global market:

What's more, a deeper look at the industry also tells the story of a U.S. steel market that is out of sync with the rest of the world, where steel prices have been declining as Chinese real estate construction has softened.

Despite an international oversupply, U.S. Steel and other domestic operators charge substantially more than global competitors for tubular goods. That's possible, analysts said, because the industry has gone through severe restructurings over the last few decades and is now more concentrated with greater ability to dictate prices.

The article also notes that US steel manufacturers have contributed to the oversupply by ramping up production of tubular steel in anticipation of increased demand from the drilling industry. It isn't until close to the end of the article that the effect on US consumers (i.e., the energy industry) is brought  up and the tariffs are described in a quote as a two-edged sword.

Now, is this bias? Afterall, the article does get around to the main counterpoints and placing the emphasis on consumers is simply replacing one bias for another. I'll just leave at noting that is you read the article backwards, you might have a very different impression of the situation than if you read it as written.

Boudreaux Weighs In

Don Boudreaux has some even more scathing comments on a letter to the WSJ in which he puts the principle behind US tariffs in terms of individuals in households:

The ostensible principle behind Uncle Sam’s action is that we Americans are made poorer when non-Americans act especially vigorously to increase our access to foreign-made products.  But this principle is economically insane.  People grow prosperous, not by rejecting, but by embracing enhanced access to goods and services, regardless of the sources of this enhanced access.

If the principle that motivates Uncle Sam to tax Americans who buy inexpensive imports were valid, then, for example, my household would be made poorer whenever I buy - rather than make myself - my own furniture and clothing.  After all, Ethan Allen and Nordstrom charge prices so low that they not only “hurt,” they destroy, my capacity to make for myself the goods that they offer for sale.  Should I perhaps, in my quest to grow more prosperous, hire my neighbor to threaten to shoot me whenever I seek out merchants willing to sell to me especially low-priced sofas and shirts?