The president vows “firm, tough enforcement” against China, and slaps a new tax on Chinese steel that would nearly quintuple its price, all to protect American steel jobs. No, that’s not President Trump next year. It’s President Obama now.
The political problem is that few mainstream candidates this year were willing to say the obvious: It’s not really free trade when one large country does not, in any way, have a free-market economy.
The steel problem is this: As China spent the past two decades building factories, skyscrapers and rail networks, it needed a lot of steel. The country’s steel production went from 100 million or so tons a year in the late ’90s to nearly a billion now.
But since China’s economy started to slow three years ago, it doesn’t need all that metal. Its own annual demand for the product has plummeted by more than 100 million tons — more steel than America makes in a year.
The free-market response would have been for China to cut steel production. And it has, a little, but not enough. Why? China doesn’t want to see massive job losses among its working class.
So China has dumped its excess steel on world markets — slashing prices. American and European steel mills simply can’t compete. Over three years, the American metals industry has lost 21,500 jobs.
This is where trade rules come into play. The Obama administration has made a credible argument that China is flouting restrictions on “dumping” (exporting products below what it cost to make them) and “state supports” (propping up money-losing companies with government funds).
So expect a new tax, or tariff, on Chinese steel by summer.
Why, then, is Donald Trump doing so well if the system is working as it’s supposed to?
One problem, of course, is that the system works way too slowly — not much help for people who already lost their jobs because of illegal trade.
But the political problem is that few mainstream candidates this year were willing to say the obvious: It’s not really free trade when one large country does not, in any way, have a free-market economy.
So when Trump’s primary opponents attacked him in a January debate for proposing tariffs to police unfair trade, they were attacking him for proposing what is settled US policy. All modern American presidents have used tariffs, and threatened them, for enforcement.
As Trump said in January — correctly — “you can’t deal in China without tariffs.”
But his opponents could answer only with wind-up doll answers about how trade is good.
For all that people lambast him for his simplistic answers, it was Trump who succeeded in making the subtler and more sophisticated economic point in the primaries: Not all trade is free trade, and supporting trade means that you support enforcement of trade rules, too.
The primaries are over now — so where does Clinton stand on the issue?
Last week, she said she wanted to put her husband in charge of the economy — when her husband was the president who invited China into the global economy without sufficiently using America’s weight to create enough fair rules.
Trump will mention that fact in a future debate. What will Clinton say?
Oh, sure, she’s already said that she won’t “tolerate attempts by China to solve its growing economic problems on the back of American workers.” But it would take a brilliant politician to trump Trump on trade — when he ran a yearlong campaign on it, and can seize on the new tariffs to show how right he was.
Ironically, the bickering over tariffs and trade isn’t going to stop the long-term trend: The American steel industry is losing jobs. The metals industry has lost 316,900 jobs since 1990, nearly half of its employment.
The bigger long-term threat, to both American and Chinese factories, is robots.
Even China can see the big picture: Though it doesn’t want to lose steel jobs now, it’s investing in automation. Otherwise, China’s political and business leaders know they will lose jobs to Vietnam and Malaysia as China’s own labor costs rise.
But today, America and China have something in common: What’s happening to jobs now is more important than what will happen five years from now.
This piece originally appeared in New York Post
Photo by Getty Images / Pool