Political Action by the U.S. Steel Industry, 2015-2018

Often regarded as the backbone of American manufacturing, the steel industry is essential to the world's water and food supply, energy generation, and national security. The U.S. military uses steel extensively, in applications including aircraft carriers, nuclear submarines, missiles, armor plate, and every major military aircraft. There are many reasons to be concerned with the health of the U.S. steel industry. However, in the 2010s, the American steel industry began to suffer from an unprecedented surge of foreign-produced steel flooding into the United States. In many cases, these imports were nearly 50 percent cheaper than U.S.-made steel, since the Chinese and some other governments subsidized their steel industries, and foreign steel companies used nonunion, low-wage workers.

Production at domestic steel mills dropped to as low as 60 percent of capacity, an unsustainable level for a capital-intensive steel producer. American steel companies began to close down major facilities or reduce production. More than 12,000 steel jobs were lost in 2014 and 2015, as foreign steel imports took a record 29 percent of the U.S. steel manufacturing market.

Almost one in three tons of steel sold in the United States were produced by foreign companies. The Chinese government owned almost half of the world's steelmaking capacity. Between 2000 and 2014, Chinese steel production increased an astonishing 540 percent, with additional surges in steel production in South Korea and Turkey. With the rising tide of cheap imports entering the U.S. market from these and other countries, the U.S. steel industry knew it had to do something dramatic and quickly.

In 2015, the steel companies launched a multi-faceted and well-funded political strategy to seek governmental protection from the onslaught of cheap steel imports coming into the country. Their main objective was the imposition of import tariffs, or an additional fee or tax, to boost the price of foreign-made steel sold in the United States. Some political activities focused on articulating a clear message to Congress and the White House. Steel executives arranged for opportunities to testify before numerous congressional committees focusing on the economy, trade, and national security. Steel companies provided "white papers," short briefs emphasizing key points, sent to congressional members and their staff, seeking to ensure that everyone with any political power knew of the steel industry's policy views.

Other efforts targeted political candidates' campaigns and funneled significant dollars to key politicians and political parties to gain influence. The American Iron and Steel Institute, the industry's trade association, and the United States Steel Corporation, a domestic integrated steel producer, increased their levels of political action committee (PAC) campaign contributions, especially during the 2014 political election cycle.

Domestic steel producers sought economic relief by filing a complaint with the U.S. Commerce Department. The steel industry was aware that Congress gave the Commerce Department new tools in 2015 when it enacted legislation that changed the trade remedy laws, and steel executives argued that it was critical that the department aggressively use them. The U.S. Steel Corporation turned to the U.S. International Trade Commission (ITC), an independent federal agency with broad investigative responsibilities on matters of trade. The U.S. Steel Corporation filled a complaint with the ITC alleging that Chinese steel producers and distributors conspired to fix prices, stole trade secrets, and falsely label steel products on the market. "We have said that we will use every tool available to fight for fair trade. With today's [ITC] filing, we continue the work we have pursued through countervailing and antidumping cases and pushing for increased enforcement of existing laws," said U.S. Steel Corporation CEO Mario Longhi.

The steel industry also worked in coalition with others to promote their interests. It joined with other manufacturers from the aluminum, textile, fabric, fiber, and resin industries to form the Manufacturers for Trade Enforcement coalition to raise awareness of their concerns about China's market status. Company executives encouraged their employees to sign petitions calling on Congress to protect the steel industry by enacting tariffs, an additional fee imposed on all tonnage of steel coming into the country. Not all other manufacturers agreed to join this effort, however. For example, Daniel Cosio of Ball Metal Food Container said that restricting Chinese steel imports would "lead to short supplies, higher prices and fewer alternatives for companies like ours. The products we buy from China are not available from U.S. producers in the quality and quantity provided by the Chinese. The level of service that Chinese producers provide is superior to the service provided by domestic steel producers."

Some steel executives launched publicity campaigns to educate Americans about the industry's economic crisis. Lakshmi Mittal, CEO of ArcelorMittal, the world's leading integrated steel and mining company, said that he "was counting on tariff protection to help save his U.S. [steel] mills, heavily concentrated in northern Indiana. [This protection] will help prices." ArcelorMittal announced that it would lay off 150 of the 207 workers at its Philadelphia plant early the following year. Kimberly Allen, a steelworker and single parent who had worked at the ArcelorMittal plant for more than 22 years, said, "I told my son, 'Christmas is going to be kind of severe, because Mommy's going to lose her job soon.'"

The steel industry's multi-faceted political strategy seemed to pay off in 2017 when President Trump announced he would impose steep25 percentglobal tariffs on steel imports, making good on his campaign promise to aggressively pursue his "America First" trade policy. "You're going to see a lot of good things happen. You're going to see expansion of the [domestic steel] companies," said Trump. However, countries impacted by these tariffs were expected to bring complaints before the World Trade Organization (WTO), discussed in Chapter 4, saying the tariffs violated WTO rules prohibiting protective tariffs under most circumstances.

News of the tariffs caused a negative reaction on Wall Street, where investors fled stocks following Trump's announcement. The Dow Jones Industrial Average declined 264 points, or 1.1 percent, the Standard and Poor's 500 fell 0.5 percent, and the Nasdaq Composite dropped 0.4 percent. Analysts argued that the new tariffs on imports would boost steel prices in the United States, offering a lifeline to beleaguered American steel makers, but also raising costs for manufacturers of goods made from steel, ranging from oil pipes to factory equipment to automobiles. Steve Handschuh, head of the Motor Equipment Manufacturers Association, said, "Tariffs limit access to necessary specialty products, raise the cost of motor vehicles to consumers, and impair the industry's ability to compete in the global marketplace."

1. Did the steel industry act appropriately as a participant in the political environment when it sought economic protection from foreign steel imports?

2. What political strategies, did the steel industry use to gain tariff protections?

3. What other political strategies could the steel industry have used to promote their interests and how?

4. What levels of corporate political involvement are evident in the case?

5. Should Chinese and other country's steel producers be permitted to engage as a political participant in the U.S. political environment to protect their economic