After the devastation of World War II, some said we would never again see such desperate fighting among major world powers given the existence of nuclear weapons. Instead, future wars amongst these big countries would be trade wars.
Are we on the cusp of such a conflagration? Doubtful, but with China now getting in on the trade case action, it’s worth keeping an eye on.
China, usually a defendant in unfair trade cases, recently put dumping duties of roughly 37-47% on imports of grain-oriented electrical sheet steel from Japan, South Korea and the European Union. Even more recently, Chinese iron miners said they are considering filing cases against imports or iron ore from Brazil and Australia, which their steel industry absolutely needs.
Crazy? Yes, but so is the phenomenon of The Donald, so who knows. Some believe China is motivated, at least in part, by the need to develop its trade case muscles.
Steel, essential to fighting conventional wars — US Steel’s massive Homestead Works was a major component of WWII’s Arsenal of Democracy — is now leading the charge in the trade realm. US mills filed a raft of unfair trade cases last year that are bearing fruit this year, helping to reduce imports by 29% through June, with China being a major target. US producers, as always, characterized the filings as a defensive action, and this time most of the world agreed.
In the past, US mills “lawyering up” on trade was often criticized abroad and even domestically. US-based steel traders, importers, port authorities and even some customers — many of whom had to rely primarily on domestic steel — were regularly opposed to dumping and subsidy litigation, either publicly or privately, on the grounds that it hampered free trade. Many offshore suppliers, importers and foreign steel users felt the deck was stacked against them, given the longstanding political strength of the domestic steel industry.
But things have been markedly different this year and last, mainly because of China’s overwhelming global steel presence: a producer of half the world’s tonnage and on track to export more than 100 million metric tons this year — more than the USA’s entire annual production. Formerly critical global steelmakers not only rushed to file unfair trade cases of their own, they also banded together with the US in an unprecedented move to single out China, alleging it to be a major global steel trade offender with more than 300 million mt tons of excess production capacity overhanging the world market.
Even those Americans who seemingly would benefit from cheap steel imports got on board. Both sides of the American steel trade scene expressed appreciation for the Obama administration’s willingness to press China on its steelmaking overcapacity in Beijing at the US-China Strategic and Economic Dialogue earlier this year. The concern was reiterated at the more recent G20 meeting in Shanghai.
The American Iron and Steel Institute and the American Institute for International Steel — not always on the same page — praised the US government’s forcefulness at what is considered the world leaders’ highest-level government-to-government economic exchange. Media reports on the Dialogue described US Treasury Secretary Jacob Lew “chiding” and “taking to task” his Chinese counterpart on the steel issue.
Richard Chriss, president of the American Institute for International Steel, a steel traders group that generally supports a free flow of imports, said the inclusion of steel issues at the talks was “a most encouraging sign that our voice on critically important policy issues is heard and acted on at the highest levels of the United States government.”
World War I was also known as the War to End All Wars. That never happened, but the wars since WWII have not been amongst the big powers. That’s too risky. But a trade war is not.