Protectionism and the Canadian Steel Industry
Discussions are currently underway in the United States with regard to protecting the U.S. steel industry against lower-priced imports. Imports, mostly from such countries as Brazil, South Korea and Spain, have captured 26% of the domestic U.S. market. Although they constitute only 3% of the American market, steel exports to the U.S. account for 20% of Canadian production. The contemplated imposition of steel import quotas would therefore seriously hurt Canada. The irony is that Canada is a fair trader, unlike other importers who try to unload their steel on the U.S. market for prices well below the American price.
A further irony in this episode was explained by Ronald Anderson in his Globe & Mail column on August 29, 1984. Anderson blamed government intervention in steel pricing in the early 1960s (remember John F. Kennedy?) for causing U.S. industry to limit investment in its steel plants and equipment. The U.S. steel industry did not keep up with new technology, and so it is uncompetitive in the 1980s. While 86% of the crude steel output in Japan is produced via the modern and cost-efficient continuous casting process, only 31% is produced via that process in the U.S. Now the government proposes to solve its troubles through import quotas. Anderson concluded: "Technological leadership evidently is the critical factor for steelmakers; it is success in this area, rather than protection, that will shape the industry's future."