Remember: It’s Not Industrial Policy Without Trade Enforcement

By Matthew McMullan
Sep 21 2022 |
Hit ’em with the gavel. Getty Images

Ensuring fair play is a continuous effort and doesn’t stop just because we’ve decided to build up our own industries.

There’s been a lot done this Congress to build the foundation of a widespread U.S. industrial policy.

Here’s how it shakes out: You’ve got your Bipartisan Infrastructure Law that passed last year and established a market for manufactured goods via $1.2 trillion in spending.

You’ve got your CHIPS Act and (weirdly named, thanks to you-know-who) Inflation Reduction Act that are in large part incentives to motivate capital investment and consumer behavior. Those bills respectively commit over $52 billion to the domestic manufacture of critically important semiconductor chips and billions more in incentives and tax credits to subsidize household purchases of clean energy products like solar panels, heat pumps and electric vehicles.

You’ve got procurement policy – a.k.a., Buy America rules – attached to this spending that will make sure the work goes to domestic manufacturers and their workers.

And lastly, it needs trade enforcement to keep the domestic investment that industrial policy represents from, well, being invested elsewhere. We shouldn’t be, for example, allowing state-owned enterprises to participate in these markets and the policies that support them. Nor should we allow dumped or subsidized products into the American market and expect our domestic workforce to compete with them.

That last piece – trade enforcement – is key here, because trade affected these industries before and after these policies were enacted. The Chinese solar industry didn’t stop being heavily subsidized after the Obama administration set duties against them, and its products still find their way into the American market. None of that will stop because our own policymakers have decided to help build up domestic solar production capacity; unfair trade remains unfair and illegal.

The point is: Trade enforcement must be maintained if not improved through all of this, because trade is ongoing. Just last week and again on this Thursday morning, the U.S. International Trade Commission (ITC) – the government body that hears and rules on trade disputes – has considered whether to maintain two sets of duties on imports of hot-rolled steel and oil country tubular goods (OCTG), which are the steel pipes used in domestic energy exploration.

Something as specific as this – duties on certain types of steel imports – may seem like an afterthought to people looking at the larger policy pieces that have only recently been set in place, but it’s really not. Steel is a major construction material and a primary input for tons of manufactured products, which makes a healthy domestic steel industry key to U.S. economic security. There are lots of way to sustain its health. But you must make sure its home market isn’t dominated by heavily subsidized imports. Steelworkers in Indiana, Texas and Ohio don’t work for their states, and they shouldn’t be exposed to weighted competition from state-backed rivals.

And that’s what removing these duties would do: Expose them.

Here’s a snippet from what Roy Houseman, the legislative director of the United Steelworkers (USW), said to the ITC at its hot-rolled steel hearing last week:

In 2016 USW testified to the dire situation faced by the steel industry and asked that you remedy that situation with AD/CVD orders on hot-rolled steel. Imports were flooding the market, the U.S. industry struggled to compete, and mill workers were losing their jobs. Since that time, the industry has started to recover. U.S. steel producers began investing in manufacturing hot-rolled steel and jobs started coming back. …

But these new contracts and new investments face an uncertain future as imports continue to enter the U.S. market at a time when demand for hot-rolled steel is softening and raw material prices are rising. These market dynamics have the potential to reverse the strides we have made over the last several years with trade protection in place. Simply, the Union sees the threat of injury remaining, and our members will be some of the first to experience the recurrence of injury if duties are removed prematurely. We’ve seen that with the orders in place, mills are operating, new investments are made, workers receive better wages, and companies innovate.

These kinds of enforcement debates happen all the time and they affect thousands of workers.

There’s still plenty of other stuff to do, of course. Remember, this is all just the foundation of a fulsome industrial policy. The Biden administration this year put out a comprehensive supply chain review that identified plenty of other industries that deserve federal investment. It’s a start, but our industrial policy can’t end with semiconductors.

But even this foundation isn’t set without trade enforcement. It requires maintenance. We can start by maintaining duties on unfairly traded imports of steel products.