Trade-restriction policies ineffectiveness in the US steel industry

Abstract

This study examines the impact of the trade restrictions on steel imports in order to protect the US steel industry. During the period of 1963 to 1988, the industry experienced a tremendous decline in its output. Trade restrictions are implemented to limit steel imports. The overall goal of this study is to estimate the impact of the steel trade restriction regimes on the output of the industry. Beside foreign competition, the study addresses the impact of other factors – other shipments (nonsteel shipments) and the prices of steel substitutes – aluminum, and plastic and rubber that may have also caused variation in steel production. The study makes two major contributions. First, the study constructs the trade restriction regimes and other high-frequency monthly data set on steel output and factor prices. Second, output is modelled as a function of the trade restriction regimes, other shipments and factor prices. Regression results show that the protection regimes are not statistically significant to enhance output expansion. This implies policies ineffectiveness and invalidates the call for the trade restrictions. The other shipments variable enhances output demand while the prices of the steel substitutes do not. Given the results here and for the fact that the mini-mills were competitive during the regime periods, a competition, not protective trade may be warranted.

Acknowledgement

I wish to thank Dr Jonathan Elimimian for editing this work.

Notes

¹See Hogan (1991) and Barnett and Schorsch (1983) for discussions of these issues.

²The source of this variable is Metal Statistics 1969, 1974, 1979, 1984 and 1990 series.

³The source of this variable is the 1971, 1973, 1975, 1977, 1986, 1988 and 1990 issues of the Annual Statistical Report; American Iron and Steel Institute.

⁴Information on both the total shipments and on the steel shipments comes from the 1958–1977, 1977–1982, 1982–1990 Current Industrial Report series, U.S. Department of Commerce.

⁵Indexed Prices of aluminum, and rubber and plastic variables are respectively constructed from the WPI 1963–1967, and PPI 1969–1989 of the Monthly Labor Review. The Industrial goods price index is obtained from 1965 to 1990 series of the Economic Report of the President.