Their labor costs are a fraction of U.S. labor costs. They have few safety regulations, and minimal responsibility for injured workers.
They can use antiquated plants because of lax environmental regulations.
Adding the export rebate to this imbalance was like raising one side of a seesaw; cheap China steel flowed into the United States, depressing steel prices, reducing demand for domestic steel and discouraging U.S. producers from expanding capacity.
Conspicuously missing from China’s reduction in export incentives, however, was steel tube. China’s tube manufacturers still receive a 13 percent tax rebate on tube they send overseas.
The discrepancy in how China treats steel tube and flat-rolled steel is an economic disaster for the U.S. tube industry, including Independence Tube.
First is the seesaw effect: Chinese producers, already enjoying numerous competitive advantages, ship more steel tube because of the rebate.
It gets worse, though. Steel tube is manufactured from flat-rolled steel.
That means Chinese steel producers wanting to take advantage of the rebate will merely convert their flat-rolled steel into tube, flooding the U.S. market with even more of their low-cost product.
The crowning irony, though, is that by reducing export incentives on flat-rolled steel, China’s new policy increases Independence Tube’s costs. The flood of cheap flat-rolled steel hurt Nucor by driving down steel prices. It tended to help Independence Tube, however, by providing it with a less expensive supply of steel.
So in an ostensible effort to placate the United States, China has created an environment in which its producers will increase the flood of steel tube exports while increasing costs for U.S. steel tube makers.
Last week, several members of the U.S. House of Representatives — including Bud Cramer, D-Huntsville, and Robert Aderholt, R-Haleyville — demanded that the U.S. trade representative push China to remove the steel tube rebate. The opportunity will present itself Wednesday at a U.S.-China economic summit in Washington.
The congressmen complained that China’s steel tube exports almost doubled between 2006 and 2007, and likely would increase more with the rebate unchanged. They warned of closed U.S. facilities and laid-off workers.
Decatur has iron in this fire. The international sparks should be interesting.
Contact Eric Fleischauer at firstname.lastname@example.org.