Patrick Semansky/AP Photo
On the campaign trail in September 2020, Joe Biden participates in an event with steelworkers in the backyard of a home in Detroit.
It matters whether the United States makes steel. The industry, far smaller than at its peak, still provides several hundred thousand jobs directly and indirectly, and supports local economies. Steel is also home to one of America’s most important and progressive unions, the United Steelworkers. It is unthinkable to imagine an American industrial renaissance without steel.
American-made steel also demonstrates how heavy manufacturing can be far less carbon-intensive than in years past. Domestic steel production is nearly three times cleaner than steel made in China. For decades, the USW has been a leading force in bringing together climate activists and trade unionists, via the BlueGreen Alliance and dozens of ad hoc collaborations.
As in so many areas of U.S. industry, Chinese subsidy and overproduction have ravaged domestic steel. China makes about half of all the world’s steel. Thanks to tariffs on Chinese steel and other products, first crudely imposed by President Trump and then better targeted by President Biden as part of an overall industrial policy that includes more aggressive use of Buy America laws, domestic steel production and employment have rebounded.
The steel industry, however, remains depressed. Its prime customer is the auto industry, and auto sales are down because the semiconductor bottleneck has slowed auto production. But the trends, for the first time in decades, are heading in the right direction. In the past two years, there has been domestic investment in about ten million metric tons of new steelmaking capacity.
None of this would have been possible without the industrial policy for steel. “We have a Corning shop in Wilmington, North Carolina, where they make fiber-optic cable,” says United Steelworkers President Tom Conway. “The Chinese have five times the global capacity of the rest of the world to make fiber-optic cable. The only thing that’s keeping these Corning workers alive in the U.S. is this tariff.”
It is unthinkable to imagine an American industrial renaissance without steel.
But the Biden strategy of using tariffs to counter Chinese subsidy and dumping (selling below cost), while domestic steel capacity gets rebuilt, is under assault from several quarters. First, the naïve free-traders, some of them in Biden’s own administration, object to the whole idea. His Treasury secretary, Janet Yellen, has described tariffs as a tax on U.S. consumers.
Second, corporate Democrats doing the bidding of business groups keep pressing Biden to suspend the tariffs or create waivers. On December 21, a bipartisan group of House members circulated the text of a letter to U.S. Trade Representative Katherine Tai, calling on her to suspend or selectively reduce tariffs. The group, led by four Ways and Means Committee members including Democrats Ron Kind of Wisconsin and Suzan DelBene of Washington state, called on Tai to “immediately expand its [tariff] exclusion process in order to support American workers, businesses, and our economic recovery.”
Even more insidiously, the Chinese use a variety of maneuvers to ship raw steel to countries not subject to tariffs, have products like pipe tubing finished in tariff-free locales like South Korea, and then claim that the entire export be admitted to the U.S. duty-free, even though most of the value added originated in China.
USW president Conway cites the case of ATI, formerly known as Allegheny Ludlum, a maker of stainless steel. “They now have a joint venture with a Chinese company that operates in Indonesia and has applied for an exclusion on the 25 percent tariff on its Indonesian inputs.”
This violates U.S. tariff policy. But keeping track of all these evasions is an endless game of whack-a-mole.
The Green Steel Deal negotiated with the European Union on the eve of the Glasgow climate summit helps stymie such maneuvers. The agreement gives preference to steel made with less carbon-intensive manufacturing processes, which both keeps out dirtier Chinese and Russian steel and rewards cleaner steel made in the U.S. and the EU.
The deal grandfathers 1.1 million tons of duty-free steel, a relatively small amount, but eliminates a much larger previous tariff-free import quota of 12 million tons. This helps domestic clean production and makes third-country subterfuges that much harder.
The very idea of clean steel production may sound improbable. The steel industry is divided into two broad segments. So-called mini-mills reprocess scrap steel, using an electric-arc process. But there is not enough scrap to meet global demand. The larger segment of the global industry uses the traditional blast furnace method to convert iron ore into steel, relying mostly on coking coal.
Even using traditional technology, U.S.-made steel is far cleaner because we have an Environmental Protection Agency whose regulations limit pollution. China has no counterpart.
New technology, including mills powered by hydrogen extracted from natural gas, and advanced carbon sequestration, promise even cleaner steelmaking, but are not operational yet.
The other major prong of the Biden administration’s industrial policy for steel is more aggressive use of the Buy America Act. In past administrations, this has not been a priority. When the Port Authority of New York and New Jersey rebuilt the upper deck of the Verrazzano-Narrows Bridge, they used Chinese steel, even though plenty of domestic steel was available.
The dodge was that the bridge was financed by Port Authority bonds, not federal dollars, so Buy America did not apply. But those bonds were exempt from federal income taxes, which amounted to a federal subsidy. The Build Back Better legislation includes an explicit provision requiring that certain clean-energy projects using tax preferences as well as federal dollars must follow Buy America.
The Biden administration for the first time has created a high-level Made in America office, located in OMB. It is headed by Celeste Drake, a longtime leader of the AFL-CIO. Federal procurement totals $600 billion a year, and having an office to systematically enforce requirements under the Buy America and Buy American statutes is a huge gain.
Among her other actions, Drake has created databases that show requests for exceptions.
The Steelworkers union, meanwhile, has mobilized its locals to create joint letters with their employers to forward information to Drake’s office on just where domestic products are available to meet Buy America requirements, in a campaign called We Supply America.
“We have never had an administration explicitly committed to this kind of enforcement of Buy America,” says Roxanne Brown, Steelworkers international vice president at large.
Could the administration do even more? “What we need now is someone to better connect the dots, convene all the stakeholders, and lay it out for industry and labor—where the opportunities are in different federal programs and agencies,” Brown adds.
This will be no small order. The remaining funds from the March 2021 American Rescue Plan Act, plus over a trillion dollars more from the November infrastructure legislation, are only now trickling out, mostly via formula allocations to state governments.
Some outlays that consume lots of steel, such as rail modernization, are easy to identify and enforce. Others are buried in thousands of small projects that can cheat or seek waivers.
But the combination of a tougher policy against Chinese steel-dumping, investing trillions in infrastructure, getting serious about Buy America, and seeing it all as an industrial policy for steel gives this storied industry a fighting chance.
