The Steel Crisis in the United States and the European ...

This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research

Volume Title: Issues in US-EC Trade Relations Volume Author/Editor: Robert E. Baldwin, Carl B. Hamilton and Andre Sapir, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-03608-1 Volume URL: Publication Date: 1988

Chapter Title: The Steel Crisis in the United States and the European Community: Causes and Adjustments Chapter Author: David G. Tarr Chapter URL: Chapter pages in book: (p. 173 - 200)

IV Industry: New Protectionism and New Competitors

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7

The Steel Crisis in the

United States and the

European Community:

Causes and Adjustments

David G. Tarr

7.1 Introduction

The years since 1974have been very difficult ones for the steel industries of the United States and the European Community (EC). Production in both regions has dropped by more than one-third and employment has fallen even more. In recent years there have been either large losses or small profits.' Data on these trends are presented in table 7.1. In response to these developments the U.S. government and the Commission of the European Community have adopted rather similar external policy measures but quite different domestic measures. How well are these measures suited to meet the problems affecting the industry and how might they be modifiedto deal more effectivelywith these problems?

In order to answer these questions, the fundamental causes of the industry's problems are discussed in section 7.2. The policy responses and their effects in the U.S. and EC are described in section 7.3. The last section of the paper evaluates these policy responses.

7.2 The Causes of the Crisis

7.2.1 New Entrants in the International Steel Market

In the past 30 years there has been a dramatic shift in the pattern of steel production, exports, and imports around the world. The basic

David Tarr wrote this paper while visiting at the International Economic Research Division of the Development Research Department of the World Bank. H e is a senior economist with the Federal Trade Commission.

The author would like to acknowledge the helpful comments of Robert Baldwin, Andrzej Olechowski, Hans van der Ven, and The0 Dage. The views expressed are those of the author and d o not necessarily reflect those of the World Bank, Federal Trade Commission or those acknowledged.

173

Table 7.1

Steel Production, Capacity, and Labor Employed in the U.S., EC, and Member Countries

~~

Crude Steel Production (thousands of metric tons)

Capacity (crude) (thousands of metric tons)

Employment (thousands of workers)

United States EC9 FRG France Italy Netherlands Belgium Luxembourg United Kingdom Ireland Denmark

1974

132,195 159,881 53,232 27,021 23,804

5,873 16,227 6,447 26,667

110 536

1977

113,700 126,121 38,984 22,094 23,335

4,923 I 1.256 4,329 20,467

47 686

1980

101,455 127,732 43,838 23,176 26,501

5,264 12,322 4,618 I 1,277

2 734

1984

83,941 119,316 39,389 19,000 24,061

5,739 1 1.305 3,987 15,121

166 548

1974

na 155,526 53,232 27,020 23,789

5,840 16,225 6,448 22,318

110 535

1977

160,000 200,869 67,701 33,282 34,168

8,230 19,151 8,200 28,870

91 1,177

1980

153,700 202,536 66,924 32,512 39,385

8,512 19,659 6,380 27,954

90 1,120

I984

135,300 172,851 5 1,556 28,829 37,271

7,965 15,664 6,380 23,991

345 850

1974

512,395 794,770 232,037 157,833 95,656 25,077 63,738 23,503 196,926

na na

1977

~~

452,388 721,619 209,465 142,992 96,593 23,293 49,752

17,437 178,874

704 2,509

1980

1984

398,829 597,873 197,406 104,940 99,528 21,047 45,220

14,904 112,120

527 2,181

236,002 445,843 152,467

85,064 75,611 18,748 37,184 12,713 61,856

657 1,543

Sources: International Iron and Steel Institute, Annual Slutistical Reporf, various years for production data; Eurostat, Iron and Sfeel Yeurhook, various years, for EC capacity and employment data; and American Iron and Steel Institute, Annud Statistical Report, various years for U.S. capacity and employment figures.

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