Trade Protection and the U.S. Steel Industry

National Bureau Of Economic Research Inc, Cambridge MA

Investigators

Abstract

The majority of worldwide trade protection efforts are connected with a few prominent sectors, such as steel, automobiles, agriculture, textiles, apparel and lumber. Future trade liberalization efforts will have to confront the various issues that make trade protection in these sectors not only relatively high, but persistent. There has been relatively little work to examine the effectiveness of this long history of trade protection in these unique sectors, much less to seriously examine the industries' own claims for why continual trade protection is necessary. This research develops methodologies to examine the effectiveness of various trade protection programs, as well as the merits of a common claim by industries that trade protection is necessary to counteract government subsidized excess capacity in world markets. This research will design and estimate econometric models to formally examine these claims using data on the steel industry, while simultaneously controlling for other factors that previous economic literature has proposed as alternative reasons for the decline of the US steel industry. Work will proceed along three connected research questions. First, to what extent has the various forms of trade protection afforded the steel industry affected industry performance? Second, to what extent has excess capacity in foreign markets led to increased import penetration and decreased industry performance? Third, to what extent has subsidization by governments distorted investment decisions in the steel industry across the major markets? While the research examines these issues using data on the steel industry, the methodologies developed to the address these issues in the steel industry have immediate applications to other sectors that have sought trade relief. The proposed research will also lead to the construction of a number of detailed databases on trade protection measures and the world steel industry that will be useful for a wide variety of other researchers.