Wilbur Ross has accomplished impressive business turnarounds during his career.
His efforts in the steel, textile and automotive parts industries demonstrate a genuine talent for reorganizing failing operations and putting them back onto their feet. When he becomes Secretary of Commerce, Ross may face his greatest turnaround challenge ever.
The Department of Commerce’s mission is, among other things, “to promote job creation, economic growth, sustainable development, and improved standards of living for Americans.”
Under the outgoing administration, Commerce has actively undermined these goals. It has overseen a massive expansion in use of anti-dumping and countervailing duty measures that artificially raise input costs and reduce the global competitiveness of U.S. manufacturers.
If Ross is serious about accomplishing his mission, he needs to find a way to reverse course.
Steel provides the best example. China’s expansionary steel policies have made it the world’s largest producer and exporter, leading to depressed global prices. In response, U.S. steel mills have sought more than 160 anti-dumping and countervailing duty measures to restrict imports of a wide variety of steel products.
Those extra import duties are intended to offset unfair trade, and there’s little doubt that Chinese exports are unfair. Thus, it makes sense to impose anti-dumping and countervailing duties on imports of steel, right?
Not so fast. American steel producers are seeking import restrictions to raise their revenues. But they have been so successful with this strategy that the effective level of steel import protection today is higher than at any time since the Smoot-Hawley Tariff Act of 1930 was being unwound. The United States has become, in essence, a high-priced island in an ocean of low-priced steel.
Ross knows a lot about steel. In the early 2000s, at a time of widespread industry bankruptcies, he bought Bethlehem Steel, Weirton Steel and LTV Steel to create International Steel Group (ISG). He later sold ISG to Arcelor-Mittal. ISG appears to have benefited from steel import restrictions, so Ross knows that protection can be convenient for U.S. firms.
However, he also has owned multinational businesses, including International Automotive Components Group (IAC), with 20 facilities in nine countries. Thus, he no doubt understands the importance of maintaining global supply chains to serve customers around the world.
These experiences make Ross uniquely qualified to guide a reform of anti-dumping and countervailing duty policies so that they no longer inadvertently damage the U.S. economy.
Daniel Pearson is a senior fellow in trade policy studies at the Cato Institute. Send comments to [email protected].