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NTU Letter to Department of Commerce: Protect Free Trade

by Brandon Arnold / /

 

The Honorable Wilbur Ross

Secretary

U.S. Department of Commerce

1401 Constitution Ave., NW

Washington, DC 20230

 

Dear Secretary Ross,

On behalf of National Taxpayers Union (NTU), I write to request that the Department of Commerce halt their investigation of Section 232 of the Trade Expansion Act to determine the national security impact of steel and aluminum imports. Activating Section 232 under the guise of national security would be a misuse of policy intended for genuine emergencies, break longstanding precedent, and adversely impact global alliances that we rely on to keep Americans safe from foreign threats.

Providing the military with dependable metal is important. However, the amount of steel and aluminum used for defense is a relatively small portion of the total demand, given that the defense industry consumes roughly 1 percent of all aluminum and 3 percent of steel. The vast majority of steel and aluminum imports originate from American allies like Canada, the European Union, South Korea, Mexico, and Japan. China, often considered the scapegoat of America’s economic woes, only accounts for 4 percent of imported steel and 6 percent of imported aluminum.

Imposing tariffs will be an economically inefficient solution to a narrow problem. International commerce is a preeminent driver of economic growth as it increases productivity, promotes competition, and fosters specialization. Restricting commerce through tariffs would increase costs for existing manufacturers who rely on lower-priced steel and aluminum imports. Any change in the delicate supply chain will increase the final cost of production, which would, in turn, raise costs for consumers. Such an action would likely lead to higher-priced goods such as automobiles, dishwashers, soda cans, housing, and much more.

Tariffs may appear attractive because the number of jobs they boost are visible but the costs to consumers and other industries are invisible. Diffused costs and concentrated benefits contributes to an overrepresentation of concentrated minority interests and underrepresentation of diffused majority interests. Steel mills employ just 140,000 workers and add $36 billion to the economy, whereas manufacturers that use steel as an input employ 6.5 million workers and add $1.04 trillion in economic value. Further, the U.S. aluminum industry generates $75 billion in direct economic impact, whereas manufacturers that use aluminum as an input add $186 billion in economic value.

While there may be a slight employment increase in factories that produce steel and aluminum, industries that rely on these metals will see greater job layoffs at small factories, local stores, and distribution centers. This will leave the U.S. at a net-loss as total costs exceed total benefits, but the benefits are concentrated and the losses are diffuse.

Restricting imports of steel or aluminum via Section 232 would only encourage America’s trading partners to use similar tactics to block the exports of U.S. goods, open the door to trade battles, and discourage imports of needed goods. I hope that your investigation will be limited in scope and all consequences - both intended and unintended - are carefully reviewed. Thank you for your consideration.

Sincerely,

Brandon Arnold

Executive Vice President