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American Politics and Steel Industry


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Abstract

This research paper is an attempt to explore and understand the relationship between

American politics and Steel industry during the past six decades or so, from the Truman

administration to the current Obama Administration. It appears that the steel industry has

always remained the centre of attention and focus of the American presidents and their

administrations because of its political, economic and social significance. There have been

intense episodes such as when President Truman tried to seize control of the industry;

President Kennedy threatened the steelmakers to take back price increases, Steel Strike of

1959 and innovation of Taft Harley Act and others. Other administrations tried to protect the

industry from foreign competition but at the same time ensuring that the industry could

become competitive. Clean Water Act, Clean Air Act, VRA, TPM and others were the few

steps that American policymakers took to provide sustainability to the industry. However, it

appears that in general, the impact of American politics on the steel industry has been

negative since it has not allowed the market forces to determine the rational supply and

demand.

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Introduction

The history of Steel industry in the US can be traced back to the year 1647 when the

first iron works began in the US state of Massachusetts. However, the operation was shut

down after a few months because of the low efficiency of the fuel. It was in the early 1800s,

after the discovery of charcoal and understanding its utility that larger level steel operations

became possible. Furthermore, that was also the period when US was going through an

industrial revolution, therefore, for years, the demand kept on increasing. The sector quickly

became the largest employer of the country providing thousands of blue collar jobs to

workers. Due to the importance and magnitude of the output that the industry was delivering,

it soon became the centre of attention of policymakers1. During the late 1800s and much of

the 1900s, the government ensured that it protects the steel industry from all foreign players

and outside competitors so that the new born industry could grow and prosper. The number of

workers that it employed and its powerful unions, on the other hand, forced the policymakers

to balance the demands of the labors with the benefits provided to their management. During

this period, US Steel Corporation, founded by renowned businessmen such as Andrew

Carnegie, J.P. Morgan, Charles Schwab and Elbert Gary, supplied as much as 70 percent of

the total steel used within the country and emerged as the most influential player in the

market. During the 1970s, the industry employed almost 0.5 million people, whereas, today,

it employs around 0.15 million people, primarily because output has not increased

significantly and the manufacturing process has been greatly automated. Also, since that

period, the industry became net importer of steel and today, the imports are double the size of

the net exports of the country2.

US Steel industry has always occupied an important position in the economy. It has

provided jobs to millions of workers, it has boosted the national GDP, provided steel for

construction of rails, roads, homes and other and manufacturing of electronics, automobiles

and other manufacturing items. Much of the economic growth and industrialization that

Americans have witnessed during the past couple of centuries, the steel industry of the US

played an imperative role in the same3.

1 John P. Hoerr. And the wolf finally came: the decline of the American steel industry. (University of Pittsburgh,

1988), pp. 220-221

2 Ray Hudson, David Sadler. The international steel industry: restructuring, state policies, and localities.

(Routledge, 1989), p. 446-448

3 Anthony P. D'Costa. The global restructuring of the steel industry: innovations, institutions, and industrial

change. (Routledge, 1999), pp. 610-615

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The relationship between American policymakers and steel industry has been

somewhat of a nontraditional and unique love story, the one where the couple has gone

through all ups and downs, yet they depend on each other greatly and want their relationship

to grow and improve. From seizing control to threatening each other, from asking for help to

dictating terms, from lending favors to intervening each other’s matters, American

policymakers and steel industry have gone through it all4.

This paper is an attempt gain a better understanding of how policymakers have

impacted the US Steel industry for the past six decades or so, from the Truman administration

to the current administration. The paper would present the important development, laws and

bills passed during each administration and reactions from the industry on the same including

its impact.

Discussion

Harry Truman Administration

It is imperative to shed some light over the events that took place in the preceding

decades concerning the US steel industry in order to have a better understanding of the events

that took place in during the Truman administration. The period starting from the early 1990s

till the mid 1990s was difficult for the US economy and the global economy as well because

of the two World Wars and Great Depression. The steel industry also shared the pain and so

did it workers. Right after the Second World War, the US steel industry, trying to make up

for the lost revenues, started increasing wages and prices at the end of every year. Statistics

indicate that the wages increased by 5.2 percent during the period of 1947-1957, whereas, the

annual average price increase was just over 7 percent. It was an open secret that the steel

manufacturers had some sort of a backdoor engagement where they were increasing the

prices every year, which were more than the wage increases, thus allowing them to share the

profits5. More importantly, this constant increase in the prices meant that the steel industry,

being an important input for many other products, was increasing the general cost of living in

the industry. It became apparent that soon the administration would react; however, it did not

intervene until the 1952 Steel Strike which was the highlight of Truman administration has its

relations with the steel industry.

When the steelmakers rejected the demands of United Steel Workers of America of

wage increases to a certain level and creation of union shop and all negotiations concerning

4 Daniel Madar. Big Steel: Technology, Trade, and Survival in a Global Market. (UBC Press, 2009), pp. 42-43

5 John P. Hoerr. And the wolf finally came: the decline of the American steel industry. (University of Pittsburgh,

1988), pp. 220-221

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the same failed, the workers decided to go on strike against ten different steel companies6.

This strike was not only a disaster for the economy but also for the national defense and

security since US was at war with Korea and also highly involved in the Cold War. The

weapons were mostly made from steel and any decline in output would have created serious

problems. Even when the Wage Stabilization Board failed and workers threatened a

nationwide strike, on April 8, 1952 President Truman, with the Executive Order # 10340

decided to take control of the entire US steel industry, with the intentions to avoid the

situation from getting any worse. This was just a few hours before the workers had decided to

go on a nationwide strike. Workers could not go on a strike against the government.

Interestingly, twenty seven minutes after the conclusion of President Speech, representatives

from Republic Steel and Youngstown Sheet & Tube Company filled a restraining order

against the Truman administration. The case reached to the Supreme Court in May 1952

where on June 2, 1952, the Court ruled that the President did not have the authority to take

control of the Steel Companies7.

More importantly, the economic impact of the strike was becoming apparent. The

economic costs were calculated to be somewhere near 4 billion US dollars. The industrial

output dropped to the 1949 levels and 1.5 million were pushed to unemployment.

Furthermore, many other businesses that used steel were their raw material had to close their

operations or work in smaller shifts. With the arbitration of Truman, an agreement was finally

reached were most of the demand of the workers were agreed upon. More importantly,

intervention of the government into the issue just made matters worse and delayed the

inevitable thus impacting the industry adversely8.

Important here to note is that before seizing the steel companies, President Truman

had another option with the Taft-Hartley Act which he vetoed five years earlier. Taft-Hartley

Act, formally the labour management relations act was passed in the year 1947 by the

American Congress. Amongst various other provisions such as outlawing closed shops, union

shops, giving 80 days notice before strike to employer and government, more importantly, the

law also had a provision which allowed the US president to intervene in any strike or

6 Kenneth Warren. Bethlehem Steel: Builder and Arsenal of America. (University of Pittsburgh, 2010), p. 187

7 Judith Stein. Running steel, running America: race, economic policy and the decline of Liberalism. (Univ of

North Carolina Press, 1998), pp. 52-56

8 Christopher G. L. Hall. Steel phoenix: the fall and rise of the U.S. steel industry. (Palgrave Macmillan, 1997),

pp. 106-107

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potential strike which poses any threat to the national security. However, if the President

would have used this act then several days of productivity would have lost9.

Dwight D. Eisenhower Administration

It was during the Eisenhower administration that the infamous steel strike of 1959

took place which was one of the longest and largest in the US steel industry and the

government intervened directly in the steel industry as a consequence of that strike. More

than 0.5 million workers in the US steel industry went on strike, which meant that almost all

of the steel production in the country was shut down10.

The dispute between the management and workers was centered on workers not

willing to give up the Section 2(B) of the union’s national master contract, which was putting

a lid on the on the ability of the management to reassign workers on different tasks, reduced

the number of workers to different tasks, change rules, introduce new machinery and others.

Management felt that this was leading to the featherbedding within the steel companies,

eliminating which could lead to higher productivity and even higher gains11. Actually, that

clause was putting as lid on the ability of the management to reassign workers on different

tasks, reduced the number of workers to different tasks, change rules, introduce new

machinery and others. Management felt that this was leading to the featherbedding within the

steel companies, eliminating which could lead to higher productivity and even higher gains.

However, unions viewed these suggestions with great skepticism and publicly announced that

this proposal was an attempt of the management to the break the union12. When negitations

failed, workers went on strike. Not only that strike impacted the GDP of the economy but at

the same time, the department of defense started raising concerns that in an event of war, the

country would face shortage or arms and other equipment, thus putting the defense of the

country at stake. The automobile industry also laid several workers and threatened to lay off

thousands other because they did not have steel to continue their operations.



10 Carolyn Rhodes. Reciprocity, U.S. trade policy, and the GATT regime. (Cornell University Press, 1993), p.

39



12 Robert W. Crandall, Brookings Institution. The U.S. steel industry in recurrent crisis: policy options in a

competitive world. (Brookings Institution Press, 1981), p. 328

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One of the biggest and the most serious implication of the strike was in form of the

fact that for the first time, different companies in the US started importing steel from Japan

and South Korea, a trend which the policymakers and US steel industry failed to reverse in

the long term. During 1950-1958, the average annual import of steel to US was around 1.5

million tons. It rose to 4.4 million tons in 1959, after which it went never back to the pre 1959

levels. In fact, for the year 1971, the imports were almost 20 million tons. In fact, as

mentioned earlier that currently the imports are double the size of US exports, something

which started happening after this strike13.

Finally, during the third week of October, President Eisenhower used the powers

given to him by the Taft Harley Act. The workers challenged the act in the court demanding

that the Act is unconstitutional14. They lost the appeal and on November 7-1959, all the

workers were back to work. However, the productivity was extremely poor due to the drift

between management and workers. The management was still supposed to make one last

proposal to the union. The management was still not ready to provide the workers with their

desired demands. This was the time when the Vice President, Richard Nixon intervened,

trying to gain the support of the labors, since he was planning to run for the office in the year

196015. Nixon somehow convinced the steelmakers to strike an agreement with the workers

because if the situation would any worse, Democratic or Republic government would back

the workers because of their numbers and winning their votes for the elections. Nevertheless,

the strike lasted for 116 days and the union was only able to get a small proportion of wage

increases which were initially proposed by them16.

John F. Kennedy Administration

Although, President Kennedy served the office for a little less than three years, this

period was eventful for the steel industry, primarily because President Kennedy was

extremely concerned about the economy which had suffered two recessions in less than three

years, one while Kennedy was in office as well. The idea was to put an end to the tight fiscal

policy, loosen up the monetary policy by keeping the interest rates down and increase public

expenditure even if it means a budget deficit. One side effect of such an approach is that

13 Ray Hudson, David Sadler. The international steel industry: restructuring, state policies, and localities.

(Routledge, 1989), p. 446-448




16 William Thomas Hogan. Global steel in the 1990s: growth or decline. (Lexington Books, 1991), p. 298

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inflation is always supposed to rise with low interest rates and increased money supply,

something which the Kennedy administration was actively suppressing with strong

involvement of government in all sectors. This was the reason why the economy expanded

with an annual average of 5.5 percent during 1961-1963, while inflation remained at only 1

percent17.

Kennedy administration turned their focus on steel industry when in April 1962, just

after negotiating a 2.5 percent wage increase with the workers; ten out of eleven major steel

companies announced an increase in price of steel by 3.5 percent. Although, there was never

an agreement between the government and steel companies to hold the prices to a certain

level but President Kennedy was enraged when he got the news and decided to take

immediate actions. Kennedy administration felt the need to react quickly because an increase

in the steel prices meant that all the other industries which depended on steel greatly as their

raw material, the construction industry, automotive industry and other manufacturing

industries, would also have to increase spiral thus creating a never ending cycle of inflation.

In an attempt to send a strong message to all the steel companies which raised their

prices, the government cancelled their contracts with all companies that were increasing

prices. Important here to note is that on an average 9 percent of the overall business of steel

companies came from the US government and the government decided to take away the

business and give to the companies which were acting in compliance. At the same time, the

FBI officials barged into the offices and homes of steel executives and demanded information

about all of the operations and expenses so that the government could find out whether or not

these price increases were a part of price fixing. Finally, all of the companies, one after

another had to step back from the decision to increase prices. Commentators and experts

agree that Kennedy averted what could have been a disaster for the economy but in doing so,

he undertook some questionable methods to pressurize the big businesses and infringed on

civil liberties18.

Lyndon B. Johnson Administration

It was under the Administration of Lyndon Johnson that the Congress passed Clean

Air Act of 1963. It was in the year 1955 when the first version of such an act titled Air

Pollution Control Act of 1955 was passed by the Federal government. In the coming years, in


pp. 106-107

18 Judith Stein. Running steel, running America: race, economic policy and the decline of Liberalism. (Univ of

North Carolina Press, 1998), pp. 52-56

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the year 1970, year 1977 and year 1990, amendments were made to the law. The law

basically focused on stationary sources of pollution such as power plants, steel mills and

others industries19. With every amendment, the focus has been to address all possible issues.

With the advent of Clear Air Act, it was expected that Steel industry would have a hard time

breathing in terms of altering many of its operational procedures but the fact is over the years,

the steel industry, based on its ability to lobby with the Congress, has been able to secure

important exemptions from the policymakers for implementation of all the guidelines. For

example, regarding the air toxics section of the Act in 1990, the steel companies were able to

buy time for over 30 years for their implementation, which is the greatest deadline given to

any industry20.

However, the same does not mean that the industry has not strived to make the

changes. In fact, in the process of making these changes, the industry also faced increased

costs of operations as well, which they were not really able to pass on to their customers thus

shrinking their profits. Only by the end of 1984, the US steelmakers had been reported to

spend over 6 billion US dollars on controlling pollution. In a typical year, the industry’s 15

percent of the investment can be classified as capital investment aiming to meet the

requirement of environmental laws. Furthermore, it was calculated that till the 2000s, these

regulations, in terms of operating costs, were costing the industry 10-20 US dollars per ton of

steel shipped21.

As mentioned earlier, after the 1959 steel strike steel imports were becoming an

important issue and it became important for the government to protect the steelmakers from

foreign competitors in order to ensure their sustainability and future. Therefore, President

Johnson’s Administration initiated Voluntary Restraint Agreements (VRA) and signed the

same with Japan and European Community in the year 1969 to restrict their imports of steel

to US at levels of 5.4 million tons. Korea and many other countries did not accept such a

proposal but the imports did decrease during the 1969 and 1970. This mechanism was used

for the coming few years during other administrations as well22.

Richard Nixon Administration

19 Jeffrey A. Hart. Rival capitalists: international competitiveness in the United States, Japan, and Western

Europe. (Cornell University Press, 1992), p. 279


p. 261

21 Jack Metzgar. Striking steel: solidarity remembered. (Temple University Press, 2002), pp. 96-98

22 William Thomas Hogan. Global steel in the 1990s: growth or decline. (Lexington Books, 1991), p. 298

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From his early days, it was reported that President Nixon did not approve of the

growing wages in the US steel industry and even formed a committee to investigate this

matter. More importantly, it was during the Nixon administration that for the first time, a law

to address water pollution was passed by the Congress, Clean Water Act. The iron and steel

industry was the centre of attention with this Act because they are the ones that create the

most toxic wastes due to their operations. Nevertheless, when the bill was passed, it was of

greater concern for the steel companies because they knew that the cost of compliance would

be very high23. Furthermore, amendments were made in the year 1987 as well which

increased the cost of compliance. Important here is to view all these happenings in totality.

On one side, when the cost of operations was increasing due to these regulations, other

countries were actively engaged in cost cutting and their low cost labor provided them with a

competitive advantage in the international market24.

Gerald Ford Administration

Critics believe that much of the problems that President Carter faced when he took the

office were inherited because of the unwise policies of Ford administration. Inflation was

soaring, which forced President Ford to place limits on the wages and prices of steel

products25. More importantly, it was during President Ford’s administration that the steel

industry was able to get its own set of regulations with strict anti dumping laws, Trade Act of

1974. VRAs from the previous administration were revived which ended up creating a lack of

trust amongst the trading partners of US.

Jimmy Carter Administration

President Cater took control of the office in the year 1977. This was the very same

year when the US steel industry was going through an important turning point. The recovery

from the 1974-75 recession was yet far from complete that two major steel producers started

closing multiple plants and a small company closed their operations altogether26. It appeared

that the advantage of modern equipment and technology which the US steel industry had was

becoming obsolete and the foreign players appeared more and more powerful.



24 Kenneth Warren. Big Steel: The First Century of the United States Steel Corporation 1901-2001. (University

of Pittsburgh, 2001), p. 23




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President Carter’s administration was also concerned with the growing imports of

steel and their impact on the US steel industry. Rather than going for VRAs as the preceding

presidents did, Carter administration came up with a new method, which they called Trigger

Price Mechanism (TPM). Based on the weaknesses of the customs and department of

commerce, which overlooked the fact that over 40 percent of the steel imports in the country

during the 1971-1976. This figure of dumped imports was six times larger than what the

customs was able to identify. The idea was that if an import from, for example, Japan was

coming at a price less than the average cost of production in Japan plus eight percent profit

then it would lead to dumping investigations without any company filling for dumping

investigations. The fall of imports during 1979-1981 is believed to be a result of TPM.

However, the policy was suspended in the year 198227.

Ronald Reagan Administration

During the Reagan Administration, there was a rash in the dumping complaints and in

order to find a permanent solution to the problem, the Reagan administration decided to

revert back to the VRA but this time, the approach was different. US government asked the

European Community to keep its share of steel in the US market at less than 5.44 percent28.

Japan did not get a quota but political pressure in the coming years forced the imports from

Japan to drop as well. Nevertheless, it is important here to note that many other countries

were able to dump their imports to US thus minimizing the impact of limiting the share of EU

and Japan’s import29.

Important here to note is the fact that President Reagan was amongst those who

believed in free markets and lesser government intervention. It meant that the industry would

receive relaxation in terms environmental regulations, decreased taxes, freedom regarding

setting their prices and the government would help in implementing strong antidumping

measures30. This was one of the reasons that President Carter lost the election when he was

rerunning for the post and Reagan won because he allowed the industry to breathe with

freedom. However, the steel industry failed to realize that whatever growth and development

27 Kenneth Warren. Big Steel: The First Century of the United States Steel Corporation 1901-2001. (University

of Pittsburgh, 2001), p. 23

28 Roger S. Ahlbrandt, R. J. Fruehan, Frank Giarratani. The renaissance of American steel: lessons for managers

in competitive industries. (Oxford University Press. 1996), pp. 336-337

29 Stephen Cooney. Current issues in the steel industry. (Novinka Books, 2003), pp. 520-523



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that they had achieved, the government had played an imperative role in the same and taking

the government out of the equation would mean that steel industry, which was still the

government’s baby, would be left alone in the harsh and competitive world. The result was

that during the period of 1982-1986, the industry lost an estimated sum of over 12 bullion US

dollars31. Imports increased and even went on to touch the level of 25 percent of the total

market production. 25 different steel companies, including some big ones, filed for

bankruptcy and it was calculated that steelmakers were losing almost 18 US dollars for every

ton shipped. In order to avert the disaster, Reagan administration even went on to use strict

import quota but it did not solve the problem for the steel industry32.

George H. W. Bush Administration

Served as the Vice President of President Nixon, President Bush decided to follow

many of the policies of the Nixon administration concerning the steel industry. However,

with the passage of time, Bush administration took serious U turns as well. For example,

rather than promoting free market, they felt the need of closely protecting the steel industry.

The steel industry which was burdened by new environmental legislations was pressurizing

protections or else they would increase the prices since their cost had risen due to the cost of

compliance33.

Important here to note is that the protectionist policies which the Bush administration

continued, ended up proving disastrous for the steel industry in the long term. When the US

policymakers were distorting the market with subsidies, relaxations, tariffs, quotas and all

sorts of government protection, most of the European and Asian governments were limiting

the government intervention in their steel industries and allowing the market forces to decide

that which steel producers are not capable to survive the shocks of international competition.

When the free markets are allowed to work without any government intervention, the weaker

opponents either leave the markets, merge with competitors or they are acquired by them thus

decreasing the rivalry and restoring the equilibrium. However, with the never ending

nurturing and care from Washington to the steel industry, many weaker companies that

should have left ago are still holding on. Worse, steelmakers have no strong incentive to be

31 Jeffrey A. Hart. Rival capitalists: international competitiveness in the United States, Japan, and Western

Europe. (Cornell University Press, 1992), p. 279

32 Roger S. Ahlbrandt, R. J. Fruehan, Frank Giarratani. The renaissance of American steel: lessons for managers

in competitive industries. (Oxford University Press. 1996), pp. 336-337


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more competitive for facing international competition since they know that their powerful

lobby in the political arena will ensure that they never have to face any competition.

Bill Clinton Administration

Despite the fact that during the start of his first term, President Clinton enacted

NAFTA but during the rest of his both terms, Clinton engaged in policies measures which

forced many to remember him as a “protectionist”, at least, when it came to the steel industry.

Furthermore, it was during the presidency of Clinton that the problem of dumping became

even more serious and imports reached the level of 50 percent in the year 1999 from the level

of 20 percent in the year 1996. The prime reason of the problem was rooted in the Asian

Financial Crisis of 1997 which meant that many of Asian producers of steel did not have

enough demand of steel within their domestic steels, thus, encouraging them to “dump” large

quantities of steel in the US market, with prices which were even less than their operational

costs. As a result, layoffs in the steel industry became a common sight, thus creating negative

sentiments in the labors and workers who voted for Bill Clinton34.

Nevertheless, the signing of NAFTA had mostly positive long term impacts on the

industry. In fact, many experts in the industry associate the survival and performance of the

US steel industry even in the midst of competitive pressures and crises to NAFTA. NAFTA

opened the Mexican and Canadian market for the US steel makers, which was quickly

booming, thus provided an excellent opportunity. For example, the steel exports increased by

almost 19 percent in the year 2011 primarily because of the free exports to Mexico and

Canada due to NAFTA. Furthermore, in the year 2010, NAFTA steel industry accounted for

almost 110.6 million metric tons with a value of over 86 billion US dollars35.

The problem of dumping was also far from year which forced the Clinton

administration to adopt the Byrd Amendment that was aimed at putting strict penalties on

foreign companies that were engaged in dumping and then allowing the affected US

companies to use the finances from tariffs. For the time being, the law had the support from

steelmakers but as the retaliation from other trade partners increased, the law had to be

repealed36.

George W. Bush Administration

After deliberations and negotiations of months with industry experts and stakeholders,

President Bush announced in the year 2002 that the government was imposing 8-30 percent

34 Jack Metzgar. Striking steel: solidarity remembered. (Temple University Press, 2002), pp. 96-98


36 Stephen Cooney. Current issues in the steel industry. (Novinka Books, 2003), pp. 520-523

13


tariff on different steel imports. The same was done by invoking the Section 201 of the Trade

Act of 1974 which allows the President to assist the domestic industry by blocking imports if

the imports are causing “substantial harm or injury to the domestic industry. The decision

was well received by the steel companies and labours, much to the delight of the President

since he wanted to win the support of blue collar workers and corporations from Ohio and

West Virginia in the midterm elections37. In fact, many experts thought that tariffs on imports

became a necessity if the policymakers wanted to see the steel industry of the US to survive.

During the period of 1998-2001, more than 18 different steelmakers filed for bankruptcy,

including LTV Steel the third biggest steel company. The Bush Administration faced great

pressures for imposing these tariffs and in the short term it did help the steel industry,

however, it is an open secret that in the long run, it will negatively impact all the

stakeholders. This was give an incentive to the steelmakers for not increasing the level of

their competitiveness, which means that in any time in the future, when the US is forced to

open its borders for international competitors with a level playing field, the local steelmakers

would not be able to compete. The recent performance of the steel industry suggests that the

same has happened. Furthermore, with the tariffs, the price of steel increased in the American

market which also increased the cost of production for the industries which rely on steel from

outside. Quite understandably, all the producers that decided not to absorb the increased cost

of production and pass it on the end consumers, contributed to the increased inflation and cost

of living. However, the implication of this decision also went on to strain the relations

between EU and US greatly. EU even went on to file a complaint with the WTO.

Furthermore, representatives from many other sectors of US also started asking for similar

protection, something which the President could not afford38.

Although, President Bush may have received applause from the industry but towards

the end of day, the administration with this protectionist policy only delayed the inevitable.

There are no doubts in the fact that many different countries in the past have gone to great

lengths to protect their steel industries, considering its importance but when compared with

developed countries like US, many of them after being a part of WTO have up on the

protectionist policies in order to instill competitiveness in their industries.

Barack Obama Administration

It is troublesome to comment on the policies of the Obama administration and its

impact on the steel industry since the same would become clear once the term of the

37 Stephen Cooney. Steel industry: price and policy issues. (Nova Science Publishers, 2008), p. 110

38 Robert P. Rogers. An economic history of the American steel industry. (Routledge, 2009), p. 247

14


administration is over. Nevertheless, when President Obama took over the office, America

was suffering with a serious recession. Subprime mortgages, burst of housing bubble,

decreasing consumer confidence and credit crunch meant that the automobile, construction

and other customers of the steel industry had no new demands39. The steel industry was

suffering badly and in order to give them a new hope, in the American Recovery and

Reinvestment Act of 2009, had a provision called “Buy American”. This provision was

meant to ensure that steel, iron and other raw materials for construction related to public

works could use products from American companies. Soon enough Canada expressed its

dissatisfaction since Canadian steel companies were relying in American contracts greatly.

Finally, the administration had to include Canadian companies from the Buy American

provision40.

Obama’s administration also tried to pass American Clean Energy and Security Act

which could have unleashed a new era of regulations and compliance costs for the industry

but the Act died in Senate. Not only the Act had forced the steelmakers to increase their

dependence on renewable energy sources but at the same time, they would had to

significantly decrease their emissions of greenhouse emissions, something which is not

possible without shooting up the costs 41.

Conclusion

As suggested earlier, the love affair between American politics and steel industry has

gone through many different phases and considering their interdependence, it will continue

for coming many decades. Much of the growth and development that took place in the steel

industry can be attributed to the decisions of policymakers; however, many other decisions of

the government have turned out to be very costly for the steel industry as well. Nevertheless,

it surprising to see that even in a country like US, where capitalism, free market and liberty

are the ideals, every administration has interfered in the steel industry, in one or another. It is

troublesome to decide which policy actions have benefited the industry and which ones have

not proven worthy because at a given time, there are a variety of factors, international,

economic, social, legal, cultural, internal and other impacting on the steel industry and

39 Stephen Cooney, Brent D. Yacobucci. U.S. automotive industry: policy overview and recent history. (Nova

Publishers, 2007), p. 56-58

40 Deborah Rudacille. Roots of steel: boom and bust in an American mill town. (Pantheon Books, 2010), pp.

475-476

41 Robert P. Rogers. An economic history of the American steel industry. (Routledge, 2009), p. 247

15


deciding the result. These factors and their interferences are difficult to separate thus leaving

the analysis with great deal of uncertainty42.

More importantly, it has become imperative that the governments ends this “love

affair” with the steel industry and allow the market forces to take charge for ending over

capacity, rationalize pricing and increase competitiveness in the industry. There are so many

instances which clearly prove that the continuous interference of the US policymakers in the

steel industry has not done any good to the industry; in fact, it has made the industry more

fearful and less able to face the competition.

Works Cited

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