China has a huge overcapacity in steel production because their economy is slowing, so internal demand for steel has fallen. Rather than cut production and lay off some of their own workers, China is exporting the problem. China is “dumping” steel on international markets below cost, forcing closure of steel facilities and layoffs across the world. Some competitors are even going out of business.
April’s post, “The Big Fight Over Chinese Steel” explained how China reacts as a country, while we react as a “market” with a number of companies in it, which gives China a huge advantage:
China increased its steel production capacity by 540% between 2000 and 2014. Then the market slowed. …
China, of course, wants to keep Chinese people employed. And China is a country that sees and does things as a country, not just a “market.” They have national industrial strategies that involve providing financing, low-cost energy, even free land to companies that operate according to the plan.
“Market” economy countries do not generally have national plans, so their companies compete individually against countries like China.
… As part of its national industrial strategy, China’s government provides its steel companies with cheap loans. Its state-owned bank keeps providing cash to steel companies even when they are losing money. These companies are then able to sell their product on world markets below its true cost. This glut of steel forces steel prices down worldwide, so companies in other countries are under pressure, laying people off, even going out of business.
In the US, tens of thousands of steelworkers have been laid off, many thousands more layoffs are threatened. Many of these are, of course, in crucial “swing states” like Pennsylvania and Ohio.
Republican presidential candidate Donald Trump gets it that blue-collar voters are frustrated (laid off, desperate, angry, any words you want to use) by this and other effects of what’s called “trade.” So he presents himself as a champion of blue-collar workers, and in particular talks about steelworkers a lot. He says, “Look at steel, it’s being wiped out,” and, “We’re not going to let Hillary shut down the coal mines and steel mills.”
In July’s post, “Billionaire Trump Claims Steelworker Status,” United Steelworkers President Leo Gerard writes:
Donald Trump stomped into my backyard just days before July 4 and claimed to be a steelworker.
… He did it in a speech at a scrap metal processing plant in Monessen, a down-on-its-luck steel town 30 miles south of Pittsburgh, which is home to my union, the United Steelworkers.
The result of Trump’s campaign promises has been that many blue-collar workers are responding. For example, a CBS report in July, “Pennsylvania’s steel workers turning to Trump,” shows laid-off steelworkers saying things about Trump like “if he does half of what he’s saying he’s going to do that’s a step in the right direction,” and that Trump “talks about letting local industries do what they do best, creating jobs here,” and “We’ve got to take care of this place first.”
Does Trump really “take care of this place first”? Does he help “local industries do what they do best”?
Trump may be gaining steelworker support with his promises but he doesn’t, of course, offer any detailed solutions. (The exception is last year, when he slipped and told The Detroit News that his “trade” plan is to force US wages down so far that companies won’t bother sending the jobs elsewhere.)
Then, on Oct. 3, Trump’s promises were exposed for what they really are. Kurt Eichenwald at Newsweek filed a blockbuster report, “How Donald Trump Ditched US Steel Workers in Favor of China.” The report shows that Trump chose China over the US for steel and aluminum, and possibly even chose the Mafia over steelworkers:
A Newsweek investigation has found that in at least two of Trump’s last three construction projects, Trump opted to purchase his steel and aluminum from Chinese manufacturers rather than United States corporations based in states like Pennsylvania, Ohio, Michigan and Wisconsin. In other instances, he abandoned steel altogether, instead choosing the far-less-expensive option of buying concrete from various companies, including some linked to the Luchese and Genovese crime families. Trump has never been accused of engaging in any wrongdoing for his business dealings with those companies, but it’s true that the Mafia has long controlled much of the concrete industry in New York.
The report shows how Trump purchased Chinese steel and aluminum for a number of projects, and used “a chain of various corporate entities, including holding companies registered in the British Virgin Islands” to hide what he was doing – possibly because the government was investigating whether China was “dumping” steel and aluminum at below-cost prices.
Trump says it was just good business because it was less expensive to turn to China and the Mafia over American steel companies and workers, but Newsweek explains that he had no obligation to go for the lowest price.
Trump does not operate a public company; he has no fiduciary obligation to shareholders to obtain the highest returns he can. His decisions to turn away from American producers were not driven by legal obligations to investors, but simply resulted in higher profits for himself and his family.
Naturally steelworkers are not happy to learn that Trump says one thing and does another.
The Hill reports, in “Steelworkers livid over report Trump bought Chinese steel, aluminum“:
United Steelworker International President Leo Gerard said the union would not only travel to every one of their steel plants across the country to educate members but they would go door-to-door in battleground states to tell voters about the Republican nominee’s business practices.
“How can you say you’re going to rebuild America and stand up for America when you’re in fact doing the very opposite,” Gerard told reporters on a Tuesday call.
Gerard said Trump has a “fundamental disrespect for workers” because he is “saying one thing and doing another.”
There are about 13,000 steel workers and 6,000 in aluminum who have been laid off because of excess supply of those products mostly coming in from China, Gerard said.
The United Steelworkers (USW) union is also looking into filing a trade violation case against Trump’s company. Pittsburgh knows steel and the Pittsburgh Business Times reports on this, in “USW president rips Trump for using Chinese-made steel“:
United Steelworkers International President Leo W. Gerard threatened to file a trade case against Republican presidential candidate Donald Trump after a Newsweek report said that Trump’s company used Chinese-made steel and aluminum to construct two of his latest construction projects.
… “Much of that steel (used by Trump) would have been sanctioned,” Gerard said. If USW can prove it “we will then move forward with that case,” Gerard said.
Jackie Tortora writes at the USW blog, in “Why Should We Believe Anything Donald Trump Says? He Buys His Steel from China“:
Another Donald Trump bombshell dropped this week—and it’s not pretty.
Trump talks a big game on creating good manufacturing jobs in the United States, but his business practices say otherwise.
A new Newsweek study shows Trump purchased steel from Chinese manufacturers rather than from US producers, in at least two of his three recent construction projects.
Did it somehow slip his mind there are steel manufacturers in Pennsylvania, Ohio, Michigan and Wisconsin?
It’s not just the union that is unhappy. The Duluth News Tribune reports, for example, in “Steelworkers, Cliffs CEO blast Trump’s use of Chinese steel in casinos“:
The criticism of Trump wasn’t limited to union workers. Lourenco Goncalves, president and CEO of Cleveland-based Cliffs Natural Resources, said Trump was only looking out for himself. Goncalves’ company is the largest supplier of US-mined iron ore to the US-based steel industry and was hard hit by the slowdown in US steel production.
Goncalves said Trump may not have been aware of what he was doing because he is “so focused on himself and not the common good” of society.
“It’s just another example of who he is. He works for Donald Trump, not the common good,” Goncalves said. “I’m a Republican, but I just can’t support a guy like Donald Trump.”
Donald Trump offered the steelworkers glowing promises but no details. Examination of his “trade” promises shows that his plan is really to drive down American wages to Third World levels so companies don’t have an incentive to move to other countries. His own business practices have sold out American producers and workers whenever it means he could pocket an extra dollar or two.
Don’t listen to the words; look at the acts. It’s time for blue-collar workers to see Trump for who he really is.
Dave Johnson of Redwood City, Calif., is a fellow at Campaign for America’s Future (ourfuture.org), writing about American manufacturing, trade and economic/industrial policy. He is also a senior fellow with Renew California. See the linked version of this at <https://ourfuture.org/20161005/trump-buying-chinese-steel-is-a-big-deal>
From The Progressive Populist, November 1, 2016
Blog | Current Issue | Back Issues | Essays | Links
About the Progressive Populist | How to Subscribe | How to Contact Us
PO Box 819, Manchaca TX 78652