Case
PROTECTING U. S. STEEL
SYNOPSIS
Because it is so basic to the development of industry, few issues have prompted so much debate as the protection of the U.S. steel industries. Because US steel has fallen from being a global leader, its decline is more remarkable and the result is more damaging. One of the reasons that American steel has become largely uncompetitive, is that the U.S. has excess capacity and high costs.
While world steel making capacity has been steadily increasing, certain governments, particularly in Europe, have given national steel companies subsidies for many years. The American steel industry has also received protection in the form of antidumping action and imposition of duties. The argument is clearly whether the US government should continue to subsidize steel, or whether it should allow the forces of free trade to prevail, effectively allowing foreign steel companies to control the US market.
TEACHING OBJECTIVES
The main teaching objectives of the case are:
1. To understand the complexities that accompany the protection of a commodity like steel.
2. To illustrate how protectionist governmental policies can often hurt the very country they are designed to help.
3. To show that government intervention is usually ineffective and counterproductive.
This case can be most effective when used after Chapter 8, describing the issues of governmental intervention in international business.
STRATEGIC ISSUES AND DISCUSSION QUESTIONS
1. What are the reasons for persistent excess capacity in the global steel industry? What would it take for this capacity to be eradicated?
There are three reasons for excess capacity in the global steel industry. First, although capacity has been reduced in the U.S. and Western Europe, new steel markers in Korea, Brazil and eastern Europe have entered the global market, more than making up for reductions elsewhere. Second, steel mini-mills have expanded and improved their efficiency,
SYNOPSIS
Because it is so basic to the development of industry, few issues have prompted so much debate as the protection of the U.S. steel industries. Because US steel has fallen from being a global leader, its decline is more remarkable and the result is more damaging. One of the reasons that American steel has become largely uncompetitive, is that the U.S. has excess capacity and high costs.
While world steel making capacity has been steadily increasing, certain governments, particularly in Europe, have given national steel companies subsidies for many years. The American steel industry has also received protection in the form of antidumping action and imposition of duties. The argument is clearly whether the US government should continue to subsidize steel, or whether it should allow the forces of free trade to prevail, effectively allowing foreign steel companies to control the US market.
TEACHING OBJECTIVES
The main teaching objectives of the case are:
1. To understand the complexities that accompany the protection of a commodity like steel.
2. To illustrate how protectionist governmental policies can often hurt the very country they are designed to help.
3. To show that government intervention is usually ineffective and counterproductive.
This case can be most effective when used after Chapter 8, describing the issues of governmental intervention in international business.
STRATEGIC ISSUES AND DISCUSSION QUESTIONS
1. What are the reasons for persistent excess capacity in the global steel industry? What would it take for this capacity to be eradicated?
There are three reasons for excess capacity in the global steel industry. First, although capacity has been reduced in the U.S. and Western Europe, new steel markers in Korea, Brazil and eastern Europe have entered the global market, more than making up for reductions elsewhere. Second, steel mini-mills have expanded and improved their efficiency,