The absurdity of protectionism.
Protection is is best describe as the practice of shielding a country’s domestic industries from foreign competition by taxing imports.
Throughout history when one has currency wars – countries revert to ‘protectionism’ – it is not a good tactic – as the domestic industries may need to retool – reassess markets and change – or simply reduce costs to compete internationally.
The United States Commerce Department – has now escalated its trade war with China – implementing the latest strategy on steel imports by announcing that corrosion-resistant steel from China – will face final U.S. anti-dumping and anti-subsidy duties of up to 450%.
A huge tariff to apply to one product.
The U.S. In its wisdom applied current duties of 210% on all Chinese-produced corrosion resistant steel – with final anti-subsidy duties ranging from 39 percent for many producers – to 241% for some of the largest ones including Baosteel, Hebei Iron & Steel Group and Angang Group.
Reuters has reported that
“China’s Commerce Ministry said it was extremely dissatisfied at what it called the “irrational” move by the United States, which it said would harm cooperation between the two countries. “China will take all necessary steps to strive for fair treatment and to protect the companies’ rights,” it said, without elaborating.”
I am scratching my head as to the rationality of this latest escapade by the U.S. Commerce Department – for a simple reason.
China has no standards – none zippo.
When I refer to standards I am referring to the International Standards – quality assurance – in what you buy is not what you get.
Standards are best described ‘as a strategic tools and guidelines to help companies tackle some of the most demanding challenges of modern business. They ensure that business complies with manufacturing standards and delivers what it promises.
Quite frankly anyone that buys ‘cheap Chinese corrosion-resistant steel’ should get a sample tested before acquisition.
Then again – is there corruption within the manufacturing and construction companies that demand the cheap counter-part?
This applies to Indian steel as well – both products can be best described as garbage – so the easiest way to overcome the situation is to stipulate in the building regulations on any industry – that ‘all’ construction should be undertaken with materials that conform to International Standards.
Simple – no one would touch the cheap Chinese and Indian imports – then again they may utilize Spanish steel – that then would pose a problem – for not only the overpriced US steel industry but for the U.S. Commerce Department as well.
Europe would not accept the 450 percent tariffs that the U.S. applied to China – yet has similar protectionism in place.
Just think for a moment though – where does China dump all of the steel produced?
Food for thought – as it is necessary to either discount the cost to others parties – stop production – or stockpile for internal use.
The problem is though is this overproduction – must hit sometime in the future – thereby reducing steel prices further and affecting the raw material imports.
For every action there is a re-action – in this case it will affect steel and raw material prices – hello deflation.