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American Steel Blames China for Sagging Fortunes

Nucor Steel

First Posted: 01/10/11 08:29 AM ET Updated: 05/25/11 07:25 PM ET

HUGER, South Carolina--Inside the dimly lit, cavernous rectangle that houses the Nucor steel mill, the workers are eager to expand their output. A mountain of scrap metal lies behind the plant, waiting to be deposited into a fire-belching furnace. Computerized equipment fills out the bare concrete floors--the gears of a well-orchestrated machine that turns molten liquid into solid construction beams and rolled coils of steel. Skilled hands motivated by a company profit-sharing agreement are keen to labor longer.

All the plant needs is one crucial element that remains in disappointingly scarce supply: orders for steel. With the American economy still weak even as it shows signs of improvement, and with much of the globe shaking off the strains of a punishing downturn, demand for this basic building block of industry remains constrained.

Yet even if the global appetite for steel soon expands, Nucor--which claims distinction as the nation's largest steel-maker--frets it will be unfairly denied a slice of the spoils. Despite innovative manufacturing processes that make the company a seeming model of old school American ingenuity, managers say they are defenseless against what they describe as predatory competition from China, now the most prodigious steel producer on the planet.

China's steel producers wield an arsenal of unfair advantages, Nucor complains, from an artificially undervalued currency to near-limitless state credit and free land for new factories, resulting in surplus product landing on global markets at otherwise impossibly cheap prices--sometimes less than the cost of the raw materials.

The worst part of this, fumes Nucor's chief executive Dan DiMicco, is how little Washington does to defend American interests by forcing China to play by the rules of the global trading system.

"As long as we continue to be namby-pamby, weak-kneed negotiators, the Chinese will continue to cheat," DiMicco declared during a recent interview. "History has shown us again and again that if you appease bad behavior, you get more of it, not less of it, and it can lead to something catastrophic. Our very existence gets threatened."

Nucor is merely one voice (albeit a particularly strident one) in a swelling chorus of complaints from American business interests claiming grievous injury at the hands of unfair Chinese competitors. Much like manufacturers from the textile trade to the paper business, American steel producers have been demanding that the Obama administration take a harder line with China. They want the White House to slap protective tariffs on Chinese steel while branding Beijing guilty of manipulating the value of its currency, which they argue keeps Chinese-made products priced unfairly low on world markets.

Many economists concur China's undervalued currency is a serious problem for the global economy, tilting too much trade toward its shores. President Obama plans to discuss the issue with China's President, Hu Jintao, when the two leaders meet in a widely anticipated summit at the White House next week. Yet most experts caution that outright trade hostilities are an invitation for trouble: As the global economy struggles to regain momentum, the last thing it needs is another restraint on commerce.

"A path of destructive responses would not only damage the Sino-US relationship but would also disrupt commerce on a global scale," concluded a recent working paper by Gary C. Hufbauer and Jared C. Woollacott released by the Peterson Institute for International Economics in Washington.

Nucor scoffs at such words.

"People say, 'Oh, you're going to start a trade war with China, what are you, crazy?'" said Giff Daughtridge, general manager of the Nucor Steel Berkeley complex, the cluster of hulking buildings here in South Carolina's low country, some 25 miles north of Charleston. "No, we're in a war. We've just chosen not to fight back. The trade war's on. We're getting our ass kicked."


Throughout much of American manufacturing, such sentiments amount to a running soundtrack, as if the United States and China are locked in a zero-sum game in which every advancement in Chinese living standards comes at the direct expense of another meal removed from an American table.

Much of this talk is overheated nonsense motivated more by political convenience and emotion than analytical integrity. Far too often, China is cast as the bogeyman in the American conversation, the ready explanation for seemingly every economic affliction.

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