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Michelle Galanter Applebaum
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Michelle Galanter Applebaum is a long-time independent steel industry analyst with nearly 30 years of experience following the sector as well as an adjunct professor at Lake Forest College in Chicago. Ms. Applebaum spent over 20 years at Salomon Brothers in New York and Chicago. During her years... More
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Steel Market Intelligence
  • Real Economic Consequences of Mercantilist – Un-Free- Trade 2 comments
    Jan 19, 2010 12:14 PM | about stocks: AKS, MT, X, CMC, GNA, GGB, NUE, STLD, BHP, CLF, RIO, SMSMY, SCHN, VALE, ZEUS, RS, WOR

    Your New Year's Eve Day "Steeling from Americans" editorial on Chinese pipe tariffs is off in a few ways. First, China is a high-cost steelmaker and its exporting into the lower-cost U.S. is mercantilism, not free trade. It also practices protection with cash subsidies, restraints on raw material exports, barriers to entry from global peers, export subsidies, etc.

    Second, tariffs aren't even the bad news you might think for the buyers. In the short run, they may pay higher prices, true. But in the long run, lower cost domestic suppliers would be driven out of the market; when China stopped subsidizing—and it would, it's unsustainable—U.S. buyers would pay even higher pipe prices.

    Ask any of the bankrupt auto-parts makers (who benefited from cheap subsidized and dumped steel in 1998-99) how their steel purchases worked for them in 2003-08 after three dozen U.S. steelmakers went into bankruptcy. They'll explain the difference between long run and short run, which is why we and every other nation have rules about trade.

    Finally, worries about Chinese retaliation don't make sense. If retaliation means that China holds us accountable to world trade laws, then where's the problem?

    But the retaliation worry is really about the core problem: China doesn't play by the rules; it restricts imports and investment based on its own mercantilist interest, which is not in line with the global trade rules others play by. The seduction of the size of the Chinese market has put too many in this country in the position of enablers, but even the enablers are starting to get it. In the end, we all know that bullying behavior backfires; sometimes it just takes a while.

    - Michelle Applebaum, Steel Market Intelligence, Chicago

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  • Jake Huneycutt
    , contributor
    Comments (1423) | Send Message
    I complete agree on this.


    I've not been too happy with American lawmakers who have allowed China to bully them on this issue, in spite of the fact that we're the ones with the bargaining leverage. Part of the problem as I see it is a bankrupt "free trade" ideology that seems to ignore the fact that it's not really "free trade" when your side has no protections, but the other side has a ton of them. Rather, you're simply forcing your own companies to compete on grossly unequal terms.
    20 Jan 2010, 07:27 AM Reply Like
  • Michelle Galanter Applebaum
    , contributor
    Comments (33) | Send Message
    Author’s reply » The reality is that there are economic interests in this country that are seduced by china's market potential. These economic interests have huge lobbying dollars behind them in Washington and huge advertising dollars behind them with certain press. So we're pissing in the wind until we get to the point where these economic interests realize that the upside they have in China isn't quite what they think - the Google events are sending that message right now - the Rio events of last summer did the same thing. It's taking time for people to get it.
    20 Jan 2010, 11:36 AM Reply Like
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