Tariff Follies

To its credit, the United Steelworkers union (USW) has lifted the living standards and working conditions of millions of workers. Birthed from the militant 1930s Steel Workers Organizing Committee and midwifed by hundreds of Communist and socialist organizers, the USW became a strong advocate of industrial unionism and one of the more progressive forces in US political life. 

But with the Cold War and the purging or repression of its most militant members, the USW abandoned the class-confrontation approach of its early years for a partnership with capital. In place of exercising the strength and power of a united membership, the union leadership chose a partnership approach, negotiating contracts based upon the notion that the worker and the boss had a common interest.

In the contest of the early Cold war, capital accepted some concessions to labor to guarantee US labor’s loyalty to US foreign policy objectives. In return for US labor leaders policing domestic radicalism in the workplace and for international collaboration in fighting Communism, the bosses tacitly agreed to accept wage and benefit growth commensurate with rising productivity. 

With the onset of the economic crisis in the 1970s and with the ruling class turning toward market fundamentalism, capital reneged on its part of the partnership, attacking labor with vengeance. The implicit partnership was dissolved by one side.

Unfortunately, the other side-- organized labor (in this case, the USW)-- clung to the partnership. Despite restructuring, downsizing, plant closures, and concession demands, the USW stood by the philosophy of cooperation, what their critics called “class collaboration.” 

Since we can remember, one expression of this affinity with corporate bosses has taken the form of seeking protection from foreign competitors. From inviting workers to sledgehammer Toyotas to advocating for steel tariffs, the USW leadership has maintained that what is good for steel corporations doing business in the USA is good for USW members. 

In recent years, the protectionist demand was at odds with the political mainstream, including the union’s putative ally, the Democratic Party. Since the rise of Thatcher/Carter/Reagan/Clintonism, unfettered free markets have been an ideological fixation of all the bourgeois parties and their policy makers, placing tariffs and other protectionist policies beyond the pale. 

But in 2016, the USW leadership found their savior. Donald Trump rudely arrived to occupy the White House. 

Moreover, he kept his promise in 2018 to impose restrictive tariffs on all the imported steel coming into the United States. Unfortunately for the USW and their bet on protectionism, the Trump tariffs failed to meet their expectations. As The Wall Street Journal reports: “With the expanded production, about 6,000 jobs were added to the U.S. steel industry’s workforce after tariffs started in 2018, according to the Census Bureau. By the end of 2019, though, those gains evaporated as steel demand and prices sank.” [my emphasis]

Authors Bob Tita and William Mauldin (Tariffs Didn’t Fuel Revival for American Steel, WSJ, 10-28-2020) add that: “Higher prices [initially] also made steel more expensive for manufacturers that buy it, leading to the loss of about 75,000 U.S. manufacturing jobs, according to a study released late last year by the Federal Reserve Board of Governors.”

In addition, foreign steel makers secured punitive export tariffs in retaliation, further hurting domestic US manufacturing.

The lack of growth in demand for steel in the USA has forced domestic producers to seek exports of steel to markets outside the USA in search of profits, the same strategy practiced by the "foreign" competition. 

A major component of Trump's 2016 victorious campaign message which helped him secure votes in the Rust Belt was his promise of major investment to rebuild infrastructure and create jobs. It never got off the ground because it was based on the false notion that capitalists will invest in the public good. Things like fixing public schools, hospitals, water systems, pollution control, and building mass transit systems simply don't offer returns to investors even though they will provide for the public good, boost steel production, and create tens of thousands of steelworker jobs. 

 Instead, Trump, true to his real, big-business agenda, pushed a major tax cut that actually reduced the revenue available for any public investment. Rather than drain the swamp, Trump drained the public coffers and offered the syrup of "public private partnerships" that were supposed to entice capitalists to invest. They never did. 

Not to be outdone, The Pittsburgh Post Gazette reports that the Republican-controlled legislature of Pennsylvania has now taken this phony concept to its practical conclusion which will result in the proposed tolling of many bridges in Pennsylvania as a way of making the "partnership" work to increase state revenues. Rather than tax the wealth of billionaires and corporations to obtain necessary revenues to rebuild in the public interest, we instead have tax cuts for the rich and privatization of necessary networks and services. 

Understandably, the US-based steel industry sought to garner greater market share through the tariff program. However, the USW leadership failed to acknowledge one of the more basic laws of capitalism: with tariff-induced prices soaring and foreign competition locked out, domestic capitalist enterprises were incentivized to engage in an orgy of expansion and production. As a result of this classic overproduction-induced crisis, prices collapsed and the industry withdrew, with layoffs and closed facilities. Prices for hot-rolled coiled sheet steel increased by nearly half to $920 a ton after the tariffs were imposed, but are now below their pre-tariff level. 

The advocates of tariffs as a remedy for layoffs and stagnant or declining wages and benefits forget that capitalism runs on profits and not sharing the wealth. The Communist, socialist, and other militant trade unionists who founded the union understood this truth. They sought a union that would fight the corporations for a greater portion of those profits for the workers. 

Today’s leadership of the USW mistakenly believes that workers will benefit if “our'' corporations are favored over “theirs.” They fantasize a world where foreigners are rapacious cheaters and US producers are inspired by the greater good. “Theirs” are driven by ruthless competition, while “ours” are committed to fairness and partnership. Lurking beneath the rhetoric is a not-too-subtle national chauvinism.

Surely, the experience with the Trump tariffs reveals that the protectionist approach not only slanders foreigners, but fails to protect domestic production, jobs, and compensation. Domestic producers, like their foreign counterparts, are ruled by the laws of motion of the capitalist system. Bust follows boom, whether it applies to a protected national market or a global unfettered market. 

The union's reliance on this cooperative approach with the steel corporations defangs it for the necessary independent political action program that could unite the membership and the general public in a fight for jobs and investment in decaying infrastructure. All research shows that this is a real path forward to create steel demand and union jobs. It's plain to see and many studies document that America's infrastructure is in horrible shape. Tariffs have not increased domestic demand for steel. The only way to increase domestic steel production is through a massive reinvestment program that not only rebuilds the decaying American infrastructure in the public interest but creates steelworker jobs.

Rather than casting their fate with their privately owned corporate rivals for the wealth created by the workers, unions should fight those rivals for a greater share. If they want to guarantee jobs, security, and compensation, they should struggle to eliminate the private corporations altogether. A real fighting union would be for public ownership of the steel industry.

Greg Godels  zzsblogml@gmail.com

Ed Grystar egrystar@aol.com

Stirring the Energy Pot

Since February of 2017, I have written frequently about changes in the global political economy of energy and the effects of those changes on imperialist rivalries and accompanying political trends: New Developments in Political Economy: The Politics of Oil (2-6-17), US Imperialism: Changing Direction (6-25-17), More on Energy Imperialism (7-26-17), Economic Nationalism: What It Means (12-28-17).

The broad gist of these articles was that (1) the era of global economic integration was severely challenged by the 2007-2008 shock; (2) a technological revolution in energy extraction moved the US-- the leading imperialist power-- towards energy independence; (3) the failure of OPEC and others to rein in US energy production and the continuing sluggishness of growth and trade prodded the US towards a further goal of energy dominance through competition in energy markets; (4) without the burden of dependence on stable, secure international energy sources, US imperialism stepped back from its role as the primary promoter and guarantor of global integration and stability; (5) intensifying competition in the context of stagnant growth fostered the politics of economic nationalism and the promotion of national self-interest in contrast to the politics of globalism.

Since the British navy and other navies converted from coal to oil-burning vessels in the early 1900s and with the burgeoning dependence of modern militaries on oil, securing energy sources has been a strategic centerpiece of imperialist strategy.

It is not too great of an exaggeration to see German expansion in World War II as accelerated by a thirst for reliable energy supplies (Romania, Soviet Union). And the denial of energy resources to the Japanese militarists similarly prodded aggression in Southeast Asia.

For the US, declining domestic production and increasing reliance on foreign oil, particularly from the Middle East, led to greater attention to security and stability in the Middle East. The US established a powerful gendarmerie to police the region: the Shah’s Iran, Israel, and the Arabian petrostates. Billions of dollars of military hardware bolstered these watchdogs at various times in an effort to guarantee stable supplies of oil. US security services worked overtime to install stable regimes in all of the petrostates and their neighbors. US dominance was sealed with the establishment of the dollar as the petroleum-trading currency. The dominance was so complete that the US was able to use low petroleum prices as a weapon against the Soviets during the Cold War.

But matters have changed radically with the technology-enabled explosion of oil and natural gas production in the US.

The New

Writing in The Washington Post (The US is about to be the world’s top crude oil producer. Guess who didn’t see it coming, 3-7-18), Charles Lane reminds us of how matters were before: “During his 2006 ‘addicted to oil’ State of the Union address, President George W. Bush bemoaned imports from unstable parts of the world and called for replacing 75% of Middle East oil imports by 2025.” Bush, like his father, spent great efforts-- lives and wealth-- policing and bullying those “unstable” oil producers.  

Energy writer James Blas explains in Bloomberg Businessweek (The New World Order of Energy Will Be American, 1-29-18) how matters are now, how the US no longer has to “tiptoe around oil supplying nations” whether they are “friends” (Saudi Arabia) or “adversaries” (Venezuela). Instead, “energy dominance” is on the agenda.

Blas notes that the US won the battle for dominance started by Saudi Arabia in 2014 when the Saudis drove the price of West Texas crude oil down to as low as $26 a barrel through massive overproduction, expecting to cripple US shale production. Thanks to huge investments, the shale oil companies survived the attack, cut costs, and roared back. Today growth is faster than pre-2014 when prices for oil were actually much higher. And imports are now below 2.5 million barrels a day, the lowest level since record-keeping began in 1973 (imports were 12 million barrels per day in 2008).

Thanks to geo-political “flare-ups” (generally US-instigated instability), US exports at one point in 2017 hit 2 million barrels a day, mainly to Canada and the People's Republic of China (PRC). Exports are fully expected to grow even more in the future.

Venezuela is Illustrative of the US’s growing interest in disrupting oil markets to its advantage. Through disinvestment and sanctions, Venezuelan oil production dropped nearly 30% last year. Similarly, the US-NATO destruction of Libya has succeeded in disabling its oil industry. The wreckage of the Libyan energy industry means that oil prices would have to reach $78.10 per barrel for the industry to break even. With prices trending well below that number, there clearly is little chance for the Libyan industry to recover, invest, or add to the country’s sovereign wealth.

With massive corruption and an expensive war to finance, Saudi Arabia now needs $70 a barrel to merely break even. Hoping to escape from dependency on an oil regimen, the Saudis had planned a public offering (a sell-off to private interests) of its national oil company, ARAMCO. In the current unfavorable competitive environment, that move has been postponed time and time again.

Formerly a price dove-- the world’s advocate for low oil prices-- the Saudis are now desperate to achieve higher prices. Their escape plan from their losing hand in oil competition-- Vision 2030-- is endangered by modest prices. To reduce supply and increase both demand and prices, the Saudis are a strong advocate for sanctions against Iran, as are powerful energy interests within the US ruling class.

The new, competitive environment has brought forth new, unexpected alliances. Russia-- a frequent foe of Saudi foreign policy-- has recently signed a comprehensive energy agreement with Saudi Arabia. For its part, Russia is offering to take a substantial position in any future IPO of ARAMCO, boosting its prospects (along with a similar offer from the PRC). Saudi Arabia, in return has agreed to invest in Russian LNG projects and Eurasian drilling. It appears that Russia and the PRC are looking to guarantee security, stability, and cooperation among the energy-producing states, a role that the US has now abandoned with its pursuit of energy dominance and a role that is a necessary condition for peace in the region.

Because emerging US oil dominance (and sanctions: war by other means) threatens to disrupt the reliability and stability of existing petro-suppliers, the PRC has begun to negotiate crude-oil futures contracts in renminbis rather than petro-dollars.

Natural Gas

Much of the growing US animosity that is so apparent in US-Russia-PRC relations revolves around competition in the natural gas market. Through political fantasies, sanctions, threats, saber-rattling, and contrived affronts, the US has made every effort to wean Europe away from Russian natural gas, especially the expansion of pipelines to Europe promising consistent supply and favorable prices.

Some Eastern European countries, mired in historic anti-Russia enmity, have welcomed US liquefied natural gas (LNG) shipments, constructing new receiving facilities. They accept inconvenience, inefficiency, and higher prices as the cost of the politically motivated anti-Russia campaign. The US is trying to browbeat the rest of Europe into giving preference to US LNG.

But the big prize is the PRC, the fastest growing natural gas market in the world. Both Russia and the US are fighting to supply natural gas: Russia has a pipeline project (GAZPROM) sales agreement to supply 1.3 trillion cubic feet a year, while the US (Cheniere Energy) has contracts to supply 1.2 million tons of LNG per year.

The recently announced selective, very selective US tariffs-- apparently really only against PRC-- likely have a covert motive. US Secretary of Commerce Wilbur Ross suggested that increased Chinese purchases of LNG might have a happy consequence for tariffs by reducing the US-PRC trade deficit-- another shot fired in the energy wars.

Trade Tariffs

The sharpest edge of US economic nationalism is the emerging establishment and threats of trade tariffs. Short of embargo or out-and-out war, establishing disruptive trade barriers is the most hostile posture towards other nations. In the case of a powerful country like the US, tariffs constitute unabashed arrogance. As perceptive left commentators have noted, the US has always pressed its problems unto its weaker “friends,” but not with this hubris.

Lest anyone think this is a ‘Trump’ problem and not shared by fellow Republicans and Democrats, attention should be paid to what others are saying. When Trump announced the first round of tariffs directed at the PRC, Democratic Senate leader Chuck Schumer was quoted in The Wall Street Journal: “I don’t agree with President Trump on a whole lot, but today I want to give him a big pat on the back.”

And Reuters reported on April 1 that Democratic Senator Elizabeth Warren, speaking in Beijing:

The Massachusetts Democrat and Trump foe, who has been touted as a potential 2020 presidential candidate despite rejecting such speculation, has said U.S. trade policy needs a rethink and that she is not afraid of tariffs.

After years of mistakenly assuming economic engagement would lead to a more open China, the U.S. government was waking up to Chinese demands for U.S. companies to give up their know-how in exchange for access to its market, Warren said.

“The whole policy was misdirected. We told ourselves a happy-face story that never fit with the facts,” Warren told reporters on Saturday, during a three-day visit to China that began on Friday.

Clearly, broad sections of the US ruling class have joined the trend towards economic nationalism.

The implications for peace or war are stark.

Greg Godels

zzsblogml@gmail.com