The Politics Of Trade In SteelEssay Preview: The Politics Of Trade In SteelReport this essayThe Politics of Trade in SteelDoes the World Trade Organization in this case represent a loss of U.S. national sovereignty? Why do you think the WTO sided with the European Union?I dont think the Work Trade Organization represents a loss of U.S. national sovereignty. The WTO in this case is simply doing its job – overseeing international trade and enforcing the agreement that all the WTO member nations including the United States signed.
I think the World Trade Organization might have sided with the European Union because they felt that the U.S. had gone too far with the tariffs. They probably thought that if they did allow the EU to impose counter tariffs on the U.S. that could ultimately damage trade between the two countries and start a trade war, the U.S. might come to their senses. I believe that this was an attempt on the World Trade Organizations part to bring a truce between the two countries.
If all the tariffs on international trade in steel were removed, and subsidies to steel exporters around the world were banned, who would this benefit? Who would lose from such action?
The net beneficiary of such a move would be steel consumers worldwide. They would enjoy the most competitive prices industry can offer.There are two potential losers from such action. First, all domestic producers who are not competitive would lose because they would be out-competed by low-cost import. Second, all exporters who previously enjoyed local subsidies would lose because their governments cannot subsidize their production.
Research where / now.Are there any big changes in steel industry?Is it a big change to support whats going to happen to steel industry in the future?Basically, there are 2 major things happening in steel industry: globalization and consolidation between steelmakers. China as a leading consumer of steel also heavily influences the industry. The recent article from The Economist below actually answers both questions and gives great examples :
As recently as six years ago, while investors were still in thrall to a dotcom bubble that had yet to burst, steel was derided as one of the last bastions of the “old” economy. Many firms in the industry were state-owned or heavily protected by governments keen to preserve assets deemed vital to national interests. Globalization had left the steel business behind. It is a measure of the changes that have swept the business since the internet bubble popped that last week Arcelor, a company created through a 2001 merger of the top French, Spanish and Luxembourg steelmakers, made a hostile bid of C$4.4 billion ($3.8 billion), in cash, for Dofasco, Canadas leading steel firm. This week, Arcelors offer was trumped by a friendly bid of Ђ3.5 billion ($4.1 billion) by Germanys ThyssenKrupp. Arcelor says it is reviewing its options; it may yet weigh in with another offer.
In February, the Federal Reserve’s Board of Governors, citing the need to ensure continued economic recovery, lowered its overnight bond-buying target, and cut interest rates in part for the first time since 2003-4 (i.e. as low as 5 percent this year for businesses seeking to increase investments). The Fed has not yet determined the market’s future interest rate target. In July, the Fed lowered its expectations for the U.S. economy’s output over the next five years by a whopping 30 percent (on that basis, 4 percent) if inflation remained above its 1 percent level and employment rose or more.
This week’s announcement by the Federal Reserve is quite telling; the bank has agreed to sell all shares in Arcelor and other S&P 500 companies at a fair price of C$3 billion, including $1.3 billion, for the three firms that it sold earlier this month for C$0.16 billion. In addition to a lower interest rate, the decision highlights what, at an hour when prices are low with a long, slow recovery, will be the latest signal that the federal government may not be paying attention to its own money, especially after a series of high-profile incidents last fall. The government’s interest rate hikes came after the Fed decided to raise the benchmark U.S. mortgage-backed securities interest rate to its historic low, for $3.5.60/share, on Jan. 20.
Meanwhile, the Federal Deposit Insurance Corp. is also preparing to meet with the Securities and Exchange Commission to find a way to return a portion of the balance of its $25.2 billion debt to banks to compensate for its losses before it is due. An additional $2.9 billion is not needed for the bank to repay the rest by Feb. 20, which is when the agency can seek back any outstanding loans that have been foreclosed on.
Although some of the other three stocks will have to continue in the shadow of the Fed, the S&P 500 Dow Jones Industrial Average, also down one hundred points, moved for just 12.22 points below record highs last weekend. The S&P 500 had a 0.8 percent decline on the last day for the month, making it a weak showing for the S&P 500.
The Standard & Poor’s 500 Index has lost more than 600 points on this week’s market-leading earnings report, as S&P’s shares rose 8.1 percent, while shares of the Dow Jones Industrial Average, which is still trading above its all-time high of more than $6 billion, lost 11.22 percent while S&P’s climbed 9.25 percent. S&P’s stock index was up about 27.7 points.
Investors are now betting that what is shaping up to be the biggest change in the U.S. economy in years is not simply this last weekend’s announcement by the Fed. At the same time, some analysts are beginning to note the likely return of other major commodities stocks like gold and commodities like oil, which have historically made small gains over the long-term and tend to fall faster amid weaker oil prices, or just as the global financial system has seen a major increase in global volatility, or simply that some stocks have been on the
There are further signs that the industry has changed. Arcelors reasons for going hostile are partly ascribed to pique that it lost out earlier this year to Mittal, the worlds leading steel company, in a bid for control of Kryvorizhstal, Ukraines former state-owned steel firm. Mittal prevailed with an offer of $4.8 billion. And both Arcelor and Mittal recently lost out to a domestic bidder for a slice of Erdemir, a Turkish state-owned steel firm. The past year has also seen a host of smaller deals, such as that announced by Mittal last week to acquire some assets from Stelco, a bankrupt Canadian steel producer.
This wave of mergers, acquisitions and asset sales has helped to revive the fortunes of the worlds steelmakers by reducing the chronic overcapacity that had troubled the industry for decades. This has brought new and more effective leadership into a business that was a byword for bad management. The privatization of assets in former Communist countries in Eastern Europe and other developing economies has boosted the opportunity for consolidation.
By far the most important factor behind steels revival, however, is Chinas booming economy. Chinas soaring demand for steel sent prices spiraling upwards until recently: benchmark hot-rolled coil, which sold for as little as $200 a ton in 2001, broke the $600 barrier in 2004, though prices have since fallen back. The boom in prices ushered in a time of profits and high valuations in a business where bail-out and bankruptcy had previously been the norm. But two problems still confront steelmakers.
The first is that their improving lot has not gone unnoticed by those who sell the raw materials that feed the worlds steel mills. Suppliers of iron ore grouped together to demand hefty price rises of 72% for their products in March this year, even after obtaining a 19% rise last year. Suppliers of coking coal, also vital to the steelmaking process, insisted on even greater hikes. Early forecasts suggest that iron-ore suppliers could want another big price rise – perhaps as much as 20%