Biden Announces Plan to Assist U.S. Steel, Shipbuilding Industries

The decline of the American steel industry after World War II was the original impetus for Congress to adopt “Buy America” requirements starting in 1977 requiring that state and local governments could only use their federal infrastructure grant funding to purchase iron and steel products that were made in the USA. These Buy America rules (distinct from the “Buy American” law, which governs things purchased directly by the federal government) were a hodgepodge of different laws and rules for different transportation modes, and were supplemented with a more uniform policy adopted in the 2021 IIJA infrastructure law.

These domestic content requirements are exempt from World Trade Organization tariff rules and disputes, but only so long as they are conditions attached to grants made by some level of government. Private manufacturers of transportation vehicles that will be purchased and operated by private industry are thus exempt. And that, for the most part, includes non-defense shipbuilding.

The purchase of U.S. Steel by Nippon Steel, approved overwhelmingly by U.S. Steel stockholders on April 12, is a body blow to the image of the American steel industry, because of the outsized role that U.S. Steel played in its history (and because of the name), though it is yet to be seen how economically significant the deal is.

The timing of the merger undoubtedly played a role in the timing of President Biden’s speech on the topic in Pittsburgh on April 17. Although the speech got a lot of news coverage for a different reason (Biden’s offhand mention that his Uncle Bosie may have been eaten by cannibals in New Guinea), it also announced several new policies relating to the steel industry and to the shipbuilding sector. But Japan, the new buyers of U.S. Steel, were not the main subject of the new actions – instead, it was Japan’s neighbors to the west, China.

Most importantly, Biden said that he was instructing the U.S. Trade Representative to consider tripling the “Section 301” retaliatory tariff rate on Chinese-made steel and aluminum, from 7.5 percent to 22.5 percent. (When in office, President Trump imposed blanket tariffs of 25 percent on imported steel and 10 percent on imported aluminum, but from almost everywhere, not just China.) Biden is “asking” the USTR to “consider” the tariff increases, and not ordering them directly, so that the USTR can make the tariffs consistent with her ongoing investigation of unfair Chinese steel sector trade practices under section 301 of the Trade Act.

Furthermore, Biden announced that the USTR has opened a new section 301 investigation, this one into Chinese activities in the shipbuilding, shipping, and maritime sector. This one was prompted by a petition filed by five U.S. labor unions on March 12 alleging:

…China’s drive to dominate the global shipbuilding, maritime, and logistics sector is built on non-market policies that are far more aggressive and interventionist than any other country. As a result, China has seized market share, suppressed prices, and created a worldwide network of ports and logistics infrastructure that threaten to discriminate against U.S. ships and shipping companies, disrupt supply chains, and undermine vital national security interests. China’s aggressive intervention in these sector is unique among countries – and the distortions to the global market for commercial vessels, maritime shipping, and logistics that result require that China’s actions be addressed.

China’s rise has been rapid: “From 2000 to 2022, China’s share of new vessels built each year on a global basis rose from less than 10 percent to 47 percent. In 2022, China built more new ships than the next two countries (Japan and Korea) combined. While Chinese shipyards now produce over 1,000 ocean-going vessels a year, the United States produces less than ten. The ratio of gross tonnage built in China to that built in the U.S. more than tripled from 108 to one in 2014 to 356 to one in 2022.”

The petition, which is an interesting read, requests five remedies from China’s unfair competition:

  1. Imposition of a special tonnage-based fee on every Chinese-made vessel that docks at a U.S. port;
  2. Dedication of the proceeds of that fee to a U.S. Commercial Shipbuilding Revitalization Fund which would, in effect, bring back the old construction differential subsidy that President Reagan killed in 1982;
  3. Full enforcement of the Jones Act and other cargo preference laws;
  4. “Consultation with allied nations should immediately begin to develop a trusted system to support logistics needs that is operated independently of any entity controlled, associated with, or subject to direction of the Government of China;” and
  5. Coordination with other shipbuilding nations so that their anti-China shipbuilding remedies don’t force a race to the bottom.

The Federal Register notice announcing the investigation is here and the docket for submitting public comments is here (requests to appear in person are due May 22, and written comments are due June 5).

Search Eno Transportation Weekly

Latest Issues

Happening on the Hill