Tuesday, May 30, 2017

One of five remaining U.S. aluminum smelters may survive, thanks to international trade loophole; trade experts warn of unintended effects

Century Aluminum (Photo from The Washington Post)
Twice in the past five years, the Century Aluminum plant at Hawesville, Ky., has served legal notice that it would shut down permanently before pulling its business back from the brink of financial collapse, typical in an industry where a glut of cheap metal from China has flooded the market and forced many plants out of business.

Hawesville, on the Ohio River east of Owensboro, is in a region where jobs in the metal industry, ubiquitous for decades, have become a rapidly disappearing way of life, Ana Swanson writes for The Washington Post. Hope was restored in Hawesville in April, however, when President Trump announced that his administration was considering restricting imports of foreign-forged aluminum in the name of national security, arguing that the country can make its own war machines, some question possible outcomes. Century is the last U.S. smelter that makes the high-purity aluminum used in armored vehicles.

"A decision by the Trump administration to use national security to protect an industry would be among the most dramatic — and risky — moves in the president’s trade agenda, which seeks to limit what he regards as unfair foreign competition," Swanson writes. "While intervention could be a boon for Hawesville, it could raise prices for other customers and companies — including the federal government, which ultimately buys the armored vehicles and fighter jets made from the aluminum."

Amid debate over how far the government should go to protect certain industries in the era of global competition and technological innovation, some trade and industry experts question whether the administration is using national security as veiled economic protectionism. The decision, based on a Commerce Department investigation, will come out in June, Trump said in a tweet Saturday night: "Will take more action if necessary."

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"The debate over aluminum’s future in the United States comes after 20 years of China flooding the global market with the metal, depressing prices to a level at which few American companies can compete. The U.S. has gone from having 23 operational aluminum smelters in 1993 to just five today, with only two running at full capacity," Swanson reports. The Hawesville plant has laid off more than 300 people in the last two years and has been scrapping unused machinery for extra cash. Another dip in global prices could close its doors permanently. The more than 200 jobs that remain, while they pay well for the area, are grueling ones: often 16 hours of physical labor in temperatures reaching 140 degrees.

"If the administration’s investigation finds that the country’s defense capabilities are being compromised by the decline of aluminum plants like the one in Hawesville, the president would have the power to impose tariffs or other restrictions on imports. Because it’s in the name of national security, Trump could circumvent a longer, more complicated process for changing trade policy at the World Trade Organization," Swanson explains. The Trump administration has relied on a rarely used trade measure, a Section 232 probe. Any resulting action could have unintended consequences. Past administrations have used Section 232 sparingly, because of the concern that this exception to international trade guidelines might become the new normal. "If we can use national security to block aluminum imports, other countries can and will use it to block agriculture and aviation imports," said Derek Scissors, a resident scholar at the American Enterprise Institute. "Widespread use of 232 by the United States won't just curb imports, it will curb trade."

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