China has announced a new greenfield steel plant, two state-of-the-art blast furnaces with an initial capacity of 8.5 million tons per year.
Chinese planners talk consolidation, but capacity rises every year and the countrys steel-producing capacity is clearly outrunning its domestic demand, with some of the steel destined for U.S. shores. U.S. steelmakers have poor defenses available in anti-dumping regulations and the World Trade Organization. Of course, China will assert its belief in fair trade, and ultimately its sovereignty as an independent nation, and it will contend its trade practices are fair.
In Arkansas, state legislators have pushed through a $200-million subsidy for a proposed new venture called Big River Steel LLC. Unemployment is widespread in the area, and the governor and the legislature feel justified in their use of taxpayer funds to create jobs and thus mitigate the harshness of unemployment. An existing Arkansas producer complained about the negative impact on its operations, but the legislature approved the bill and the governor signed it into law. All parties to the dispute are citing fairness as the basis for their argument, but whether taxpayers ultimately benefit from the creation of jobs at the rate of $600,000 per job remains to be seen.
There exists another political activity classified as saving jobs. Pittsburgh-based U.S. Steel Corp. gave its money-losing plant in Serbia to the government for $1; and ArcelorMittal SA, Luxembourg, tried to close a plant in Florange, France, but after being threatened with nationalization retreated to downsizing with committed reinvestment at that plant. The elected politicians in both these cases rationalize their action as being in the interest of fairness.
Then we have the public advocates of higher taxes, like Bill Gates and Warren Buffett, who argue on behalf of fairness. Sen. Carl Levin (D., Mich.) used his chairmanship of the Senate Permanent Subcommittee on Investigations to stage a public character assassination of Apple Inc. chief executive officer Tim Cook for minimizing and avoidingÑlegallyÑApples corporate taxes. True to fashion, the media hyped the hearing into an issue of fairness.
President Obama has suggested that we all support higher taxes. Why? So we all pay our fair share. It is telling to witness the behavior of politicians in China, France, Serbia, Arkansas and Washington. Judgments based on fairness are founded on the shifting sands of popularity, and are vulnerable to the unpredictable winds of change.
One mans judgment that something is eminently fair stands opposed to another mans judgment that the same act is grievously unfair. Fair is now a politicians code word for some other objective. When politicians set out to create jobs, save jobs or vilify a hugely successful American corporation on taxes, ignore the appeal to fairness and look for the ulterior motive.
Thomas C. Graham is a founding member of T.C. Graham Associates. He is a former chairman and chief executive officer of AK Steel Corp., president and chief executive officer of Armco Steel Co. LP, chairman and chief executive officer of Washington Steel Co., president of the U.S. Steel Group of USX Corp. and president and chief executive officer of Jones & Laughlin Steel Co. His column appears monthly. He invites readers comments and can be contacted at email@example.com.