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
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
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