VISION & VALUES CONCISE: Q&A with Thomas J. Usher (Part II)

Editor’s Note: The “V&V Q&A” is an e-publication from the Center for Vision & Values at Grove City Collge.  Each issue will present an interview with an intriguing thinker or opinion-maker that we hope will prove illuminating to readers everywhere. In this second of a special two-part edition of the “V&V Q&A,” the executive director of the Center for Vision & Values, Dr. Paul Kengor, interviews Dr. Thomas J. Usher, former chairman and CEO of U.S. Steel Corporation. This Q&A is in keeping with a long tradition of healthy debate within the conservative movement over the often contentious domestic-economic issue of free trade. On October 24 at 7:00 PM, Dr. Usher will be delivering the College’s annual Albert A. Hopeman Jr. Lecture in Science and Engineering.  The title of his talk is “Engineering for Wealth Creation.”

V&V: Dr. Usher, in the last Q&A we talked about the common complaint that the U.S. steel industry unfairly benefits from intervention by the federal government. Yet, often not mentioned is the reality that your industry can also be hurt by federal regulation or intervention that adds to your costs, right? Please address that.

Dr. Thomas J. Usher:
 A common example is the environmental-compliance regulations. Granted, a lot of those are the same country to country, but we also have compliance laws unique to us. We can live with many of those, but what’s difficult to live with is a foreign government that gives a one percent low-interest loan to the building of a new facility for one of our competitors, or a foreign government picking up all the social costs for employees, such as when people retire or when our competitor lays off people.

On that, you note that U.S. Steel does things for its employees that foreign companies do not, especially when it comes to benefits for employees, where, again, the foreign government (rather than the foreign company) picks up the tab.

We pay a big burden in pensions and health care. We have roughly four retirees for every active worker, whereas in other countries all of those costs for those retirees go on the government dole. That’s fine, but my point is that when you’re looking at a competitive posture, these things make a big difference, that’s a major disadvantage to us.

V&V: You argue that America needs to take better advantage of its vast marketplace to ensure better trade laws worldwide.

Usher: In general, what sort of bugs me is that we have the marketplace that everyone wants but don’t use it to our advantage. Everyone around the world wants to come here. They all want to sell here. Look at all the Chinese products in our stores. But what bugs me is that we don’t use that advantage to force better equity among our trade partners, whether on intellectual property or better trade laws. We don’t use the tool that we have to insist that others play by the same rules—to insist on fair trade.

Look, we don’t want help from the government. We simply want the government to enforce the laws it has passed. We made decisions based on trade laws that are on the books. We want those laws enforced. That’s not protectionism.

V&V: Speaking of those laws, there is a recent example that got a lot of press: President Bush, beginning in March 2002, imposed 18 months of tariffs on foreign steel, which he could’ve imposed for 36 months, but neglected to extend for the full three-year period. You favored his decision but regretted that he didn’t do the full extension. You said at the time that while restructuring did take place in the U.S. steel industry, no one “could honestly expect this industry to completely restructure in as little as eighteen months.” Here is one of those areas where the critic asks, “Well, then, how long do you need?”

Usher: The law that applies here is Section 201 of our trade laws. It needs to be understood that the president didn’t do this unilaterally. Bear in mind that his decision was preceded by probably the most extensive hearings maybe in the history of the ITC [International Trade Commission]. There were months and months of testimony by both sides. The conclusion that was reached and went to the president was that the violation of our trade laws had been so excessive and to such a degree that this had to stop, and that if we didn’t blow the whistle on the violators this whole industry could potentially go down the tube.

And the reasons for this is that we got into a very weak market in which foreign steel was coming in at prices that basically no one else in the world could match from a cost standpoint. Now, they could price it at those levels, but that wasn’t the cost. It is important to distinguish price from cost, which people often fail to do.

The testimony before the ITC showed that those who were selling in this country were selling at a price far below their cost of production. And this was attacking an industry that is critical to this nation’s security.

Here again, if you have a government subsidy involved, that distorts the actual cost of production. That means that we are competing not so much against a foreign company but a foreign government.

So, the president agreed and gave us some relief. If we hadn’t had that, if these practices would have went on for another couple of years, there was a very real chance that we probably wouldn’t have any steel industry left.

V&V: It would have been that bad?

Usher: It would have been that bad. And it is a much healthier industry today as a result of that decision by the president. It worked. I’m disappointed that President Bush after a while seemed to back track a little and apologized for it, when in fact I thought he should’ve said, “Look, this was the law, and it worked exactly as intended.”

V&V: I’d like to wrap up with a final, big-picture question that gets to the issue of parties and politics and even ideologies: This subject of trade is always a divisive issue within politics, including splits among both parties, Democrats and Republicans, among libertarians and conservatives, among a Pat Buchanan vs. others in the Republican Party. Where will this subject end up in the future, politically speaking?

Usher: I think it all goes back to the issue of how wealth is created. My view is that wealth is created by mining something, making something, producing something, growing something, that’s how you produce wealth. This country became a wealthy country because we produced a lot of things. In agriculture, we became the breadbasket of the world. We produced an awful lot of goods in this country. If, as a country, we fail to make things, we are not going to have wealth. Some people think we will be the “managers” of the world, that we have the intellectual capacity—

V&V: —they are talking about our educational strength, about our so-called “services” and service industry, about those being our strength in the global economy—

 —yes, but let me tell you, there are an awful lot of smart Indians and Chinese and others who will not need us to manage the world, they will manage their own things. They can also do services. For a country to be an advanced economy, I think you need a manufacturing base. Some disagree, but I think you can’t be simply a service economy and remain a great nation.

Having said that, I’m certainly not anti-trade. Now, some countries will have a natural competitive advantage in trade in certain areas, which is fine. We have that in certain areas. You can create win-win situations for both countries in certain areas of trade.

But what I object to is when we don’t have a win-win situation and when we allow our industrial base to be destroyed, especially when we’re in the driver’s seat and we have the ability to insist on equity and fair trade. Thirty years from now, we may not be in that driver’s seat anymore. We don’t want to lose that base which allows that wealth to be created. Meanwhile, those other countries are building up their own manufacturing base.

Free trade is good if it’s fair trade. We, from a political party standpoint, need to be much more aggressive in ensuring that it is fair trade. In the end, thirty to forty years down the road, we will be a much poorer nation if we don’t do that.

V&V: Tom Usher, thanks for talking to V&V Q&A.

Usher: Thank you.