Crony capitalism on steroids, or a big nothingburger? The New York Times’ Jim Tankersley made it sound like the former in their headline and lead about the use of challenges to exemption requests from steel-import tariffs. The two steel firms with the closest connections to the Trump administration have had a lot of success in closing out exemptions for domestic companies seeking to protect their foreign sourcing for steel materials:
Two of America’s biggest steel manufacturers — both with deep ties to administration officials — have successfully objected to hundreds of requests by American companies that buy foreign steel to exempt themselves from President Trump’s stiff metal tariffs. They have argued that the imported products are readily available from American steel manufacturers.
Charlotte-based Nucor, which financed a documentary film made by a top trade adviser to Mr. Trump, and Pittsburgh-based United States Steel, which has previously employed several top administration officials, have objected to 1,600 exemption requests filed with the Commerce Department over the past several months.
To date, their efforts have never failed, resulting in denials for companies that are based in the United States but rely on imported pipes, screws, wire and other foreign steel products for their supply chains.
It certainly sounds like crony capitalism — and it may still be. However, the scope of the issue comes into much clearer focus in paragraphs 7 and 8:
Since May, companies have filed more than 20,000 requests for steel tariff exemptions. As of the end of July, the Commerce Department had denied 639 requests.
Half of those denials came in cases where United States Steel, Nucor or a third large steel maker, AK Steel Holding Corporation, filed an objection, a New York Times analysis shows. Nearly all of the rest were in cases where the company applying for an exclusion erred in its submission, Commerce Department officials say.
That puts a much different light on the issue. Out of over 20,000 requests for tariff exemptions, Commerce has denied only 3.2%. Only half of those were on the merits of the complaints from three firms, not just the two cited as tied to the Trump administration. The Times doesn’t explain that little sleight of hand, nor do they explain the difference between 1,600 objections filed that “have never failed” and only the three-hundred-plus actually sustained by the Commerce Department on substantive objections. That’s less than a quarter of their filed objections; perhaps the rest are still pending. But even with that, the two firms would have combined up to object to only 8% of all exemption requests.
What are the grounds for exemptions? The Trump administration provided American manufacturers with a process to import steel products that are not available from domestic producers. Domestic producers can successfully block those exemptions if they demonstrate that they can provide the products on the capacity required. That’s how tariffs are supposed to work, if they are employed at all. They exist to protect domestic manufacturers and to penalize the importation of products produced by domestic manufacturers.
It’s hardly odd to see US producers object to importation for tariffed material they produce at home, and an 8% rate of objection hardly seems excessive or corrupt. Notably, the Times never points to a decision that didn’t meet those standards. They use two examples of companies denied exemptions to import steel pipe from Turkey, but never states that those products weren’t available from American manufacturers.
Tariffs are open to criticism on other grounds, especially since they essentially act as a tax on consumers and businesses. One can chalk up tariffs themselves as a crony-capitalist outcome, and protectionism for industries with ties to a president should be viewed with considerable skepticism. However, the process described by the Times is not unusual, nor is the rate of objection in the context of the number of exemption requests. Other than the tariffs themselves, this is a non-story.
Update: Reader Clay Ranck finds an MPR report that digs deeper into the numbers:
I'm having trouble finding good numbers (which bugs me based on lack of transparency), but this story mentions only around 1,300 of the 20k requests have been reviewed, with 760 approvals and 552 rejections. Real rejection rate may closer to 42% than 8%. https://t.co/XUNA8DFbLO
— Clay Ranck (@clayranck) August 7, 2018
— Clay Ranck (@clayranck) August 7, 2018
This was from more than a week ago, and does a better job of getting to relevant numbers. Besides the excerpt from Clay above, this also does a better job of making the crony-capitalism argument:
Companies could be excused from the tariff if they could show, for example, that U.S. manufacturers don’t make the metal they need in sufficient quantities.
But there are hurdles to clear on the path to securing an exemption. A single company may have to file dozens of separate requests to account for even slight variations in the metal it’s buying. That means a mountain of paperwork to be filled out precisely. If not, the request is at risk of being rejected as incomplete. All this can be time consuming and expensive, especially for smaller businesses. …
An analysis of the numbers by the office of Rep. Jackie Walorski, an Indiana Republican and one of the most vocal opponents of the steel tariff on Capitol Hill, shows that 760 requests have been approved while 552 have been denied. The department hasn’t yet approved a waiver request that triggered objections, according to Walorski’s review.
The congresswoman’s office also examined the more than 5,600 publicly available comments and found they were submitted on average about four days before the end of the 30-day comment period. More than 50 percent of the comments weren’t delivered until 48 hours or less before the comment window closed. It took department an average of nine days to post comments online after receiving them, according to the analysis. The most prolific commenters were Nucor and U.S. Steel with 1,064 and 1,009, respectively.
MPR also mentions the 20,000 exemption requests. The flood of comments on this appear to be more of a function of size and resources rather than political ties to the White House, however, and the outcomes of rent-seeking behavior.