North American Free Trade: Issues and Recommendations

By Gary Clyde Hufbauer; Jeffrey J. Schott | Go to book overview

12
Steel

During the 1980s both the US and the Mexican integrated steel industries were radically transformed. In the United States, old integrated mills in the Ohio Valley and elsewhere were closed, industry production was cut from 154 million to 117 million metric tons, new capital outlays totaled $20.6 billion, and the labor force was slashed from 399,000 to 164,000 workers, as the industry underwent a significant consolidation.1 During the 1980s several Japanese and other foreign steel firms entered the US industry with $4 billion of new investment, mainly via joint ventures with US steel firms (some 30 joint ventures in all; Business Week, 1 July 1991, 27-28).

Despite the substantial new capital expenditure, the infusion of Japanese management and technology, and overdue cutbacks in capacity and employment, the US steel industry again faces hard times. With a weakening economy, the spot price for a ton of hot rolled steel dropped from about $345 in early 1990 to $280 in late 1991. During the first half of 1991, US steel firms recorded losses of about $1 billion.2 Nevertheless, the rationalizations of the past decade have paid off: the US industry is far more competitive and its losses are far smaller than in the bleak days of the mid-1980s.

Rationalization of a different kind has occurred meanwhile in Mexico. The parastatal Fundidora de Monterrey S.A. (fmsa) was shut down in May 1986, cutting Mexican capacity by over 1 million metric tons. Industry employment was reduced from 65,000 to 57,000 between 1980 and 1988. In 1988 the World Bank provided a $400 million loan to restructure and modernize the Mexican steel industry. With the addition of new facilities at the sicartsa II plant (Siderúr-

Joanna M. van Rooij helped draft this chapter. Robert Crandall gave helpful suggestions.

____________________
1
The most notable merger involved Jones & Laughlin Steel and Republic Steel (the thirdand the fifth-largest US steel producers), which became ltv Steel (the second-largest producer) in June 1984. For a current overview of the industry, see US International Trade Commission ( 1991c).
2
New York Times, 12 August 1991, D1. Losses continued in the third quarter of 1991: Bethlehem Steel, for example, reported a $61 million loss, and Armco reported a $27 million loss ( Wall Street Journal, 31 October 1991, A8).

-243-

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North American Free Trade: Issues and Recommendations
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface xi
  • Board of Directors xiv
  • Acknowledgments xv
  • I - The Political Eonomy of a NAFTA 1
  • 1 - Nafta: Overview and National Objectives 3
  • 2 - The Substantive Agenda and Implications for Nonmember Countries 23
  • II - Economic Implications 45
  • 3 - Trade Effects of a Nafta: a Survey 47
  • 4 - Investment 71
  • 5 - The Maquiladora Phenomenon 91
  • 6 - Labor Issues 107
  • 7 - Environmental Questions 131
  • 8 - Rules of Origin 155
  • 9 - Intellectual Property Issues 173
  • III - Sectoral Analyses 183
  • 10 - Energy 185
  • 11 - Automobiles 209
  • Appendix - Motor Vehicle and Parts Manufacturers in Mexico 234
  • 12 - Steel 243
  • 13 - Textiles and Apparel 263
  • 14 - Agriculture 279
  • 15 - The Mexican Financial System 305
  • IV - Summary and Conclusions 327
  • 16 - Summary and Conclusions 329
  • References 345
  • Index 361
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