Protectionism and Disinvestment
Voluntary restraint agreements against foreign imports . . . may have made some sense. . . . But what is not understandable is the lack of initiative on the part of steelmakers to invest aggressively for expansion, productivity improvement, and export under the umbrella of this temporary protection.
Ira C. Magaziner and Robert B. Reich
The Voluntary Restraint Agreement between the United States and the major steel producers of Japan and the European Community provided a temporary nostrum acceptable to diverse segments of the international corporate community. Foreign steelmakers circumvented the threat of mandatory quotas, free trade interests avoided the possibility of a trade war, and the nation's integrated steel firms received some protection against imports. The agreement, which took effect on January 1, 1969, and was to run for three years, covered 80 percent of all steel imports into the United States and placed tonnage restrictions on specific steel products.1 Policymakers justified the VRA on the grounds that it would give the steel industry some breathing room to resolve its economic plight by modernizing and eventually reestablishing its international competitiveness. But the steel companies failed to take advantage of the protection; they did not rebuild their deteriorating facilities. Instead, integrated steel producers diversified and invested overseas. This only aggravated their already precarious economic condition and increased their reliance on political action
Grateful acknowledgment is given for permission to reprint in slightly revised form "Economic Power in the United States: The Case of Steel", Politics and Society 5.