Quantitative Assessments of U.S. Safeguards on Steel Products

Abstract

In March 2002, the United States imposed temporary safeguard measures on 11 steel products in the forms of higher tariffs and tariff-rate quotas. Using a dynamic computable general equilibrium (CGE) model, we evaluate the effects of U.S. safeguards on economic welfare, real GDP, steel trade, and sectoral output and average cost of the United States and its trading partners, with particular attention to those of Japan, China, Korea and Taiwan. The results suggest that the U.S. welfare marginally increased during the two years when the safeguards were in effect because of an improvement in the terms of trade. By contrast, the safeguards had a small negative impact on U.S. real GDP. Japan, Korea and Taiwan incurred some welfare losses, but they were extremely small. China did not suffer any welfare losses. U.S. steel imports from the Northeast Asian countries declined by 9-25 percent, but those from the NAFTA partners and other countries on the exclusion list increased by 10-11 percent, largely offsetting the reductions in the total U.S. steel imports. The safeguards caused output contraction in the steel-consuming industries in the United States and output expansion in those industries in Japan, Korea and Taiwan, but these effects were again extremely small. These results suggest that the impact of U.S. safeguards was minimal.

Keywords: safeguards, steel, CGE model

JEL Classification: F13, F14