It's Not Just Oil

By Daniel Ikenson

Daniel Ikenson is a trade-policy analyst at the Cato Institute.

September 9, 2005

President Bush has already said he'll tap the Strategic Petroleum Re serve to help mitigate the post-Katrina oil shock. He should take a similar bold step on crucial (re)building materials -- by repealing trade restraints on steel, lumber and cement.

U.S. trade policies restrict the supply and boost the costs of all these vital-to-reconstruction items. Indeed, pervasive restrictions on imported construction materials are already partly to blame for tight supplies and inflated prices. The exact impact varies enormously from product to product and year to year, but could push up prices by 50 percent or more. With severe shortages and spiking prices likely in the wake of the disaster, lifting those restrictions should be a no-brainer.

The U.S. construction industry relies heavily on imported cement, lumber and steel: Domestic production can't keep up with the growing demand for new housing and development. Yet:

• For 15 years, the United States has maintained prohibitively high tariffs on Mexican cement.
• Imports of Canadian lumber have been restricted under one guise or another since the early 1980s. Since 2001, combined antidumping and countervailing duties in double-digit percentages have prevailed, even though those restrictions were imposed in violatation of U.S. law.
• Steel imports are subject to a vast web of duties -- 180-plus separate restrictions on different steel products
  from dozens of countries. Yet imports are needed to satisfy about 20 percent of U.S. steel demand.

Yes, the oil rigs in the Gulf of Mexico and the refineries on the shores are crucial to the U.S. economy. But so are essential building materials. The president moved swiftly to mitigate the oil-supply breach; he should do the same on the construction-materials shortage.

No, the political pressure won't be as great. When gasoline prices spike, consumers want to know why and want politicians to do something about it. But most Americans are less inclined to blame high construction prices on tariffs: Few of us buy much concrete or steel directly. And though the tariffs hike the price of products like cars and homes, those are infrequent puchases -- so few draw the connection between import duties and higher costs. (If consumers were so informed, the president and Congress would be less capable of subsidizing favored industries at their expense.)

But it's still true: By choking off supply, trade restrictions on steel, lumber and cement inflict needless scarcity and higher costs on retailers, builders and consumers. That means serious human suffering. Rolling back the duties on cement, lumber and steel would've been good policy before Katrina. With reconstruction a vital need along much of the Gulf Coast in Katrina's wake, it's now a moral imperative.

This article appeared in the The New York Post.