Trump's Campaign Promises To Steel Industry Backed By Early Hires
President-elect Donald Trump’s nominee for Commerce secretary, Wilbur Ross, is scheduled to go in front of the Senate commerce committee Wednesday. The billionaire investor has a connection to Cleveland – 15 years ago he bought the city’s downtown steel plant. And as and trade experts see his selection as a sign that the incoming president will look to protect the U.S. steel industry.
Back in 2000, The LTV Corp. filed for the largest bankruptcy up to that point in U.S. history. The conglomerate owed more than $4 billion to more than 20,000 creditors. Its three steel plants, including one here in Cleveland, were about shut down.
Susan Murnane is a former Justice Dept. lawyer and author of a 2014 book called Bankruptcy in Industrial Society. She studied the LTV collapse and says that while the company’s end was in 2000, it was a long time coming.
“General decline really started about 1970. I think it’s really important for people to realize that," says Murnane.
Murnane says LTV was sunk by its pension obligations, which she says made up about three-quarters of the company’s debt. Bankruptcy gave its new owner, Wilbur Ross, a chance to shed those debts. In 2002, his private equity company, W.L. Ross and Co. LLC, bought the three LTV Steel plants for $83 million. Ross was able to cut pensions and health care costs and renegotiate a contract with the steelworkers union.
Another cause of LTV’s long decline, says Murnane, was competition from other countries set on developing their steel industries.
“Everybody wants steel, all countries want steel. They want steel for a lot of reasons - steel built industrial capitalism in America. it built the railroads, it built the skyscrapers, it built the factories, it built everything,” says Murnane.
But Ross got a little help on the competition front. Just as he got into the business, the George W. Bush administration slapped a tariff on steel imports. So with the debt to its workers cleared and foreign competitors stymied, the Cleveland plant went back to producing steel.
In 2004, Ross moved on. He sold his 13 steel plants in the US to Mittal Steel for $4.5 billion. Ross still sits on the board of the company he sold to, now Luxembourg-based Arcelor Mittal - the largest steel producer in the world.
Juscelino Colares is a former trade litigator in Washington DC. Colares says in picking Ross for Commerce secretary President-elect Trump seems genuine in backing up his campaign stump speech promise to protect domestic manufacturers, particularly steelmakers.
“His actions on trade seem to be very coherent, based on the rhetoric that he's used and based on the people he's choosing,” says Colares.
In addition to Ross, Trump has chosen former Nucor Steel CEO Dan DiMicco to lead the trade office transition team. And Colares describes Trump’s expected choice for US Trade Representative, Robert Lighthizer, as the steel industry’s top trade litigator.
“And you can see that's why Trump made a very forceful, for a Republican, he made a very anti-liberalization, anti-liberal argument you know for second-guessing, relooking, revisiting NAFTA, revisiting all these agreements. Everything is back on the table, right?” said Colares.
Case Western Reserve University economics professor Sue Helper supports the idea of renegotiating trade deals. But the former chief economist at the Department of Commerce in the Obama administration says there’s been too much emphasis on tariffs and protecting corporate profits, not enough emphasis on environment and labor regulations.
“A lot of what Trump complains about in terms of this job loss is really due to this lack of worker protection. It’s very difficult to organize an independent union in Mexico. It’s difficult in the US, but even more difficult," says Helper.
Besides getting a better deal for the US, it’s not yet clear what a Trump administration wants to change by reopening trade deals. It’s a question open for discussion at Ross’s confirmation hearing.