The Irrationality of Steel and Aluminum Tariffs:

Failure of G7 Seen in International Trade Agenda

Commentators have spoken and written reams regarding President Trump’s imposition of tariffs on steel and aluminum and his refusal to sign a new NAFTA deal. This trade agenda is dominating the G7 Summit with claims that most members are opposed to tariffs and trade wars and want a rules-based system. All are united, however, when it comes to the global neo-liberal direction they have set for their economies and they refuse to admit that the G7 has given rise to disasters all over the world. G7 leaders and media speak as if the sky is falling and nothing can be done or understood of Trump’s actions. International trade is made to appear as imponderable and beyond the grasp of mere mortals.

First, anything is knowable following scientific investigation, discussion and analysis, including the actions of humans. Humans act according to the social conditions, the level of the productive forces, their outlook, interests, and the historical crib into which they are born. Trump acts according to his social conditions, outlook, private interests, and imperialist historical crib. His actions appear irrational with regard to trade because imperialist international trade has descended into anarchy and chaos, features of irrationality. International trade is captured within a contradiction. Its present condition demands cooperation but cut-throat competition between private interests to dominate the markets and sources of raw materials prevails. However, within the irrationality of the conditions, and their descent into chaos and crisis, meaning can be found, in particular the necessity for change and how to bring about that change.

Aluminum Imports into U.S. and the 10 Per Cent Tariff

The oligarchs in control of the steel and aluminum sectors are global actors with private interests scattered throughout the world. Oligopolies such as those formed by mining and aluminum producer Rio Tinto and global aluminum producer Alcoa are larger than many states in terms of gross income and the new value their workers produce. The concentration of social wealth and power in the hands of a few is unlike anything the world has ever seen. Alcoa has private interests in the U.S., Canada and elsewhere. Although these giants export aluminum into the U.S. market, they appear to gain from the Trump 10 per cent tariff, as market prices for the metal have risen since the tariff became a talking point last January.[1]

The tariff acts similarly to a sales tax on the buyer. The U.S. federal government will receive over $2 billion in tax revenue annually from the tariff. Generally, the tax is added to the market price the U.S. consumer must pay. This is particularly the case with aluminum as current internal U.S. production and potential for increase are very limited with regard to overall demand.

Trump’s remarks that the aluminum tariff is meant to create jobs in the U.S. sector do not appear to have substance. In fact, they appear irrational. The existing smelter capacity in the U.S. is incapable of supplying the demand. Rebuilding smelter capacity would take years to accomplish and may itself be an irrational response under current conditions. The rise in market prices from tariffs could possibly allow Alcoa to re-commission several stalled U.S. aluminum smelters it owns and controls but as yet it has not made any steps in this regard. The amount of potential production in the U.S. is not large, and besides, international production from Alcoa can meet demand and increasing U.S. production would depress prices. The current higher prices could stimulate more internal recycling of aluminum but again even that amount would come nowhere near to meeting current demand without the global supply from Canada, China, Russia and elsewhere.

The aluminum producers Rio Tinto, Alcoa and Alouette together form the Aluminum Association of Canada. Together, the big three or rather big two dominate primary aluminum production in Canada. They have nine plants in Quebec and one in Kitimat, BC with a total of 8,000 workers. The Aluminerie Alouette Inc. smelter in Sept-Iles, Quebec alone produces 606,000 metric tonnes a year, which is only 134,000 tonnes short of the current entire U.S. primary production of 740,000 tonnes. Rio Tinto owns 40 per cent of the Alouette smelter. Canadians do not control any of the big three.

To meet demand, especially for their war economy, U.S. buyers of aluminum import over 6 million metric tonnes a year. U.S. manufacturers have greatly benefited from cheaper imported aluminum. U.S. government 2017 statistics report the main suppliers as follows (the amounts, in U.S. dollars, include both primary and recycled aluminum imports):

1. Canada: $8.5 billion (36.3%)
2. China: $3.5 billion (15.1%)
3. Russia: $1.6 billion (7%)
4. United Arab Emirates: $1.5 billion (6.5%)
5. Mexico: $1 billion (4.3%)
6. Bahrain: $621.1 million (2.7%)
7. Argentina: $570.8 million (2.4%)
8. Germany: $561.7 million (2.4%)
9. India: $484.1 million (2.1%)

The Aluminum Association of Canada, along with similar associations from the U.S., Europe and Japan, held a forum in Montreal June 3-4 prior to the G7 Summit. The apparent goal of those primary aluminum producers and recyclers was to form a united front against the competition from Chinese production, which has become globally dominant.

The communiqué from the forum does not mention the Trump tariff but only the need to resist the dominance of Chinese competitors in the sector. They will present their views and demands at the G7 Summit and later at the G20 Summit. The forum did not specify how their members would counter the dominance of Chinese (and Russian) competitors in the sector or what they wanted the G7 leaders to do.

Total global production of aluminum for 2017 = 63,404,000 metric tonnes
Chinese production (estimated) = 35,905,000 metric tonnes
Total North American production = 3,950,000 metric tonnes
Smelters in Canada produced 3,210,000 metric tonnes
The U.S. produced 740,000 tonnes in 2017 and imported 6,000,000 metric tonnes of both primary and recycled aluminum.[2]

In 2012, the U.S. produced 2,070,000 metric tonnes. Much of that productive capacity has been decommissioned, as imported aluminum from Canada, China and Russia is far more cheaply produced. The main already-produced value needed for primary aluminum production is bauxite and electricity. The transferred-value from electricity forms around one-third of the final price of production. The price of production of electricity is much higher in the U.S. than in Canada, China and Russia.

Trump’s tariffs on aluminum imports will only make a small dent in the 6 million imported tonnes. Some U.S. production may come on stream, probably from increased recycling. The biggest difference will be the higher market price, not only in the U.S. but worldwide, at least for a time. The higher price is also a result of the global economic recovery from the 2008 crisis and the ever-increasing war preparations and global sales of military planes, missiles, bombs, ships and other means of destruction.

Private interests concentrated within global companies characterized as oligopolies and cartels, such as Rio Tinto and Alcoa, have become supranational entities. They marshal their power of privilege, control, social wealth and contacts to manipulate in their favour the affairs of economies and states. They confront other private interests in a permanent condition of competition and collusion. The competition and collusion to serve their private interests and not the common good reduce all other considerations to secondary pragmatic issues, only of concern if they affect their primary aim and motive to expropriate as much as possible of the new value workers produce.

For example, Rio Tinto together with Alcoa have locked out workers at their jointly owned aluminum smelter in Bécancour, Quebec to force higher prices in North America and put pressure on workers and the Quebec government to accept concessions on terms of employment and the price of electricity. This action directly contradicts the interests of the working people at the smelter, in their community and throughout Quebec and Canada.

The entire world is blocked from moving forward. The control of these private interests, these uber rich oligarchs concentrated in oligopolies and cartels, reduce the working people to spectators of their own economy, into impotent onlookers of the affairs that affect their lives. The main business and actions of states have been reduced to serving the private interests of competing oligarchs resulting in a continual condition of civil war for political power and control.

Nothing wrong in itself can be determined from having an aluminum sector far beyond the needs of Canadians and geared to exports. But who made this decision to invest in this way, including hydroelectric production, to serve the war economy of the United States, and the reasoning of those in control lie hidden behind a wall of secrecy of the global cartels. Not even Canadian managers are in control let alone working people. The decisions are made elsewhere in secret conclaves of the oligarchs. For example, the local managers at the Rio Tinto/Alcoa aluminum smelter in Bécancour, Quebec say they have no mandate or permission from those in control to negotiate and settle with their locked out workers and Quebec government. The supranational control and decisions of the oligarchs have surpassed even the mysteries of state, as the situation degenerates into global anarchy, recurring crises, constant war and irrationality.

The decisions of Trump, Trudeau and other G7 members on trade are of this obscurantist nature. They reflect the irrationality of a world gone mad in competition to serve powerful private interests in a race to be first and dominant. Imperialist competition is in contradiction with the necessity for cooperation to solve the problems of today’s economy and world. The ruling oligarchs and their mania to serve their private interests and all else be damned is out of sync with the modern world and its socialized productive forces. Today’s world and its peoples are interconnected; their economies are interrelated. They need cooperation for mutual benefit and development to solve their problems and allow the productive forces of industrial mass production and social product to reach their full potential to guarantee the well-being and security of all and not the narrow private interests of a privileged few. They need the human factor/social consciousness and empowerment now of the working people to bring this necessary cooperation and unity into being.

This world of socialized productive forces has the material capacity to sort out all problems facing humans and the social and natural environment. What is absent from making it happen? There is not any attempt to make rational the irrationality of the actions of the oligopolies and their political servants and states and their unbridled competition to favour their narrow private interests. Crucially absent is the empowerment and control of the actual producers, the working people within the socialized economy where they work and live. The pro-social aim, outlook and potential control of the working people are in conformity with the modern social and productive conditions. They are the necessary human factor to sort things out. The struggle is centred on empowering and bringing into being the control and pro-social aim of the working people.

International trade under the modern productive forces is understandable only within the pro-social outlook, interests, and social conditions of the actual producers who create the social wealth and reproduce their own human condition and the socialized economy. The working people, the mere mortals who are the essential human factor of the modern world, have to empower themselves now and emerge from under the suffocating anti-social control and outlook of the imperialist oligarchs. They have to become masters of their own thinking, outlook and interests and extend their control to all the affairs of the economy and state that affect their lives. This is the only way to make international trade rational. This is the only way to bring sense to their lives and open a path forward.



2. Figures from the International Aluminium Institute. For list of aluminum smelters worldwide click here.

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