Economic consequences of the steel trigger price mechanism

This study theoretically analyzes and empirically estimates the impacts of the "Trigger Price Mechanism" policy on the U.S. Steel and auto industries. The first chapter developes an econometric model which explains the domestic market as well as the import market of steel. The model is used to estimate the following: the equivalent tariff rates of the TPM, the percentage effect of the policy on U.S. domestic prices of steel, the price elasticity of demand for domestic steel and imported steel, and finally the price elasticity of supply elasticity. The second chapter computes the economic Impacts of the TPM on steel producers, consumers, and workers by using the estimations of the first chapter. Here it is concluded that the producers and workers temporarily benefited from the policy at the tremendous welfare loss of the consumers. The third chapter shows that the TPM, imposed to protect the steel industry, resulted in injuring the automotive industry. In fact, the detrimental effect of the policy on the auto industry alone (measured in the number of laid off workers) exceeded its beneficial effect on the steel industry (measured in the number of jobs created). The effects of the policy on autoworkers, auto producers, and consumers are discussed and estimated. In this chapter a Cournot oligopoly model is presented which helps to estimate the effects of the TPM on auto prices and output. A consistent strategy throughout Chapters II and III is the comparison of the actual (restricted trade) with the hypothetical (free trade) situation.Economics, Department o