Tuesday, August 9, 2016

Not So Free

A recent story by Bloomberg casts light on some of the distortions of the current trade system.  U.S. aluminum producers are under increased economic pressures caused by falling aluminum prices.  The People's Republic of China has recently been increasing output, flooding the global market and lowering aluminum prices.  American manufacturers, among others, have been squeezed by this market shift.

Bloomberg focuses on the travails of Century, one of the last major American manufacturers of aluminum:
Century, with three plants in the U.S. and one in Iceland, has about 1,778 employees, some 25 percent fewer than in 2014. Hawesville, which at its peak produced 252,000 tons annually and employed 750, has dropped to a staff of 300 and cut capacity by 60 percent.
However, it might be premature to chalk this shrinking employment up to "free trade."  American producers have argued that the Chinese government heavily subsidizes its domestic aluminum manufacturers.  These subsidies mean that these companies can afford to produce aluminum for much less.  Maybe that artificially "cheap" aluminum is good for the global market or not, but its price has not been determined by free-market capitalism.

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