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JC History Tuition Singapore - What is the steel trigger price mechanism - Global Economy Notes

What is the steel trigger price mechanism?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Learn more about the steel industry in the United States [Video by Wall Street Education].

Historical background
By the late 1970s, the share of imports for steel in the United States (US) market rose to 18 percent. This was substantially higher than the 2 percent in the late 1950s. In response, there was mounting pressure on the White House for protectionist responses.

Led by US President Jimmy Carter, the US government launched a programme to advance the domestic steel industry. At the core of this programme was the ‘Trigger Price Mechanism’ (TPM). This mechanism was targeted at the prevention of ‘unfair’ price competition from imports.

How does the Trigger Price Mechanism work?
Given that Japan was being identified as the lowest cost producer of steel in the world, its production costs would be publicly declared as ‘Trigger Prices’. Should the price of an import shipment be below the ‘trigger price’, the US government was authorised to intervene and act against the foreign supplier on the grounds of suspected dumping practices (i.e. export priced below the market price of an importing country).

Notably, the TPM functioned well in industries that were guided by price leadership. Once a market leader sets its ‘leading price’, other competitors would follow voluntarily. In 1920, the Supreme Court made a decision in the United States Steel Corporation case, declaring price leadership as an acceptable practice under the US anti-trust law. In other words, if the White House declares the ‘fair prices’ to all producers, these prices will be observed. By doing so, price competition can then be minimised.

The TPM was in effect from 1978 to 1982.

With the recession of 1980, prices of imported steel fell by less than 1 percent, and the price of domestic steel declined by 5.5 percent. In the first quarter of 1980, U.S. Steel filed dumping complaints against five European producers. By basing the trigger prices on Japanese costs, the program gave the higher-cost European producers a license to dump. […]

Nevertheless, the real price of imported steel continued to decline, producing another round of complaints from the steel industry in 1982. In addition to allegations of dumping, the steel companies maintained that foreign steel companies were being subsidized by their governments and that countervailing duties should be imposed. This charge led to the permanent suspension of the trigger price mechanism.

An excerpt taken from “Has trade protection revitalized domestic industries?” by Daniel P. Kaplan.

Did the Trigger Price Mechanism benefit the US steel industry? Assessing its impacts on the world economy.
The TPM functioned as a form of trade protection to enhance the efficiency of the domestic steel industry. Since 1960, the steel industry has not been as profitable as manufacturing, on average. With rising debts and low profitability, the domestic steel producers struggled to accumulate finances. Even with the use of the TPM, the profits generated were inadequate.

In summary, efforts to modernise the steel industry under the Carter administration were disappointing. By 1984, employment in the steel industry fell by nearly fifty percent compared to 1968. Instead, the TPM contributed to an increase in the world price of steel, indicating an adverse impact on the global economy.

The trigger price mechanism has, however, altered the geographic pattern of imports, cutting into the Japanese share of the U.S. market to the advantage not only of European producers, which was part of the original intent, but of such fast-growing newcomers as Brazil, Korea, and Taiwan.

The most striking impact, however, of a trigger price mechanism based on Japanese costs, given the rapid appreciation of the yen, has been to raise prices. Trigger price levels rose by more than 10 percent in 1978, almost entirely as a result of the yen’s appreciation, and were scheduled to rise by another 7 percent on January 1, 1979. […] In the words of the EEC’s steel producers’ group, Eurofer, the trigger price mechanism “has raised steel prices all around the world.”

An excerpt taken from “The International Environment: Readings” by Eston T. White and Walter R. Milliken.

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JC History Tuition Online - What was Ronald Reagan's Strategic Defense Initiative - Cold War Notes

What was Ronald Reagan’s Strategic Defense Initiative?

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Topic of Study [For H2 and H1 History Students]: 
Paper 1: Understanding the Cold War (1945-1991)
Section A: Source-based Case Study
Theme I Chapter 3: End of Bipolarity [US policy of renewed containment and confrontation]

Historical context: Peace through strength
After the Soviet invasion of Afghanistan in 1979, the short-lived Détente was over, ushering a time know as the ‘Second Cold War‘. Then, US President Ronald Reagan assumed a more confrontational stance against the Soviet Union, asserting that the ‘Evil Empire’ had to deterred through military build-up.

By the early 1980s, there were anti-nuclear demonstrations taking place in the USA, which had put pressure on Washington to support ‘nuclear freeze’. Yet, Reagan opposed this approach, claiming that the Soviet Union’s aggression would put the USA and its people in grave danger.

I know too that many of you seriously believe that a nuclear freeze would further the cause of peace. But a freeze now would make us less, not more, secure and would raise, not reduce, the risks of war.

[…] It is that we embark on a program to counter the awesome Soviet missile threat with measures that are defensive. Let us turn to the very strengths in technology that spawned our great industrial base and that have given us the quality of life we enjoy today. What if free people could live secure in the knowledge that their security did not rest upon the threat of instant U.S. retaliation to deter a Soviet attack, that we could intercept and destroy strategic ballistic missiles before they reached our own soil or that of our allies?

An excerpt from US President Ronald Reagan’s speech entitled “Address to the Nation on Defense and National Security“, 23 March 1983.

A “Star Wars program”: Fiction or Reality?
During the historic speech, Reagan had revealed to the American people that a technologically-advanced missile defense system was being developed, which was later known as the Strategic Defense Initiative (SDI). Notably, when Reagan was a governor of California in the 1960s he became very interested in the concept of directed-energy weapons (DEWs), which was briefed by physicist Edward Teller. Teller mentioned that DEWs, which included lasers and microwaves, could act as an effective defense against a nuclear attack.

To begin with, SDI became an easy object of derision in the British press. The Guardian reported that there was ‘little hope’ of SDI ever succeeding, and a generally dismissive tone dominated that newspaper, labelling SDI an unrealistic fantasy. Cartoons poked fun at Reagan’s initiative, quickly labelled ‘Star Wars’ by US Senator Ted Kennedy, and reiterated on Time magazine’s front cover in April 1984. Of course, SDI was officially declared to be defensive in nature, which was a useful imaginary to promote.

An excerpt from “NATO and the Strategic Defence Initiative: A Transatlantic History of the Star Wars Programme” by Luc-André Brunet.

On 25 February 1981, President Reagan signed the National Security Decision Directive (NSDD) 12, known as the Strategic Forces Modernisation Program. The Directive had authorised an improvement of strategic defenses and the development of ‘ballistic missile defense systems’.

The proposed SDI program was a space-based missile defense system that could protect the USA from a large-scale nuclear attack. It involved the use of space-based lasers, which reminded some of the popular science fiction film ‘Star Wars’ by George Lucas. (Interestingly, the trilogy was released in 1977, 1980 and 1983).

Although the program sounded absurd and unrealistic, the Reagan Administration was intent on developing the system to nullify the Soviet Union’s ability to make a first strike, thus giving the USA a chance to end the Cold War.

On the other hand, the Kremlin viewed the SDI as a serious breach to global peace and security as Reagan’s plans signalled the US decision to restart the arms race in the early 1980s.

And critics were certainly correct in predicting that Reagan’s proposal would anger the Soviet Union. Four days after Reagan’s surprise speech, Yuri Andropov (1914-1984), who had replaced Brezhnev, called SDI “irresponsible” and “insane”. He said the initiative was “putting the entire world in jeopardy.” He predicted it would “open the floodgates of a runaway race of all types of strategic arms, both offensive and defensive.”

An excerpt from “America’s Star Wars Program” by Ann Byers.

What can we learn from this article?
Consider the following question:
– How far do you agree that Reagan was responsible for the end of the Cold War?

Join our JC History Tuition to learn more about the End of the Cold War. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

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JC History Tuition Online - How did the USA help Japan's economy after WW2 - Global Economy Notes

How did the USA help Japan’s economy after WW2?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

A shift of US priorities in Japan: ‘Reverse Course’ policy
After Japan was defeated in World War Two, the Allied Occupation oversaw social and political reform of Japan from 1945 to 1946, ensuring that it would not endanger world peace. Under the Supreme Commander for the Allied Powers (SCAP) led by American general Douglas MacArthur, the Japanese military was disbanded and the zaibatsu conglomerates were broken up.

Against the backdrop of the looming Cold War tensions in Europe, the US government relooked its priorities. Instead of punishing Japan for its wartime aggression, the government supported the post-war recovery of Japan, in hopes of cultivating it as a new Cold War ally. This was also known as the ‘Reverse Course’ policy (逆コース).

After the early stages of the Occupation, SCAP began showing a strong interest in stabilizing Japan’s economy near the end of 1946. In spite of the fact that the “Basic Directive” clearly stated that the Occupation would not be responsible for economic reconstruction, faced with the danger of rampant inflation unless production restarted, SCAP had no choice but to become involved in economic reconstruction.

An excerpt from “The Economic History of Japan: 1600-1990: Volume 3: Economic History of Japan 1914-1955: A Dual Structure” by Takafusa Nakamura, Konosuka Odaka and Noah S. Brannen.

Consequences of warm bilateral relations: US aid to Japan
In 1958, negotiations for a US-Japan Security Treaty (日本国とアメリカ合衆国との間の相互協力及び安全保障条約) were underway. In essence, the treaty permitted US military bases in Japan, thereby establishing a military alliance between the two countries.

At the same time, the USA provided a series of economic assistance to build up Japan as a bulwark against communist expansion in Asia. For instance, the US government offered low-interest loans to Japan. These substantial capital injections led to increase in Japanese investments that propelled economic growth.

Additionally, the USA sponsored Japan’s admission to the General Agreement on Tariffs and Trade (GATT) organisation in September 1955. The USA feared that an absence of market for Japanese exports may possibly draw Japan into the Communist bloc for economic cooperation. As such, the Eisenhower administration rejected protectionist demands from local groups in the USA and opened American markets to Japanese exports.

The United States needed Japan as a stable capitalist country that would provide a bulwark against communism in Asia. It therefore supported Japanese membership of the IMF and GATT in 1955 and assisted Japan in improving relations with other Asian countries in the late 1950s and early 1960s, while at the same time keeping its own market open to Japanese goods and making technology and capital available to Japanese enterprises. Japanese capitalism could thus pursue its own interests on the international stage under the umbrella of U.S. world strategy.

An excerpt from “Japanese Capitalism Since 1945: Critical Perspectives” by Tessa Morris-Suzuki and Seiyama Takuro.

From 1958 to 1960, US purchases from Japan rose by more than 150%. This enabled Japan to enjoy its first-ever trade surplus. The correction of Japan’s balance of payment deficits thus allowed it to grow rapidly.

What can we learn from this article?
Consider the following question:
– Assess the importance of the USA in contributing to the economic miracle of Japan after 1945.

Join our JC History Tuition to learn more about the growth of the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.