THE STEEL INDUSTRY'S wage negotiations, now going into their fourth week, seem to be pushing this country toward a conscious industrial policy. In the past, the steel companies have generally settled high -- well above the national average increases -- and then tried to pass the increased costs on to their customers. Rising domestic prices naturally bring in more foreign competition. Some of that foreign competition is subsidized by governments abroad, particularly in Europe, to hold up employment there. In response, U.S. steel companies and unions join hands and come to Washington to demand protection. But the imports are the only real competitive check on the highly concentrated American industry. The industry then threatens to close plants if they are not exempted from federal enviromental pollution rules.
It is a familiar cycle, and may well be repeated this year. It will be a particularly important test of the Carter administration's ability to reconcile its various good intentions regarding inflation, employment, foreign trade and environmental protection. Mishandled, the steel case could easily lead to the collapse of the wage guidelines at home and the beginning of a trade war abroad.
Most Americans would agree that the country requires a strong and efficient steel industry -- although not quite so large as the present one. Some of steel's traditional markets are shrinking, the shift to smaller automobiles is one example. There's a national interest in moving to a somewhat smaller scale by a route that does not financially weaken the whole industry or impose suffering on the people who earn their livings in it. But the industry's first choice -- the status quo embellished by higher profits and wages -- is not possible.
The administration's response so far has been an agreement on import pricing that has turned out to be unexpectedly inflationary and disruptive. For technical reasons, it hinges on the dollar-yen exchange rate, and when the yen rose, the price of steel rose with it. When the yen fell, it allowed imported steel to undercut American prices again. That whole agreement was originally intended to be only temporary and clearly won't last much longer.
The steel wage negotiations are following a procedure designed to produce a contract by mid-April. President Carter might usefully let the negotiators know that he is aware of the public implications of the outcome. Imports will continue to be a healthy and necessary pressure on the domestic steel industry. Beyond that, the companies and the unions will be entitled to White House sympathy in direct relation to their observance of the wage guidelines. If Mr. Carter wants to tighten his inflation policy, the steel contract is not a bad place to start.