Authors
1 Faculty member of the Faculty of Economics, Allameh Tabatabai University
2 PhD student at Allameh Tabatabai University
Abstract
Steel production is considered as a mother industry playing perhaps the most fundamental role in all aspects of national economy. Steel production has traditionally been a state monopoly in Iran, although some private sector investment has been encouraged in recent years. Major plants at present are the Ahwaz Steel Mill in Khuzestan province, and the Isfahan Steel Mill and Mobarakeh steel complex in Isfahan province. They are operated by the state National Steel Corporation with the prices administered by the government.
The present study is an attempt to analyze the effects of protectionism in the steel industry in Iran to find out circumstances in which the industry may operate in a competetive environment in the future. We have applied three major factors assumed to be effective criteria in determining the consequences of state protection measures in steel production. They are: Nominal Protection Rate, Effective Protection Rate, and Domestic Resource Cost (DRC). To present a reasonable criteria, shadow pricing method is used for foreign exchange rate, energy cost, costs of primary resources (labour and capital), and non-tradeable inputs to construct input-output table for the 1990 and 1995 figures.
The analysis reveals that protectionist policy in the steel industry is highly sensitive to changes in the exchange rate and costs of energy since the effects of tariff and non-tariff protection measures are heavily influenced by them. There exists apparently comparative advantages in steel production under protectionist policy. But steel production would not be economically viable and competetive if energy costs are charged using the world energy pries. In this paper, we suggest using the remoral of protection measures through a well-prepared short-term scheme to make the steel industry capable of adapting to new circumstances of world competition awaiting all major industrial production.
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