The last post dealt with the unreality of finding the workers required to make it all in the U.S. President Trump almost daily continues to announce a company or nation will invest billions in production in America. According to our leader, we’re bringing back all those good-paying jobs that left our Rust Belt states in despair. However, Hyundai’s proposed steel mill in Louisiana may be the exception that proves the rule.

Since the 1970s, the U.S. steel industry, mainly in the Midwest, has been retreating. Foreign competitors used their comparative advantages to deliver quality products at better prices. The fate of U.S. Steel illustrates the decline. Once dominant, with its vast mills in places like Gary, Indiana, and Pittsburgh, Pennsylvania, it’s now a weak minor player subject to absorption by Nippon Steel.

In towns like Gary, Indiana, well-paid steel union members lived comfortable middle-class lives. Now, like their primary employer, the decline is evident. Even with ongoing government protections, U.S. Steel isn’t competitive.

So if the rule is that significant U.S. steel production isn’t competitive on the world market, why is Hyundai bucking the trend? Tariffs play a part, but they’ve only kept the industry on life support. Does Hyundai see a comparative advantage?

This plant will be an electric arc facility that will consume much reliable power. Where better to locate than a place where natural gas is plentiful? This plant highlights our comparative advantage in energy production. In the modern world, machines do the heavy lifting, requiring inexpensive, reliable energy sources. If the government doesn’t get in the way, the U.S. has an energy cost advantage over almost all other nations.

Germany has learned this the hard way. Using cheap Russian natural gas to run its industrial complex, it produced the products that made the nation a great exporter. The Ukraine war cut its Russian gas imports while it was bringing online only unreliable wind and solar to replace its nuclear plants. Germany is struggling because it’s burning coal and importing more expensive natural gas.