“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”
PRESIDENT RONALD REAGAN, JUNE 28, 1986
US CHINA TRADE WAR JUNE 16, 2017
Trump’s trade war on downstream industries continues with exhibit number 1 being the Section 232 Steel case. As indicated below, numerous comments were filed May 31st by downstream steel users saying that tariffs on steel imports will devastate their business and cost millions of jobs.
But the question is whether anyone is listening. Commerce is rushing to turn out the Section 232 report by the end of June. But it has received numerous comments, but many of those comments are only a few pages long. The hearing itself limited testimony from each company to 10 minutes each.
When the US International Trade Commission (“ITC”) conducts a injury investigation in steel cases, it sends out numerous multiple page questionnaires to US Steel Producers, US importers, foreign producers and even US purchasers. In addition to those questionnaire responses, it will often have prehearing and posthearing briefs that are many pages long. In the recent Cold-Drawn Mechanical Tubing case, for example, we filed a brief that was over 200 pages long.
Now all Commerce Secretary Ross will have is the arguments of the US Steel industry and no in depth data regarding what the impact of these trade restraints will have on downstream users.
Moreover, there is a rush to judgement in the Section 232 cases. In the ongoing Solar Cells section 201 case, which is comparable to the Section 232 case, the ITC will take 6 months to make its injury determination, 2 months to make a remedy determination. The ITC will hold two hearings, send out numerous questionnaires and large briefs will be filed. Not in the Section 232 case, which is only 2 months long.
Although the Section 232 Steel report is due at the end of June, President Trump is stating that the Aluminum Section 232 Steel report should come out at the end of June when the hearing is on June 22nd and comments are not due to June 30. This is truly a rush to judgement without due regard to the impact on downstream users.
As indicated below, on trade President Trump and President Ronald Reagan are diametric opposites, and Reagan understood that protecting one industry hurts other industries.
Meanwhile, new antidumping and countervailing duty cases have been filed against Fine Denier Polyester Staple Fiber and Citric Acid and ITC and Commerce deadlines are very, very strict. Also Commerce has ruled Aluminum Pallets are in the Aluminum Extrusions case.
The Section 201 case against imports of solar cells from every country continues. Border Adjustment taxes are still an issue and NAFTA negotiations will start up, but Trump has told Lighthizer to do no harm to agriculture, which is going to be difficult to pull off.
Again, maybe this is why Trade Adjustment Assistance to Companies is so important.
If anyone has any questions or wants additional information, please feel free to contact me at my e-mail address [email protected]
TRUMP’S TRADE WAR
Trump’s trade war continues as downstream steel user industries finally wake up to the damage they could face. In the Section 232 case, on May 31st, numerous downstream industries from automobiles, equipment manufacturers, forging industry, industrial fasteners, motor and equipment manufacturers, electrical machinery manufacturers, transformers, heavy trucks, and other companies that use steel products filed short public comments stating cutting off their steel raw materials would devastate their companies.
But Trump himself cannot wait to impose tariffs. On June 8, 2017, Politico reported that:
President Donald Trump appears to be champing at the bit to impose steel import restrictions under a national security probe being conducted by the Commerce Department. In a speech Wednesday in Cincinnati, Trump indicated major action was coming quickly and that it could affect countries besides China, which is often blamed for creating a global steel glut.
“Wait until you see what I’m going to do for steel and for your steel companies,” Trump said. “We’re going to stop the dumping, and stop all of these wonderful other countries from coming in and killing our companies and our workers. You’ll be seeing that very soon. The steel folks are going to be very happy.”
But big US steel consumers, like machinery, auto, energy, including oil and natural gas, are not going to be happy and are extremely worried that Trump’s trade action will damage their US industries and cause companies to close costing millions of jobs. In Trump’s desire to move quickly to protect the steel industry, he could well damage many other US industries in the process. This has happened before and likely will happen again.
As the National Foreign Trade Council, which represents more than 200 companies, stated in its public 232 comments filed at the Commerce Department on May 31, 2017:
In considering whether to impose restrictions on steel imports for national security reasons, it is important to keep in mind two important facts about those industries that rely on steel as a key input to their production. First, steel-consuming companies producing goods in the U.S. account for a vastly greater share of total manufacturing output and employment than does the domestic steel industry itself. The U.S.- based auto and auto parts industry employs over 800,000 production workers, more than four times as many as are employed by U.S. steel producers. The construction industry, which accounts for a majority of all steel consumption, employs nearly 8 million production workers. Many other steel-consuming sectors have larger employment than the steel sector.
Secondly, many steel-consuming companies are also major suppliers for our nation’s defense-related needs, building the ships, aircraft, machinery, high technology weapons and other goods that a modern military demands. Therefore, these downstream industries are critical to the U.S. industrial capacity and the nation’s security is weakened if the production capacity of these industries is curtailed. Because of these two factors – employment effects and national security needs – it is of utmost importance to weigh carefully the potential effects of higher steel tariffs or restrictive quotas on these steel-consuming sectors.
On June 14th Politico reported that Congress is now getting concerned about the impact of the Section 232 case and that Trump administration officials will hold staff-level briefings with the Senate Finance and House Ways and Means committees on June 16th to lay out the context and process for an investigation into the national security threats of steel imports
Apparently, Commerce Department officials are still debating what products should be covered and from where. One question is whether semi- finished steel, imported and fabricated into various products, should be exempt.
The big question still at issue — what is the magnitude of the national security concern? Disagreement among top White House officials could be partly to blame for slowing the report. Some in the Trump administration see the threat extending all the way to steel used in infrastructure projects while others see it limited strictly to steel used in the defense-industrial base.
Another question is whether to give a pass to steel imports from Canada and Mexico under certain circumstances. There’s also statutory authority for treating Canada as a defense partner, which could eliminate any consideration of imports from north of the border as a threat to national security.
Politico reports that the Commerce Department is expected to present three options to the President:
- A 25 percent tariff that would apply to any steel imports that fall in the scope of the investigation. The tariff would also apply to all existing anti-dumping and countervailing duty orders.
- A tariff-rate quota that would hit imports with a tariff once they exceed a certain volume. There is also discussion of an alternative that would apply tariffs if imports dip below a certain price, but there is concern that Commerce or USTR may not have the resources to set up a sophisticated system to monitor prices across a range of steel
- A straight quota that would apply strict limits on imports of certain types of steel products from certain countries.
Politico also indicated another concern whether Commerce and USTR have the manpower to effectively implement and administer any of these trade actions? Sources said that concern is one element driving the debate over what specific trade action to take.
Chairman Kevin Brady of House Ways and Means also expressed his concern with the Section 232 case at The Wall Street Journal’s annual CFO conference, stating:
“Any administration has to be careful in its assessment and its implementation of those provisions. Done incorrectly, it can send a very protectionist signal to other countries to do the same. It is a tool that has to be wielded very carefully.”
Chairman Brady should be concerned because of the strong possibility of retaliation. As the US Wheat Associates stated in their May 31st comments to the Commerce Department:
Wheat is often viewed as an import sensitive industry in many countries that are export destinations for U.S. farmers. Before taking action under Section 232, the Department of Commerce should consider the fallout if other countries follow suit and impose restrictions on U.S. wheat or other products as a result of their own national security concerns, whether real or imagined.
U.S. Wheat Associates is extremely concerned about the potential ramifications of import protections based on national security arguments. Under the 1994 General Agreement on Tariffs and Trade (GATT) Article XXI, national security can be a legitimate reason to restrict trade, but this has been rarely cited for very good reason: Article XXI is the Pandora’s Box of the GATT. If it is opened for our import sensitive industries, the results could be devastating.
Outside of a few obvious, generally uncontested areas, such as trade in weapons and nuclear material, most trade in goods are not considered national security issues because the implications are enormous. Steel and aluminum are undoubtedly import sensitive products. But the Department of Commerce should think very carefully about the potential consequences of declaring steel and aluminum imports to be national security concerns.
The U.S. wheat industry is highly dependent on exports, with roughly half of U.S. wheat production exported each year on average. . . However, anytime a trade restriction is put in place, there is the potential for it to be applied to U.S. exports in response, particularly if trade restrictions are imposed outside the World Trade Organization (WTO) dispute settlement system. . . .
U.S. farmers also rely on international commitments made by countries in the WTO and other trade agreements to keep markets open. However, not every country abides by those rules, and a radical shift by the United States in its respect for trade commitments could give effective ammunition to those who seek to stop or slow food imports under the guise of national security. . . .
As indicated further below, when it comes to trade, people need to understand that Donald Trump and Ronald Regan are 180 degrees, diametrically opposite. Reagan was a true free trade, but President Trump is a protectionist. Although his protectionist rhetoric is probably a very good reason for his election victory, especially as it relates to trade agreements, such as TPP and NAFTA, the problem with protectionism is the collateral damage to other US industries. When one wants to protect raw material industries very quickly with not enough time to consider the full impact of a protectionist action, the collateral damage on other US industries can truly be devastating. The protectionist cure can be much worse than the trade disease. Not only in Steel, but also aluminum.
TRUMP’S TRADE WAR ON DOWNSTREAM INDUSTRIES—SECTION 232 STEEL CASE
The real impact of the Trump Steel War on downstream industries is illustrated in spades by the public comments in the Section 232 Steel case by steel consuming industries. As stated in the last blog post, in response to pressure from President Trump, Commerce Secretary Ross has self-initiated National Security cases under Section 232 of the Trade Expansion Act of 1962, 19 U.S.C. 1862, against imports of steel and aluminum, which go directly into downstream US production. The danger of these cases is that there is no check on Presidential power if the Commerce Department finds that steel or aluminum “is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security, the Secretary shall so advise the President”. The Secretary shall also advise the President on potential remedies.
If the Secretary reports affirmatively, the President has 90 days to determine whether it concurs with the Secretary’s determination and “determine the nature and duration of the action that, in the judgment of the President, must be taken to adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security.”
Once the President makes his affirmative determination, he will report his decision to Congress, but it is questionable whether Congress can disapprove the decision. The statute also does not provide for any appeal to the Court of International Trade. Commerce also is very protectionist and in antidumping and countervailing duty cases. The only check is the injury determination by the independent US International Trade Commission. There is no such determination under Section 232.
On April 20, 2017, President Trump and the Commerce Department in the attached press announcement and fact sheet along with a Federal Register notice, Presidential Memorandum Prioritizes Commerce Steel Investigation _ Department of Commerce Section 232 Investigation on the Effect of Imports of Steel on U.S COMMERCE FED REG SECTION 232 NOTICE, announced the self-initiation of a Section 232 National Security case against imports of steel from every country. See video of Trump signing the Executive Order with Secretary Ross and Steel Producers at https://www.youtube.com/watch?v=EiVfNOl-_Ho.
Commerce held a hearing on May 24th in this case. The video of the hearing can be found at https://www.commerce.gov/file/public-hearing-section-232-investigation-steel-imports-national-security.
Although Section 232 investigations usually take 6 months, at the hearing, Ross stated that a written report would go to the President by the end of June in less than two months. At the start of the hearing, Commerce Secretary Wilbur Ross said something has to be done to help the Steel producers. In the past Secretary Ross has stated that the Section 232 case is meant to fill the gaps created by the patchwork of antidumping and countervailing duties on foreign steel, which he said have provided only limited relief to the U.S. industry.
On May 31, 2017, public comments were filed at the Commerce Department on the Section 232 Steel case. These are some of the comments by the Downstream Steel Users.
AMERICAN AUTOMOTIVE POLICY COUNCIL (AAPC)
The AAPC represents the common public policy interests of its member companies – FCA US, Ford Motor Company and General Motors Company, and states the following in its May 31st comments:
Although sympathetic to the challenges the steel industry faces, we are concerned that if, as a result of this Section 232 investigation, the President were to increase tariffs on foreign steel or impose other import restrictions, the auto industry and the U.S. workers that the industry employs would be adversely affected and that this unintended negative impact would exceed the benefit provided to the steel industry from this Executive action.
Steel is a critical input into the manufacture of automotive products. The price of steel in the United States is already significantly higher than in the markets where our competitors build the majority of their cars and trucks. This puts U.S. automakers at a competitive disadvantage.
Inevitably, the imposition of across the board higher tariffs or other restrictions on imports of steel into the United States would only widen the existing price gap by increasing the price of U.S. steel and thus the cost of U.S.-built vehicles. Additionally, outside of the United States, the price of steel will fall further, giving foreign automakers an additional cost advantage over the U.S. auto industry.
As a result of such a Section 232 remedy, sales of domestically-built cars and trucks would fall, auto exports would shrink, and American auto sector jobs would be lost. In the end, this contraction could actually reduce the amount of U.S. steel consumed by U.S. automakers, jeopardizing the very industry the remedy was intended to assist. . . .
The U.S. automotive industry makes significant contributions to the U.S. economy, with FCA US, Ford Motor Company and General Motors Company representing the majority of the following 2016 economic contributions.
- Directly employing/supporting more than 7.3 million American jobs- including manufacturers of auto parts, steel, glass, plastics, rubber and semi-conductors;
- Exporting $137 billion in vehicles and parts, more than any other U.S. industry sector;
- Manufacturing 12.2 million cars & trucks;
- Representing 8% of the manufacturing sector’s contribution to GDP on a value added basis;
- Investing $8 billion in U.S. plants/equipment, and nearly $20 billion in R&D; and
- Selling a record 17.5 million cars and light
The AAPC concludes:
While we strongly support the Administration’s focus on ensuring that our trading partners live up to their commitments and abide by their trade-related obligations, actions taken as a result of this Section 232 investigation to restrict imports of steel, in order to support the U.S. steel industry, could have unintended negative consequences for the domestic automotive industry and the millions of American workers it directly and indirectly employs.
Any such restrictions that this Administration might implement would lead to an increase in the price of U.S. steel and depress the price of steel in foreign markets. This would lead to lower sales of domestically-built cars and trucks in the highly competitive U.S. auto market, a decrease in U.S. auto exports, and a loss of the jobs that those economic activities support. In the end, that would be a net-negative for the U.S. economy, and potentially the U.S. steel industry – the very sector such restrictions were designed to assist.
ASSOCIATION OF EQUIPMENT MANUFACTURERS (“AEM”)
AEM Represents 950 member companies that manufacture equipment and provide services for the construction, agriculture, utilities and mining sectors worldwide. These manufacturers represent 1.3 million Americans, contribute $159 billion to the U.S. economy and raise over $25 billion in federal and state taxes each year. As AEM states in its comments:
Manufacturing equipment in America frequently requires the sourcing of steel products from around the world. While manufacturers in the United States often procure steel from domestic suppliers, they at times must source steel from international producers because the steel’s formula matches a specific spec required to ensure a piece of equipment’s proper function and performance that is not otherwise available in the United States. Inhibiting access to foreign steel will force manufacturers to procure steel from a domestic supplier that may not match required specifications, thus degrading the quality and performance of the equipment and risking operational safety concerns. In cases where a particular type of steel is available from domestic suppliers, a sudden surge in demand will likely lead to extended procurement timeframes and delays in the manufacturing process.
Restricting the import of foreign steel will also ultimately have a very negative impact on the manufacturing competitiveness of the United States as domestic steel prices rise, and global steel prices fall when steel originally destined for the US enters global markets. With nearly 30 percent of equipment manufactured in the U.S. designated for export, U.S. manufactured exports will become uncompetitive in many global markets if manufacturers are forced to pay higher prices for necessary steel inputs. In addition, restricting raw material imports hurts American jobs by driving up the costs of value-added manufacturing in the U.S. Furthermore, imported manufactured equipment will become much more competitive in the U.S. market as foreign manufacturers are able to produce and sell equipment at a much lower price by leveraging global steel markets.
CATO INSTITUTE—FORMER ITC COMMISSIONER DAN PEARSON
Former ITC Commissioner Dan Pearson presently at the Cato Institute made the following points:
First, the 232 investigation must be understood in the context of the existing U.S. steel marketplace. Roughly 200 antidumping or countervailing duty measures already are in place on steel products from a variety of countries. Steel currently is one of the most protected sectors in the U.S. economy. . . .
Third, any further import restrictions would do far more harm to steel-using manufacturers than any benefit that could be provided to steel mills. That is simply due to the raw numbers. Steel mills employ just 140,000 workers. Downstream manufacturers that use steel as an input employ 6.5 million, 46 times more. Steel mills account for a fairly small slice of the overall U.S. economy. The $36 billion in economic value added by steel mills in 2015 equals only 0.2 percent of U.S. Gross Domestic Product (GDP). By contrast, the economic value added by firms that use steel as an input was $1.04 trillion – 29 times more – or 5.8 percent of GDP.
Any government action to drive up steel prices by restricting imports will hurt steel-consuming manufacturers by artificially increasing their steel costs and reducing their competitiveness relative to companies overseas. It’s clear that the broad public would be harmed by additional steel import restrictions. A decline in U.S. economic welfare is not something the administration ought to pursue. It’s very difficult to have a stronger national defense when the economy is getting weaker.
FORGING INDUSTRY ASSOCIATION
The Forging Industry Association (FIA) is the Association representing the US forging industry. The Comments state:
In 2016, custom forgings accounted for nearly $10.5 billion of sales in North America. An additional $3-5 billion in catalog and captive sales would bring the industry total for 2016 to the $13.5 – 15.5 billion range. The North American forging industry is comprised of nearly 500 forging operations in 38 states, Canada and Mexico, with the largest US presence of forging operations located in Ohio (79), Pennsylvania (63), Illinois (54), Michigan (54), California (38), Texas (41), New York (16), Indiana (18), Wisconsin (17), Kentucky (13), Massachusetts (10), and South Carolina (9). . . .These operations provide more than 36,000 well-paid jobs and benefits.
As noted above, the steel forging industry supplies many products essential to national security, including numerous tank and automotive forgings for combat vehicles, small caliber weapons forgings, ordnance forgings, and forgings used in building airplanes, helicopters, ships and submarines. . . .
US steel forgers rely almost exclusively on domestically-produced SBQ steel. SBQ is specialty steel long products made to customer specifications suited for forging into the final product. Because it is heavy, bulky and expensive to ship long distances, the forging industry depends upon a healthy, competitive domestic SBQ steel industry to provide necessary raw material at globally competitive prices for steel forging here in the U.S. The “globally competitive prices” are critically important – if the price for domestic SBQ steel is higher in the U.S. than anywhere else in the world due to tariffs or trade restrictions, then we begin to see less imports of raw material and more imports of downstream products.
The US steel forging industry relies heavily on 6 domestic SBQ steel producers with mills in multiple locations. SBQ steel imports accounted for 15% of the consumption in 2016, and domestic consumption was 4 million tons of SBQ steel, while SBQ imports totaled only 600,000 tons. This import volume has remained relatively flat over the past few years. . . . Generally speaking, we do not believe the SBQ steel industry has been adversely affected by steel imports. The domestic SBQ steel market is currently running close to capacity, and producers recently announced substantial price increases.
While SBQ raw material import penetration has been relatively insignificant, the import of steel forgings has grown significantly and at an ever increasing rate, threatening the health and viability of the domestic steel forging industry. . . .
In effect, when current trade laws are used to remedy injury in one subsector of the economy, such as steel, they often shift the injury to another tier within the manufacturing sector.
INDUSTRIAL FASTENER INSTITUTE (“IFI”)
The IFI represents approximately 85% of fastener production capacity in North America, and there are few, if any, products used in the pursuit of national security that do not contain fasteners.
In its comments, the IFI stated:
In 2015, the U.S. fastener industry accounted for $13.4 billion (of a $69.6 billion global market), and is projected to grow +2.6% per year to roughly $15 billion by 2020. In the U.S., the fastener industry employs approximately 42,000 people at about 850 different manufacturing facilities. . . ..
The fastener industry is critical to all segments of our manufacturing industrial base, including the defense industry. .
Fastener manufacturing is a major consumer of metals, including steel. Since fasteners can be made anywhere in the world, the U.S. industry is dependent on access to adequate supplies of globally priced raw materials such as steel to remain globally competitive. . . .
However, even with a healthy domestic industry, history has shown that fastener manufacturers must sometimes import raw material because the particular types of steel needed are not available in the quantities, quality or form required. (Fasteners are made out of round form, not sheet, flat or bar products.) By some accounts, the U.S. steel industry is able to produce only about 70 percent of the total steel consumed in the U.S. . . .
No one disputes that unfair trade exists, and that trade remedy laws can be a useful tool to combat it when it occurs. However, while the trade remedy laws can provide some protection for domestic metals producers, they are a double-edged sword for downstream users such as fastener manufacturers, who may be negatively impacted by higher raw material costs and may not be able to fully utilize the trade remedy laws themselves. In particular, downstream users of products subject to trade remedies have no standing under U.S. law to participate in the process that may lead to the imposition of duties on those products. In addition, these downstream users are likely to be smaller companies who do not have the financial resources to pursue trade cases, which can cost millions of dollars to fully prosecute.
The fastener industry has experienced this scenario many times, where efforts to protect a basic raw material segment of the economy create unintended consequences throughout the rest of the economy. The most recent example occurred in 2002, when President Bush, at the urging of the U.S. steel industry concerned about a surge of imports, imposed 30% tariffs on nearly all imported steel under a Global Safeguard action. The impact on steel consuming industries was immediate and devastating. The evidence of harm to the broad economy grew quickly, leading President Bush to terminate the Global Safeguard order after only eighteen months instead of the full three years, but by then 1.3 million manufacturing jobs in steel consuming and related industries had been lost.
The fastener industry not only understands the need to ensure that the U.S. has the necessary industrial capacity to provide for our national defense needs, we are a vital part of that very capacity. To be frank, steel is a commodity until somebody makes it into a part/end item. We are concerned that the proposed 232 investigation will not give proper consideration to the importance of downstream industries to that industrial capacity.
MOTOR & EQUIPMENT MANUFACTURERS ASSOCIATION (MEMA)
MEMA represents 1,000 vehicle suppliers that manufacture and remanufacture components and systems for use in passenger cars and heavy trucks providing original equipment (OE) to new vehicles as well as aftermarket parts to service, maintain and repair over 260 million vehicles on the road today. In its comments, the MEMA stated:
the total employment impact of the motor vehicle parts manufacturing industry is 4.26 million jobs. Nearly $435 billion in economic contribution to the U.S. GDP is generated by the motor vehicle parts manufacturers and its supported activity. In total, motor vehicle parts suppliers contribute more than 77 percent of the value in today’s vehicles. .
Free and fair trade is imperative for a strong domestic supplier industry. Disruption to supply chains or increases in production costs will not contribute to the national security of the United States.
Our industry is closely associated with the U.S. defense industry. . . . Adjustments to steel imports that prevent our members from obtaining the type of steel they need in a timely manner or increases to production costs would jeopardize our ability to manufacture in the United States and to provide these critical products to the U.S. defense industry.
Adjustments to steel imports will adversely impact MEMA member companies by disrupting U.S. manufacturing operations and increasing costs. Suppliers expect adjustments to steel imports to cause job losses due to a decrease in production if steel is not available in a timely manner or the costs of production increase. Adjustments to steel imports would also be likely to decrease overall U.S. production because production of the downstream products using steel subject to such adjustments would move abroad.
Member companies would have to compete with those finished goods imports, which likely would take market share from MEMA member companies. Finally, other countries may retaliate against the U.S. for imposing such restrictions by imposing their own restrictions, which could detrimentally impact exports of MEMA member companies.
MEMA member companies need specialized steel that either is not available at all in the U.S. or is not available in sufficient quantities. Certain foreign steel producers worked closely with MEMA member companies to develop the specialized steel and this type of collaboration benefits the U.S. by improving products. Continued access to these types of steel are critical to our industry. Attached to these comments is a non-exhaustive list of steel products that must be excluded from any import adjustments (see Appendix I). Several of our member companies are submitting exclusion requests directly as well. . . .
Motor vehicle component and systems manufacturers are the largest employers of manufacturing jobs in the U.S. and many of these companies import steel of all types, including specialized steel products, to manufacture goods in the U.S. that are then sold to the U.S. defense industry, U.S. government and consumers. Disrupting American manufacturing operations or increasing costs through adjustments to steel imports would not benefit the national security of the United States. Such adjustments to steel imports would, in fact, detrimentally impact U.S. employment, compromising our economic and national security.
NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION (NEMA)
NEMA represents nearly 350 electrical and medical imaging manufacturers and stated in its comments:
Our combined industries account for more than 400,000 American jobs and more than 7,000 facilities across the U.S. Domestic production exceeds $117 billion per year and exports top $50 billion.
Many NEMA member companies import specific types of steel from abroad for their U.S. manufacturing operations. Accordingly, NEMA urges the Administration to refrain from recommending or pursuing measures to adjust imports of fairly-traded electrical steel.
Power and distribution transformers are essential components of the U.S. electrical grid. Grain oriented electrical steel (GOES) can be the most expensive material used in the manufacture of transformers as the steel core is a very large percentage of the overall cost of a transformer, more than 50% in some cases. GOES is also the most important material in terms of quality and performance of a transformer. . . .
Some electrical steels are imported into the U.S. because they are not available from domestic or North American suppliers. Loss of access to these materials would cause grave harm to NEMA manufacturers, who would no longer be able to manufacture and supply DOE-compliant products, and their customers – which include U.S. electric utilities as well as tens of thousands of industrial, commercial, and defense/national security facilities – but would have no effect on domestic or North American steel manufacturers, since they do not manufacture/produce or offer for sale those materials today.
The significant anti-dumping and countervailing duties in place have effectively eliminated supply from the seven largest NOES-producing countries. There is only one North American producer of NOES, who is effectively petitioning the government to become a protected monopoly.
If access to NOES were to be restricted further based on this Section 232 investigation, U.S. production of finished goods would face even greater pressure to move outside the United States.
U.S. motor manufacturers should not be forced by government policy to purchase from only a single U.S. monopoly supplier.
U.S. electrical manufacturers compete in a global market. Measures to restrict or block access by U.S. finished-product manufacturing operations to fairly-traded essential materials will harm domestic manufacturing and high-paying manufacturing jobs, and national and economic security. It would be patently unacceptable and un-American for the U.S. government to prevent U.S. manufacturers to mitigate supply chain risks through the use of a diversity of suppliers of fairly-traded materials.
Similarly, suggestions that the federal government should place restrictions, on national security grounds, on the importation of fairly-traded components and finished goods could not be more misguided. If products are entering the U.S. at less than fair value and causing injury to a domestic industry producing like products, then U.S. trade remedy laws are in place to address such situations. Steel manufacturers/producers do not have standing to call for restrictions on fairly-traded imports of products that they do not manufacture; therefore motors, transformers and steel cores (regardless of size) should not be part of this Section 232 discussion.
Many commentators, including US Auto Parts companies, requested exclusion of their specific type of imported steel because the US steel producers could not produce the specific type of steel used to make the downstream products.
In its comments, Borg Warner, a large US auto parts company, first listed 18 different specific types of steel and parts produced from that steel and went on to state:
The list above is crucial to our U.S-manufactured products that require types of specialty steel that are not available domestically. The products we make with these specialty materials provide key essential vehicle propulsion technologies for improving fuel-efficiency, emissions, and performance. These technologies are critical in helping automakers meet federal regulations for Corporate Average Fuel (CAFE) standards and achieving better overall environmental conditions.
These technologies take many years to refine and often require specialized materials in its engineering and production. We have worked closely with these specialty steel suppliers to develop our products to ensure quality and affordability for our customers and consumers. Any major changes to our supply chain could hurt our engineering and manufacturing processes, delay production, and or jeopardize our ability to meet the vehicle production demands of the industry. If these steel exclusions are not granted, the cost of these types of products would increase and ultimately be passed onto the consumers in the overall price of the vehicle. Most importantly, a major shift in steel supply could hurt U.S. vehicle sales and therefore negatively impact U.S. automotive manufacturing jobs.
BSH HOME APPLIANCE
In its comments, BSH states that it manufactures appliances sold under the Bosch, Thermador and Gaggenau names at factories in North Carolina and Tennessee, with warehouses, sales offices and show rooms throughout the United States. BSH further states in its comments:
If the Department decides that some steel is being imported into the United States in such quantities or under such circumstances as to threaten or impair the national security, BSH requests that steel used for home appliances—light gauge sheet metal, galvanized pre-painted steel, and light gauge stainless steel—be exempt from that determination. . . .
Steel is one of the main materials used by home appliance manufacturers in the construction of their products. In particular, home appliance manufacturers typically use light gauge sheet metal, galvanized pre-painted steel, and light gauge stainless steel in the construction of their products. These materials are critical to the design, function, and durability of home appliances and, should the Department decide to recommend action, we ask that the steel used for home appliances be exempt.
First, we are concerned that any action to ban or limit the quantity of steel imported into the United States will overly burden U.S. steel capacity. U.S. steel capacity is insufficient to meet the demands of industry, including the home appliance industry. Were steel to become more difficult to source, it would hamper the industry’s ability to deliver products to consumers. In addition, some manufactures use specialty steel that is simply not available in the U.S. and must be sourced internationally.
Second, foreign competition in the steel industry improves the welfare of the home appliance industry, which is a low margin business. Competition between U.S. steel producers and international steel producers results in lower steel prices. Without this competitive pricing, it is likely that the home appliance industry could become less competitive and/or, in some cases, would need to pass price increases onto consumers.
Moreover, an action to impose a ban or limit on the quantity of steel imported into the United States or a tariff on steel imports is a disincentive to manufacture home appliances in the United States. It is likely that, in response to such actions, companies producing products domestically would be at a disadvantage compared to products produced internationally. Thus, limits on imported steel and/or tariffs on imported steel could result in companies deciding to produce home appliances outside of the United States in an effort to avoid higher steel prices or the unavailability of domestic steel. . . .
The Department and the President must ensure that in assisting one industry, they do not negatively impact others.
BUSINESS AND INSTITUTIONAL FURNITURE MANUFACTURERS ASSOCIATION (“BIFMA”)
BIFMA is the trade association for business and institutional furniture producers and is the Association for the commercial furniture industry. BIFMA stated in its May 31st comments:
It is difficult to imagine how it is in our national security or national economic interests to impose tariffs or quotas that risk thousands of jobs in steel-consuming industries. Disregarding or discounting the economic impact of adjustments on consuming industries could have serious and unintended consequences. We urge the Department to refrain from, or carefully limit, any import adjustment recommendations.
Any adjustment to steel imports is likely to increase steel prices domestically. Adjustments that restrict supply and increase costs domestically will cause significant, negative financial consequences for companies. A sudden increase in material costs would be extremely detrimental for our members and the customers that they supply . . . . We urge the Department to take into consideration the serious ramifications to steel- consuming manufacturers while considering any recommendation it may make to the President.
STEEL BUILDING AND CONSTRUCTION COMPANIES
In its May 31st comments, more than ten steel building and construction companies stated:
Our companies produce building materials, such as prefabricated building sections, roofs, etc. from galvalume and galvanized steel coils. Our companies are very concerned about the threat to our company’s future if the imports of flat rolled galvalume steel we rely on are restricted by additional tariffs or quotas. Only a few American mills produce galvalume at all; those mills are not interested in selling this at a competitive price to most users. There also are not enough mills producing this product to satisfy demand. Only certain selected customers are able get pricing at competitive levels. Without access to imported galvalume, our ability to compete will be reduced or eliminated.
American national security is not threatened by imports of galvalume. Not only are coated products not used in defense applications; most American mils are profitable, to the extent that they are expanding their coated steel operations, not reducing them. . .
We urge you to not restrict the steel imports that are vital to our survival.
Several transformer manufacturers stated in their comments:
The proposal made in oral comments that the Department initiate remedies on the import of electrical grade steel, including GOES, deeply troubles the Transformer Manufacturers. This proposal presumes that the importation of GOES or cut steel for use in power transformers is a threat the national security. We propose that protecting the interests of the domestic transformer manufacturers and their employees is more vital to national security than the risk associated with importing GOES, which only accounts for a portion of the total market. One thing is certain of the proposal if adopted as recommended, it will severely damage the domestic transformer marketplace, the underlying companies and their United States employees. . . .
Simply put, at present there is no other domestic alternative to AK Steel as a source of GOES. Granting its requested relief will, in effect, further entrench a domestic de facto monopoly for GOES. While each of the below entities wants to continue to work with AK Steel and maintain positive commercial relationships, the potential economic impact of an unrestricted sole-source domestic provider could be devastating on the domestic transformer manufacturing industry.
TRUCK AND ENGINE MANUFACTURERS ASSOCIATION
EMA represents the world’s leading manufacturers of heavy- duty commercial vehicles, as well as the world’s leading manufacturers of the internal combustion engines that power the vehicles and equipment used in virtually all applications other than passenger cars and aircraft. In its comments EMA stated:
members maintain significant manufacturing operations in the United States that employ tens of thousands of workers engaged in the manufacture of, among other things: trucks, buses, heavy-duty pickups and vans, construction and agricultural equipment, mining equipment, law and garden equipment, along with the wide array of internal combustion engines that power those myriad applications, as well as the engines that power locomotives and marine vessels. All of those very significant and vital manufacturing operations – operations that quite literally produce the machinery that powers and moves our domestic economy – use significant amounts of steel. As a result, EMA and its members have a significant stake in the DOC’s pending investigation. . . .
While all of those concerns are certainly genuine and significant, there is also a significant national interest in ensuring that domestic manufacturers are not forced to purchase steel at prices that are materially higher than those that prevail in foreign manufacturing markets.
Steel is a key commodity in the manufacture of the goods produced by EMA’s members. In addition, those steel-derived goods are sold into world-wide markets, and so necessarily compete with goods manufactured in multiple foreign locations. To the extent that U.S.-based manufacturers are compelled to pay more for necessary steel inputs than their foreign competitors, they will be at a significant and unfair disadvantage from the outset.
Restrictions on the imports of steel could result in increases in the price of steel based on reduced supplies in the U.S. marketplace. That cost increase, as noted above, could cause significant competitive disadvantages for U.S.-based manufacturers that utilize steel as a key commodity in their manufacturing operations. It also could force manufacturers to pass on higher prices for their finished goods to U.S. consumers, thereby compounding the negative impacts of the increased price of steel in the U.S. Accordingly, in addition to the important concerns that are motivating the DOC’s investigation, the DOC should take into account, and give high priority to, the potential impacts on the competitiveness of U.S.-based manufacturers. A proper assessment of those impacts should be a key component of any recommendation that the DOC submits to the President on this matter.
Previous experience with additional tariffs and related restrictions on steel imports is highly instructive. In 2002, the U.S. government imposed tariffs on a broad range of steel imports over a 3-year period. In subsequent studies of the economic impact of those tariffs, it was found that the tariffs had resulted in a number of unintended adverse consequences, including the following: (i) 200,000 Americans lost their jobs due to higher steel prices; (ii) one-quarter of those job losses occurred in the machinery and equipment, and transportation equipment sectors; (iii) every U.S. State experienced employment losses from higher steel costs; and (iv) steel tariffs caused shortages and higher steel prices that put U.S. manufacturers of steel-containing products at a disadvantage relative to their foreign competitors. The same types of unintended adverse consequences could result in this case, depending on the types of “adjustments” to steel imports that the DOC may choose to recommend as an outcome of the pending study. . . .
Like the chorus in a Greek tragedy, US manufacturers that rely on steel as a key raw material input are crying their warning about imposing restrictions on steel imports. Many more jobs on a factor of 10 could be lost by the restraints than are saved by the restraints. The real question is whether Commerce Secretary Wilbur Ross and President Trump are listening.
On April 27, 2017, President Trump and the US Commerce Department self-initiated a Section 232 National Security case against imports of aluminum from all countries. See the attached documents related to the Case Section 232 Investigation on the Effect of Imports of Aluminum on US National S ALUMINUM FED REG PUB Aluminum Presidential Memo Summary. The hearing will be June 22, 2017 at the Commerce Department.
Trump has indicated that he is expecting the Aluminum report by the end of June. But the hearing will be held on June 22nd with written comments due by June 29th. That certainly shows a rush to protectionist judgment when aluminum users will have the same concerns as steel users.
DONALD TRUMP AND RONALD REAGAN—DIAMETRICALLY OPPOSITE IN ONE IMPORTANT AREA—TRADE
It is important to note that there is one area in which President Ronald Reagan and President Donald Trump are diametrically, 180 degrees opposite and that is trade. None of the news shows that are Pro-Trump and Pro-Republican highlight the trade views of the Gipper, but he was certainly no Donald Trump and Donald Trump is no Ronald Reagan when it comes to trade.
At a time like this, it is important to review President Reagan’s June 28, 1986 speech on international trade. President Reagan knew something that President Trump does not work. Protectionism destroys jobs. As Reagan stated:
Now, I know that if I were to ask most of you how you like to spend your Saturdays in the summertime, sitting down for a nice, long discussion of international trade wouldn’t be at the top of the list. But believe me, none of us can or should be bored with this issue. Our nation’s economic health, your well-being and that of your family’s really is at stake.
That’s because international trade is one of those issues that politicians find an unending source of temptation. Like a 5-cent cigar or a chicken in every pot, demanding high tariffs or import restrictions is a familiar bit of flimflammery in American politics. But cliches and demagoguery aside, the truth is these trade restrictions badly hurt economic growth.
You see, trade barriers and protectionism only put off the inevitable. Sooner or later, economic reality intrudes, and industries protected by the Government face a new and unexpected form of competition. It may be a better product, a more efficient manufacturing technique, or a new foreign or domestic competitor.
By this time, of course, the protected industry is so listless and its competitive instincts so atrophied that it can’t stand up to the competition. And that, my friends, is when the factories shut down and the unemployment lines start. We had an excellent example of this in our own history during the Great Depression. Most of you are too young to remember this, but not long after the stock market crash of 1929, the Congress passed something called the Smoot-Hawley tariff. Many economists believe it was one of the worst blows ever to our economy. By crippling free and fair trade with other nations, it internationalized the Depression. It also helped shut off America’s export market, eliminating many jobs here at home and driving the Depression even deeper. . . .
Sometimes foreign governments adopt unfair tariffs or quotas and subsidize their own industries or take other actions that give firms an unfair competitive edge over our own businesses. On those occasions, it’s been very important for the United States to respond effectively, and our administration hasn’t hesitated to act quickly and decisively.
And in September, with more GATT talks coining up once again, it’s going to be very important for the United States to make clear our commitment that unfair foreign competition cannot be allowed to put American workers in businesses at an unfair disadvantage. But I think you all know the inherent danger here. A foreign government raises an unfair barrier; the United States Government is forced to respond. Then the foreign government retaliates; then we respond, and so on. The pattern is exactly the one you see in those pie fights in the old Hollywood comedies: Everything and everybody just gets messier and messier. The difference here is that it’s not funny. It’s tragic. Protectionism becomes destructionism; it costs jobs.
Now I know that others, including USTR Lighthizer himself, argue that Reagan was not really a free trader. But the trade actions he took, including his appointment of very free traders as ITC Commissioners, show that Reagan deeply understood the dangers of protectionism. He lived through the Great Depression and the effects of the 1930 Smoot Hawley Tariff Act. Donald Trump did not live during that time period and the comments of the US Steel users above indicate that President Trump does not understand the dangers of protectionism.
SOLAR 201 ESCAPE CLAUSE CASE
On May 17, 2017, Suniva filed a Section 201 Escape Clause against all Solar Cell imports from all countries at the US International Trade Commission (“ITC”). On May 23, 2017, in the attached Federal Register notice, ITC iNITIATION NOTICE SOLAR CELLS, the ITC decided to go ahead and institute the case. If the ITC reaches an affirmative determination, within 60 days the President must decide whether or not to impose import relief, which can be in the form of increased tariffs, quotas or an orderly marketing agreements.
At the ITC, Section 201 cases are a two stage process. The ITC must first determine whether “crystalline silicon photovoltaic (“CSPV”) cells (whether or not partially or fully assembled into other products) are being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported articles.” The ITC has determined that the investigation is “extraordinarily complicated” and will make its injury determination within 128 days after the petition was filed, or by September 22, 2017. The Commission will submit to the President the report required under section 202(f) of the Act (19 U.S.C. § 2252(f)(1)) within 180 days after the date on which the petition was filed, or by November 13, 2017.
Notices of appearance at the ITC are due on June 22nd at the ITC. During the injury phase of the investigation, the ITC will hold an injury hearing on August 15, 2017. Prehearing briefs are due at the ITC on August 8, 2017. Posthearing briefs will be due at the ITC on August 22nd.
If the ITC reaches an affirmative determination, it will go into a remedy phase and the hearing in that phase will be on October 3, 2017.
COMMERCE AND ITC DEADLINES ARE VERY VERY STRICT
In the ongoing Tool Chests from China antidumping case, Commerce just bounced nine Separate Rates Applications from Chinese companies filed by a US law firm on the due date because of computer problems at Commerce and the law firm. Most documents are now filed electronically at both the Commerce Department and the International Trade Commission in trade cases. Computer problems and other filing issues are why we are so paranoid about Commerce and ITC deadlines and try to file documents, if possible, before the deadline date.
Computer systems including the Commerce and ITC computer systems, can have problems and one can miss the deadline. If deadlines are missed, truly there is hell to pay.
ALUMINUM PALLETS ARE WITHIN THE SCOPE OF THE ALUMINUM EXTRUSIONS CASE
In the attached memorandum, PALLETS IN ALUMINUM EXTRUSIONS CASE, to prevent circumvention, the Commerce Department has determined to include aluminum pallets in the Aluminum Extrusions case. In one situation, one Chinese producer/exporter exported 1000s of aluminum pallets into the US in an attempt to evade the antidumping (“AD”) and countervailing duty (“CVD”) orders on Aluminum Extrusions.
NEW TRADE CASES
ANTIDUMPING AND COUNTERVAILING DUTY CASES
FINE DENIER POLYESTER STAPLE FIBER
On May 31, 2017, DAK Americas LLC, Nan Ya Plastics Corporation, America, and Auriga Polymers Inc. filed an AD and CVD petition against imports of Fine Denier Polyester Staple Fiber from China, India, Korea, Taiwan, and Vietnam. The preliminary determination in the CVD case is due October 28th and the AD Preliminary Determination is due December 27, 2017.
CITRIC ACID AND CITRATE SALTS FROM BELGIUM, COLOMBIA AND THAILAND
On June 2, 2017, Archer Daniels Midland Company, Cargill, Incorporated, and Tate & Lyle Ingredients America LLC filed AD and CVD petitions against imports of Citric Acid and Certain Citrate Salts (“Citric Acid”) from Belgium, Colombia, and Thailand.
AD duties are imposed on subject imports that are found to be sold in the United States at less than “normal value.” CVD duties are imposed on imports that benefit from unfair government subsidies. For AD/CVD duties to be imposed, the U.S. government must determine not only that dumping or subsidization is occurring, but also that the subject imports are causing “material injury” or “threat of material injury” to the domestic industry.
This is the second AD/CVD case filed against Citric Acid. AD/CVD orders were previously imposed on citric acid from Canada and China in 2009. The cases are targeting Chinese subsidiary companies in Thailand and other countries.
Alleged AD Rates
Belgium: 56.02 – 118.44%
Colombia: 41.18 – 49.46%
Thailand: 4.6 – 67.1%
Petitioner also identified various Thai government subsidy programs under the Thai Investment Promotion Act, along with other export-import loans, grants and export promotion measures.
Estimated Schedule of AD/CVD Investigations
June 2, 2017 – Petition filed
June 22, 2017 – DOC initiates investigations
June 23, 2017 – ITC staff conference
July 17, 2017 – ITC Preliminary Determination
October 30, 2017 – DOC CVD Preliminary Determination (assuming extended deadline)
December 29, 2017 – DOC AD Preliminary Determination (assuming extended deadline)
May 13, 2018 – DOC AD/CVD final determinations (assuming AD, CVD aligned and extended)
June 27, 2018 – ITC Final Determination (extended)
July 4, 2018 – DOC AD/CVD orders issued (extended).
OTHER TRADE CASES
SECTION 201 ESCAPE CLAUSE CASE AGAINST RESIDENTIAL WASHERS
On May 31, 2017, Whirlpool Corp. filed another Section 201 Escape Clause case against imports of Large Residential Washers. The petition indicates that this is an attempt by Whirlpool to go after the Korean producers, including Samsung. Whirlpool tried AD and CVD cases against Korea, but that failed because the Korean producers moved to another country. Now like the Solar Cells 201 case, the US producer is trying to close the holes in the trade protection.
But do note another point, what is the major raw material input for residential washing machines—Steel. When US steel prices are many times higher than the world market price, that puts US steel users at a major competitive disadvantage.
USTR ROBERT LIGHTHIZER CONFIRMED—NAFTA FIGHT
Countries are still gearing up for NAFTA negotiations. President Trump has told USTR Lighthizer not to do any damage and add to the bottom line.
Attached is an article with my quotes about the Mexico/Sugar suspension agreement to settle the dumping case against Mexico, Wilbur Ross likely will impose Mexico sugar deal over industry objections. The Suspension Agreement will be finalized on June 30th with some possible tweaks to make the US industry feel better. In fact, on June 16, 2017, Politico reported that the US sugar industry has given its blessing to the US-Mexico sugar deal making Commerce Secretary Ross’s day. As Secretary Ross stated:
“I am glad all parties have agreed that the new sugar agreement is fair and addresses the shortcomings of the original deal. I look forward to seeing the public comments on this deal, but am hopeful that we can successfully implement this new agreement with the support and cooperation of all stakeholders.”
The Sugar deal shows that Wilbur Ross wants to clear up trade issues before the NAFTA negotiations begin in earnest so we can expect a similar deal in the Lumber case.
On June 14, 2017, Robert Samuelson, a well-known economist, in an article in the Washington Post entitled “Trump is Deluded About NAFTA” stated:
The Trump administration is determined to renegotiate the North American Free Trade Agreement (NAFTA) — which created a single market from Mexico’s southern border to the Yukon — but the main political appeal of this policy rests on a popular myth: that “fair” trade requires the United States to have a surplus or balanced trade with both Mexico and Canada.
We are supposed to feel especially aggrieved that Mexico regularly has a sizable surplus with us, $63.2 billion in goods in 2016, according to Commerce Department figures. This shows, as the president repeatedly has said, that U.S. trade officials negotiated a bad deal for American firms and workers. Trump has promised to do much better. That will be hard. . . .
In addition, the trade imbalances within NAFTA aren’t as large as they seem. It’s true — as noted — that the United States had a $63.2 billion deficit in goods trade (cars, computers, plastics) with Mexico. But the U.S. surplus on services (travel, transportation, consulting) was $7.6 billion, reducing the overall deficit with Mexico to $55.6 billion. On the same basis, covering goods and services, the United States had a trade surplus of $12.5 billion with Canada in 2016.
So: The total trade deficit with Canada and Mexico was $43.1 billion ($55.6 billion minus $12.5 billion). All trade — exports and imports — between the United States and Canada and Mexico totaled $1.207 trillion in 2016. Our net deficit equaled 3.5 percent of total trade and about two-tenths of 1 percent of U.S. GDP. This hardly seems crushing.
Against that backdrop, the notion that either Canada or Mexico is going to offer the United States vast new markets in their countries — without corresponding U.S. concessions — seems wishful thinking. “The administration appears to perceive Mexico and perhaps Canada as surplus countries,” writes [Fred} Bergsten, “whereas they (more accurately) see themselves as deficit countries,” seeking to increase exports or dampen imports. This is Trump’s delusion.
BORDER ADJUSTMENT TAXES
Although the Trump Administration says that the Border Adjustment tax (“BAT”) is dead, it continues to raise its head. On June 7th Senate Finance Committee Chairman Orrin Hatch stated at a global transfer pricing conference in Washington DC that although Congressional Republicans and the White House are generally 80 percent in agreement on key issues for tax reform, he has not ruled out the BAT proposal.
Hatch noted the resistance against the BAT, including from certain industries that are “downright apoplectic” about it, but then went on to state that it will have a difficult time becoming law:
“I don’t think I’m making any news when I say that, given the small margin of error we have in the Senate and the number of senators who oppose the very concept of a [BAT], the proposal will have a difficult time becoming law. That said, I want to see the specifics of the proposal and find out if it works like its proponents say it will. Until then, I’m not going to publicly rule anything out.”
Hatch also said on Wednesday that the tax reform plan should include a conversion to a territorial system, which would see only revenue generated in the U.S. taxed. Under the current system, all revenue earned by U.S. incorporated companies, regardless of where it is earned, is taxed. As Hatch stated
“My position has, I believe, remained clear: A territorial system will put us on par with other industrialized countries and allow our businesses to compete in the global marketplace.”
On June 15, 2017, it was reported that Kevin Brady, Chairman of House Ways and Means, has proposed a five year transition to a BAT to make it more palatable. As Brady stated:
“My current thinking on border adjustment … is a five-year transition. We’ll be lifting the ‘Made in America’ tax [on exports] at the same rate. A very gradual five-year phase-in really resolves a lot of the challenges.”
But many opponents argued that a five year transition did not make the BAT a good idea.
TRADE ADJUSTMENT ASSISTANCE FOR FIRMS/COMPANIES – A BETTER ALTERNATIVE TRADE REMEDY WHICH ACTUALLY WORKS
As indicated in previous blog posts, I feel very strongly about the Trade Adjustment Assistance for Companies program because with very low funding it has a true track record of saving US companies. In fact, in the ongoing Section 201 case on Solar Cells, the statute requires the industry seeking protection to provide a trade adjustment plan to the Commission to explain how the industry intends to adjust if trade relief is provided. The problem is that the Commission is not the entity with experience on determining whether the Trade Adjustment plans are viable. The entities with that experience in trade adjustment plans are the various trade adjustment centers throughout the US.
Donald Trump’s proposed budget, however, would 0 out the trade adjustment assistance for companies program. Although Secretary Wilbur Ross has made it very clear he wants to increase exports to reach the 3% plus growth rate, putting protectionist walls up to limit imports of steel, aluminum and many other products invites retaliation.
The Trade Adjustment Assistance for Firms/Companies program does not put up barriers to imports. Instead the TAA for Companies program works with US companies injured by imports to make them more competitive. The objective of TAA for Companies is to save the company and by saving the company it saves the jobs that go with that company.
In contrast to TAA for workers, TAAF or TAA for Companies is provided by the Economic Development Administration at the Commerce Department to help companies adjust to import competition before there is a massive lay-off or closure. Yet the program does not interfere in the market or restrict imports in any way.
Right now the total cost to the US Taxpayer for this nationwide program is $12.5 million dollars—truthfully peanuts in the Federal budget. Moreover, the Federal government saves money because if the company is saved, the jobs are saved and there are fewer workers to retrain and the saved company and workers end up paying taxes at all levels of government rather than being a drain on the Treasury. In his budget, Trump increases TAA for Workers, but kills TAA for Companies. Yet to retrain the worker for a new job, the average cost per job is $5,000. To save the company and the jobs that go with it in the TAA for Companies program, the average cost per job is $1,000.
Moreover, TAA for Firms/Companies works. In the Northwest, where I am located, the Northwest Trade Adjustment Assistance Center, http://www.nwtaac.org/, has been able to save 80% of the companies that entered the program since 1984. The Mid-Atlantic Trade Adjustment Assistance Center, http://www.mataac.org, uses a video, http://mataac.org/howitworks/, to show in detail how the program resulted in significant turnarounds for four companies. The reason the TAA for Firms/Companies is so successful—Its flexibility in working with companies on an individual basis to come up with a specific adjustment plan to make them competitive once again in the US market as it exists today. For a sample recovery plan, see http://mataac.org/documents/2014/06/sample-adjustment-plan.pdf, which has been developed specific to the strengths, weaknesses and threats each company faces.
But as also stated in my last blog post, in this environment with so many injured companies, funding for TAA for Firms/Companies has to be increased so it can do its job. Moreover, with the threats of a massive trade war in the air, which will injure all US companies and destroy US jobs, the US government needs to look at an alternative—TAA for Firms/Companies is that alternative.
FOREIGN ANTIDUMPING AND COUNTERVAILING DUTY LAW AND CASES
UNIVERSAL TRADE WAR CONTINUES
CHINA AD/CVD NEWSLETTERS
SECTION 337 AND IP CASES
NO NEW 337 CASES AGAINST CHINA
If you have any questions about these cases or about Trump and Trade, the impact on downstream industries, the Section 232 cases, the 201 case against Solar Cells, border adjustment taxes, US trade policy, the antidumping or countervailing duty law, trade adjustment assistance, customs, False Claims Act or 337 IP/patent law, please feel free to contact me.