US CHINA TRADE WAR–TRUMP’S TRADE WAR AGAINST DOWNSTREAM INDUSTRIES, SECTION 232 CASES STEEL AND ALUMINUM, SECTION 201 CASE SOLAR CELLS, BORDER ADJUSTMENT TAXES, NAFTA AND 337

TRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR MAY 26, 2017

Dear Friends,

This blog post is coming out very late because I have been very busy with so many trade cases being filed.  In fact, this is the most trade cases I have seen in my lifetime filed in such a short period.  Every day there seems to be another trade case.

For the last two weeks I have been intensely involved in an antidumping and countervailing duty case on mechanical tubing.  We are representing auto parts companies, which have warned the US International Trade Commission (“ITC”) if they go affirmative and find injury in the case, in all probability the companies will close their US operations and move offshore.  The US producers bringing the petition want to force auto parts companies to buy their commodity mechanical tubing, which is sold to the oil & gas industry and goes down a hole.  The auto industry needs made to order mechanical tubing as their raw material because of the advanced designs and safety requirements in the United States.

If the United States is going to block raw materials, US downstream industries will have no choice.  They will move offshore to obtain the high quality raw materials they need to not only be competitive but also produce high quality safe auto parts.  In this first article below, one can read directly the public statements of these auto parts producers to the ITC.

Meanwhile, Trump is increasing the trade war.  Throughout the Presidential campaign, Trump threatened to put tariffs on many different products.  With Commerce Department Secretary Wilbur Ross, President Trump has discovered Section 232 National Security cases against Steel and Aluminum.  There are no checks on the President’s power in Section 232 cases.  No check at the US International Trade Commission (“ITC”), the Courts or the WTO.  Once the Commerce Department issues a report, then Trump has the power to impose tariffs or other remedies.

If you look at the link to the Commerce Department hearing in the Section 232 Steel case, at the end of the hearing you will hear numerous downstream companies telling Commerce to exclude their products and if they cannot get the imported steel, their companies will close.

Meanwhile, numerous antidumping and countervailing duty cases have been filed against aluminum foil, tool chests, biodiesel, tooling and aircraft just to name a few.  As described below, Trump has found his Trade War, but the real victim in this trade war may be US downstream industries.

In addition to two Section 232 cases, Suniva has filed a Section 201 case against imports of solar cells from every country.  The main targets appear to be third world countries where Chinese companies have moved their production facilities and Canada and Mexico.  The ironic point of this filing is that Solar World, the company that brought the original Solar Cells and Solar products cases against China, has now become insolvent and just today announced that it is supporting the petition.  Companies that were buying solar cells from Solar World all of a sudden cannot get the solar cells they paid for because of the insolvency.

Maybe this is why Trade Adjustment Assistance to Companies is so important.  With TAA, Solar World might have been saved with no damage to the US Polysilicon industry.  But despite the fact that section 201 requires US companies to submit adjustment plans and the Trade Adjustment Assistance Centers are the real trade adjustment experts, President Trump has zeroed out the Trade Adjustment Centers in his budget.  Apparently all President Trump wants to do is to put up protectionist walls to protect US companies and industries, rather than make them more competitive.  Very short sighted.

On the Trade Policy side, with protectionist walls appear to be going up.  Lighthizer was just confirmed as USTR and immediately plunged into NAFTA negotiations.  USTR Lighthizer has pledged to protect agriculture in the negotiations.

The only good news is that when Trump released his Tax Plan, border adjustment taxes were not part of the proposal.  But in a recent hearing before the House Ways and Means, one could tell Congressmen are split, but Republicans want border adjustment taxes.  On May 23rd, however, Treasury Secretary Mnuchin told House Democrats on Ways and Means that he and President Trump are opposed to the Border Adjustment tax.

One interesting note is that Trump’s proposal to cut corporate taxes to 15% has China scared.  Chinese companies could move to the US to set up production

If anyone has any questions or wants additional information, please feel free to contact me at my e-mail address bill@harrisbricken.com.

Best regards,

Bill Perry

TRUMP’S TRADE WAR

With the number of trade cases being filed, including the Section 232 cases against Steel and Aluminum, which give President Trump carte blanche authority to issue tariffs and other import restrictions, the President truly is creating a trade war.  Trump’s threat to kill NAFTA scared Canada and Mexico to come to the table.  One of the reasons for Trump’s threat is the Canadian threat not to drop its barriers to US dairy exports.

One Canadian Parliament member threatened President Trump not to get so tough on trade.  The member should understand that such threats play right into the hands of Donald Trump and his argument that NAFTA is not truly a free trade agreement.

But all these threats and trade cases will make it very difficult to conclude trade agreements. In looking at Commerce Secretary Wilbur Ross’s plan to get to 3% GDP increase, one pillar of the plan is increased exports.  Exports, however, will not increase if there is a trade war, and it sure looks like that is going to happen.

From January 1, 2017 through March 31, 2017, the GDP was an anemic 0.7%.  Trump has to change that dramatically and deciding to have a trade war with every country is not the way to change the GDP number.

In fact, all these trade cases could be the Achilles heal of Trump’s Economic policy.  Trump’s carrots to encourage domestic industry, including lowering taxes and cutting regulations, are not the issue.  Protectionist walls to try and protect raw material industries, however, will have an opposite effect because of the collateral damage these orders will have on US downstream producers, which use these raw material inputs.  As Ronald Reagan stated, “Protectionism becomes destructionism; it costs jobs.”  But protectionism is not a partisan issue, as the only one more protectionist than President Trump may be the Democratic party.

TRUMP’S TRADE WAR ON DOWNSTREAM INDUSTRIES—COLD DRAWN MECHANICAL TUBING

To understand the real impact of the Trump Steel War on downstream industries, including the US auto parts and automobile industries, read the quotes below.  The Automobile Industry is going to be hit hard.

On April 19, 2017, ArcelorMittal Tubular Products, Michigan Seamless Tube, LLC, PTC Alliance Corp., Webco Industries, Inc., and Zekelman Industries, Inc. (collectively, “Petitioners”) filed an antidumping (“AD”) and countervailing duty (“CVD”) petition against imports of cold-drawn mechanical tubing from China, Germany, India, Italy, Korea and Switzerland.

Cold-drawn mechanical tubing can be sold as a commodity product to be used in the oil & gas, mining, agricultural and construction industries.  Certain types of mechanical tubing are also sold as commodity products to the auto industry to produce axles and drive shafts, but there is another segment of the auto parts industry, which produces specialized automotive products.  Because of US safety requirements, the specialized auto products companies need made to order mechanical tubing.  They cannot simply buy mechanical tubing off the shelf.  Petitioners, however, want the auto parts companies to buy their commodity products.

In order to win the antidumping and the countervailing duty case, Petitioners must establish dumping and subsidization at the Commerce Department and injury to the U.S. industry at the US International Trade Commission (“ITC”).  Once the petition was filed, the ITC immediately started up its 45 day preliminary injury investigation.   On May 10, 2017, the ITC held a hearing in Washington DC in the preliminary investigation and then we submitted a post-conference brief.

We represent in the case importers and two US auto parts companies. The importers, including these specialized auto parts companies, are very worried because the Commerce Department preliminary determinations, which will be issued very soon on September 16, 2017 (“CVD)” and November 15, 2017 (“AD”),  are when their liability begins.  With the Trump Administration and the Commerce Department’s war on steel imports, the duties are expected to be very high.  This is especially true with regard to China since Commerce does not use actual Chinese prices and costs to determine dumping.  Like many downstream customers in US AD and CVD cases, the customers are telling the ITC that they may have to close production and move offshore to get access to the higher quality competitive raw steel products.  Our hope is that the ITC will listen to these arguments, but to date the ITC has ignored them.  End users do not have standing in AD and CVD cases at the ITC.

As stated in our ITC postconference brief:

“The Petitioners/US mechanical tubing industry in this case will recover as their commodity markets in the energy, agricultural, mining and machinery markets recover.  But since antidumping and countervailing duty orders stay in place for 5 to 30 years, the impact of this case on the US downstream auto part and automobile industries will last for many years.

If the Commission goes affirmative in this case, we will see many auto parts producers close shop and move to another country where they can buy the high quality mechanical tubing that they need to compete with the loss of thousands of US jobs.  Many of these companies, including voestalpline Rotec Inc., already have operations in Canada, Mexico and through their parent company in numerous other countries and they will move their operations to obtain the high quality raw materials that they need to safely compete in the downstream auto parts market.”

As Andrew Ball, President, of voestalpine Rotec in Lafayette, Indiana stated at the Preliminary Conference:

“Our customers will not allow a change in the supply base, and this material is absolutely not available from these U.S. producers, thus making the decision to move equipment to other countries or procuring the completed components from our other global facilities in Austria, the United Kingdom, France, Spain and Poland a likely outcome.

With so much discussion surrounding trade imbalance, it is ironic that because of this case, we as a U.S. manufacturer will be forced to relocate millions of dollars of manufacturing equipment with significant loss of U.S. jobs for specialty high value, highly engineered components because several commodity U.S. producers are determined to ignore market realities.

I can say with a high degree of certainty that none of the petitioners will see one extra pound, not one single foot of material as a result of this action.  I am certain, however, that companies like ours and our customers will accelerate the relocation of domestic manufacturing to other countries, and all this business will flow in NAFTA region as semi-finished components, thus avoiding the dumping duty altogether. . . .

I simply cannot ignore the reality that the automotive industry waits for no one and for nothing.  To highlight this point, in 2013 our facility took a direct hit from an F-3 tornado, obliterating 30 percent of our manufacturing capacity.  Within 48 hours, we had the rest of the facility fully operational and with the help of our international partners and domestic competition, we had the balance of our business sourced and supplying parts to assembly facilities throughout the world within four days. Not one single production line was affected as a result. . . .

That was a natural disaster.  This one is man-made, and I can assure you that in 45 days if this case is not dismissed, these actions will accelerate the market forces already working against our U.S. manufacturing base and will either force our hand or the hand of our customers to move business overseas in many places closer to the customer locations in Mexico, to ensure the continuity of cost, quality and service, resulting in the loss of precious U.S. manufacturing jobs, future investment and all but killing the chances of fixing the trade imbalance.”

As Andrew Ball further stated in the ITC Postconference brief:

“This petition puts at risk our factory, our jobs and the factories and jobs of our US customers and subcontractors. Increases to prices that are already considered high in the global market will result in our customers resourcing our business to other suppliers or will force them to insist that we move equipment to other locations in the world to avoid this unjustified action. I was always raised that before I ask for help it was expected that I had done everything I could to help myself. Why then have none of the petitioners made sales calls to my organization looking to reform or start a partnership ahead of this action? Unfortunately, if you vote affirmative, resource decisions will be taken well ahead of the final DOC determination for risk mitigation purposes. I trust that you will analyze all details in this case and make your determination based on clear “facts and data.”

Another auto parts company stated in the brief:

We have fixed contracts with our vendors and customers, so any increase in piece price will be countered by evaluating the region that we manufacture products in or may require that we look at bringing in the  components from other countries. If your vote is affirmative then we will be making these decisions ahead of  the determination by the DOC in September as the risk is too high to wait.

If these auto parts component companies do not move, their customers, the auto parts producers, which are multi-nationals, will move because auto parts companies cannot buy commodity products when safety issues are a concern.  Product Liability cases can bankrupt an auto parts producer.

In her statement at the Preliminary Conference, Julie Ellis, President of Tube Fabrication of Logansport, Indiana echoed Andrew Ball’s statement:

The impact of this case on downstream manufacturing operations will result in the loss of thousands of jobs, maybe even more jobs than those saved by the case.  If we are unable to provide our customers with tube components at a competitive global price, they will be forced to move production from the United States to other countries.

Most of our customers already have global operations in place and have the ability to divert the production away from the U.S. locations to remain competitive.  The loss of business would not only impact businesses like TFI, but coating facilities, plating operations, heat treating, tool and die shops, machine shops, testing facilities, transportation companies, along with our customers’ U.S. facilities, and further downstream manufacturing.

In other words, in response to this petition, we fear that U.S. automotive companies will simply shift and procure the final parts with the tubes in them from multiple overseas operations.  From our point of view, this case will not result in any more tubes being switched to U.S. producers.  Instead, it will simply be a lose-lose situation.

TFI is representative of many U.S. producers at a comparable level of U.S. production.  The inability of Tube Fabrication and other companies in similar situations to remain competitive will result in a tremendous loss of jobs in the U.S. downstream manufacturing sector.  We will be forced to either move portions of our operations to Mexico, where we currently ship 20 percent of the components that we manufacture in the United States and/or cut USW jobs and benefits.

In her statement attached to the Brief, Julie Ellis states:

This is a rural community with limited manufacturing operations. We are an asset to the local economy, pay our taxes and provide community support. Thru the years we have watched as many of the local manufacturing companies have closed up operations and moved to Mexico and overseas. The inability of Tube Fabrication and other companies in similar situations, to remain competitive, could result in a tremendous loss of jobs in the downstream US manufacturing sector. It could potentially equate to thousands of people being displaced. We must have the ability to procure our raw materials at a competitive global price or we will lose business! As I said in my statement at the hearing, 20% of the components that we manufacture ship to Mexico. Please don’t force us to be the next ones to go!

Petitioners argue that respondents are simply exaggerating the problem and that the issue is simply dumped low import prices.  But in this case, the issue is not just price; it is quality.  As one importer, Salem Steel, stated at the Preliminary Conference, the same scenario played out as a result of the Section 201 Steel case, where many steel products were shut out of the US market:

“This scenario has happened before. One widely quoted study by Dr. Joseph Francois and Laura Baughman of Trade Partnership Worldwide, LLC showed that as a result of Section 201 investigation brought at the behest of the U.S. steel industry, 200,000 Americans lost their jobs to higher steel prices in 2002.

More Americans lost their jobs to higher steel prices in 2002 than the total number employed by the entire steel industry itself in the U.S.  Every U.S. state experienced employment losses from higher steel costs, with the highest losses occurring in California, Texas, Ohio, Michigan, Illinois, Pennsylvania, New York and Florida.”

In the attached Trade Partnership article, STEEL USERS ARTICLE1, Dr. Joseph Francois and Laura Baughman state at page 1 and 2 of their article that as a result of the Section 201 trade restrictions on steel:

“200,000 Americans lost their jobs to higher steel prices during 2002. These lost jobs represent approximately $4 billion in lost wages from February to November 2002.

One out of four (50,000) of these job losses occurred in the metal manufacturing, machinery and equipment and transportation equipment and parts sectors.

Job losses escalated steadily over 2002, peaking in November (at 202,000 jobs), and slightly declining to 197,000 jobs in December.

More American workers lost their jobs in 2002 to higher steel prices than the total number employed by the U.S. steel industry itself (187,500 Americans were employed by U.S. steel producers in December 2002).

Every U.S. state experienced employment losses from higher steel costs, with the highest losses occurring in California (19,392 jobs lost), Texas (15,826 jobs lost), Ohio (10,553 jobs lost), Michigan (9,829 jobs lost), Illinois (9,621 jobs lost), Pennsylvania (8,400 jobs lost), New York (8,901 jobs lost) and Florida (8,370 jobs lost). Sixteen states lost at least 4,500 steel consuming jobs each over the course of 2002 from higher steel prices. . . .

Steel tariffs caused shortages of imported product and put U.S. manufacturers of steel-containing products at a disadvantage relative to their foreign competitors. In the absence of the tariffs, the damage to steel consuming employment would have been significantly less than it was in 2002.

The analysis shows that American steel consumers have borne heavy costs from higher steel prices caused by shortages, tariffs and trade remedy duties, among other factors. Some customers of steel consumers have moved sourcing offshore as U.S. producers of steel-containing products became less reliable and more expensive. Other customers refused to accept higher prices from their suppliers and forced them to absorb the higher steel costs, which put many in a precarious (or worse) financial condition. The impact on steel-consuming industries has been significant.”

But the remedy in the Section 201 case lasts from three to five years and in the Section 201 Steel case, President Bush lifted the restraints on Steel imports sooner because of the very damaging impact on downstream users.  Antidumping and Countervailing Duty orders stay in place for five to thirty years.

The experience of downstream users in the Mechanical Tubing case reflects the experience of many downstream users in steel cases, such as the recent AD and CVD cases against Carbon Steel Wire Rod.  There are real costs that will be borne by US downstream companies and their employees because of this Mechanical Tubing trade case and any AD and CVD orders that are issued.  The Commission should have learned the same lesson from its AD order on Magnesium from China, which has been in place for more than ten years.  This AD Order protects a one company US industry in Utah, but it has led to the demise of the entire US Magnesium dye casting industry and the movement of many light weight auto parts companies to Canada.  But since downstream industries have no standing in an AD and CVD cases and there is no part of the injury provision to take this collateral damage into account, although downstream industries can testify at the ITC, in fact, they have no voice.

As Andrew Ball of voestalpine Rotec stated at the Preliminary Conference, ”I simply cannot ignore the reality that the automotive industry waits for no one and for nothing.”  With Antidumping and Countervailing Duty Orders staying in place for 5 to 30 years, if the Commission does not look at market realities, many, many US auto parts companies will close down and move to a third countries.  The real result of this Mechanical Tubing case brought by the Petitioners could well be to hollow out the US auto parts industry and lead to the destruction of the Petitioners’ US customers.

This is the real cost of the Trump trade war—thousands of jobs lost in downstream industries.

SECTION 232 INVESTIGATIONS  — STEEL AND ALUMINUM

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.  According to the Statute, on Petroleum and Petroleum products, the Congress can disapprove the decision, but there is no reference to Steel or Aluminum so it is questionable whether Congress can overrule the President in these cases.   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.

Moreover, in these Section 232 Steel and Aluminum cases, it is questionable how much weight Commerce will give to comments or testimony by downstream raw material users.  This is dangerous because tariffs on steel products may cause real harm to the downstream automobile industry, which is important for National Security too.

STEEL

On April 20, 2017, President Trump and the Commerce Department in the attached press announcement and fact sheet along with a Federal Register notice, Section 232 Investigation on the Effect of Imports of Steel on U.S, Presidential Memorandum Prioritizes Commerce Steel Investigation, 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.  Witnesses were given five minutes each to make their concerns known.  Written comments are due at the Commerce Department on May 31st.

At the hearing, Secretary Ross stated that a written report would go to the President by the end of June.

At the end of the hearing, several downstream users asked Commerce to exclude certain steel products from any remedy in the Section 232 case.  Counsel for the Steel Importers warned Commerce about retaliation against US exports of military products, including airplanes and agriculture products.

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:

“It’s a fairly porous system and while it has accomplished some fair measure of reduction, it doesn’t solve the whole problem.  So we are groping here to see whether the facts warrant a more comprehensive solution that would deal with a very wide range of steel products and a very wide range of countries.”

At the Trump Press Conference, Ross stated:

I am proud to stand here today and say that, under your leadership, we are restoring the primacy of American national security, American workers, and American businesses.

For years, we have simply reacted to over 150 cases of improper imports of foreign steel into this country. With our investigation launched last night, the federal government will finally become proactive.

This investigation will help ensure steel import issues do not make us less safe in a world that is increasingly fraught with geopolitical tensions.

The sheer volume of steel trade cases makes it clear that global steel overcapacity has an impact on our economy, but for the first time we will examine its impact on our national security.

We will conduct this investigation thoroughly and expeditiously so that we can fully enforce our trade laws and defend this country against those who would do us harm.

I look forward to the completion of this investigation so that I can report not just the findings, but also any concrete solutions that we may deem appropriate.

Under section 232 the Commerce Department will determine whether steel imports “threaten to impair” national security.  Commerce must issue its findings to the White House within 270 days, along with recommendations on what steps to take.

But Ross said that the investigation may move along a quicker track, citing the abundance of steel data the U.S. already has on hand from its past investigations as well as a memorandum from President Donald Trump that calls for the agency to expedite the process.  In fact, at the hearing, Secretary Ross stated that a report to the President will be issued by the end of June.

Once Commerce’s review is completed, the president has 90 days to decide whether to accept or reject its recommendations. The statute gives the administration wide latitude to act, including raising tariffs

Secretary Ross further stated in the past:

“We will conduct this investigation thoroughly and expeditiously so that, if necessary, we can take actions to defend American national security, workers, and businesses against foreign threats.  This investigation will help determine whether steel import issues are making us less safe in a world that is increasingly fraught with geopolitical tensions.”

While the use of Section 232 is rare, the actual deployment of tariffs under the 1962 law is even rarer. Commerce last conducted a Section 232 probe of iron and steel in 2001, but ultimately decided that the goods posed no national security threat, and no further action was taken.

The last time an administration forged ahead with import relief under the law was 1975, when President Gerald Ford hiked license fees and other charges on shipments of imported petroleum during the throes of the mid-70s oil crisis. President Richard Nixon also used Section 232 to impose an across-the-board 10 percent surcharge program in 1971.

But with the new protectionist outlook of the Trump Administration, the huge steel overcapacity in China, and the fact that there are no checks under section 232, this action could definitely result in tariffs, quotas and other trade remedies.

ALUMINUM

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.  Attached are documents related to the Case, ALUMINUM FED REG PUBAluminum Presidential Memo Summary.  The hearing will be June 22, 2017 at the Commerce Department.  The Presidential Memorandum issued on April 27th provides:

This Presidential Memorandum (PM) directs the Secretary of Commerce to investigate, in accordance with the Trade Expansion Act of 1962, the effects on national security of aluminum imports.

During this investigation, the Secretary will consider the following:

The domestic production of aluminum needed for projected national defense requirements.

The capacity of domestic industries to meet such requirements.

The existing and anticipated availabilities of the human resources, products, raw materials, and other supplies and services essential to the national defense.

Recognize the close relation of the Nation’s economic welfare to our national security, and consider the effect of foreign competition in the aluminum industry on the economic welfare of domestic industries.

Consider any substantial unemployment, decrease in government revenues, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive aluminum imports.

The Secretary shall conduct this investigation with speed and efficiency in order to find if aluminum is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.

If the above is deemed true, the Secretary shall recommend actions and steps that should be taken to adjust aluminum imports so that they will not threaten to impair the national security.

Although Secretary Ross wants to expedite the case, there are rumors that many investigators and other staff in Import Administration have now been moved to work on the Section 232 cases.  With an enormous number of antidumping and countervailing duty cases along with two large Section 232 cases, Commerce staff will be stretched very thin.

SOLAR AD AND CVD CASES DID NOT WORK SO LET’S TRY A SECTION 201 ESCAPE CLAUSE CASE

Just recently, Solar World, the company that brought the Solar Cells and Solar Products antidumping and countervailing duty cases against China, announced that it was going into insolvency.  The bottom line is that the antidumping and countervailing duty orders against solar cells and solar products from China did not save Solar World, but they did result in substantial damage to the upstream US Polysilicon industry.  Because of the US action, China brought its own antidumping and countervailing duty case against $2 billion in US Polysilicon exported to China.  REC Silicon in Moses Lake, Washington got hit with a 57% antidumping duty, deferred a $1 billion investment into Moses Lake, and in November 2016 laid off 70 workers in Moses Lake and cut their capacity in half.

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.

By the way, in its determination to the President the ITC is to report any assistance given companies under the Trade Adjustment Assistance for Companies program, the only government program that truly saves US companies.  President Trump, however, in his recent budget proposal completely zeroed out the TAA for Companies program.  More about this below.  Directly contrary to President Reagan, President Trump does not want to make US companies more competitive so that they can compete; he wants to put up protectionist walls.

The main targets of the Petition are not imports from China, but imports from third countries.  In response to the antidumping and countervailing duty orders, many Chinese companies moved to third countries and set up production there.

SCOPE OF THE 201 INVESTIGATION

The articles covered by this investigation are CSPV cells, whether or not partially or fully assembled into other products, including, but not limited to, modules, laminates, panels, and building-integrated materials.

The investigation covers crystalline silicon photovoltaic cells of a thickness equal to or greater than 20 micrometers, having a p/n junction (or variant thereof) formed by any means, whether or not the cell has undergone other processing, including, but not limited to cleaning, etching, coating, and/or addition of materials (including, but not limited to, metallization and conductor patterns) to collect and forward the electricity that is generated by the cell.

Included in the scope of the investigation are photovoltaic cells that contain crystalline silicon in addition to other photovoltaic materials. This includes, but is not limited to, passivated emitter rear contact (“PERC”) cells, heterojunction with intrinsic thin-layer (“HIIT”) cells, and other so-called “hybrid” cells.

Excluded from the investigation are CSPV cells, whether or not partially or fully assembled into other products, if the CSPV cells were manufactured in the United States.

Also excluded from the scope of the investigation are crystalline silicon photovoltaic cells, not exceeding 10,000mm in surface area, that are permanently integrated into a consumer good whose function is other than power generation and that consumes the electricity generated by the integrated crystalline silicon photovoltaic cell. Where more than one cell is permanently integrated into a consumer good, the surface area for purposes of this exclusion shall be the total combined surface area of all cells that are integrated into the consumer good.

SECTION 201 PROCEDURES IN SOLAR CELL CASE

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 in about three weeks from now or 21 days after publication of the notice in the Federal Register.  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.

REASONS FOR SECTION 201 PETITION

According to Suniva in its petition, the problem is not China.  Suniva argues that the antidumping and countervailing duty orders in the Solar Cells and Solar Products case were simply evaded:

“as the impacted producers have simply opened significant capacity in third countries not subject to those AD/CVD orders. One of the underlying principles of those prior Title VII cases was that implementing duties against the subject goods originating from the offending countries would­ create a cost basis that generates greater domestic price equity. Unfortunately, that outcome has not occurred. Rather than invest in U.S. manufacturing or charge fair market prices, Chinese and Taiwanese manufacturers, either directly through the establishment of their own facilities, or indirectly through the support of contract manufacturing operations in Southeast Asia, India, and Eastern Europe, created alternative capacity that was not subject to U.S. tariffs.  In fact, the data in this petition shows a direct correlation between:

  • The institution of tariffs against subject goods made in China or Taiwan;
  • The reduction of imports into the United States from those countries; and

The increase in imports from Vietnam, Thailand, Malaysia, and other third countries.”

The Petition also states:

“What is striking is that even with these relatively high duties against two of the world’ s largest CSPV cell and module countries, imports continue to flood into the United States. Also striking is the quantity of Chinese and Taiwanese product that continues to enter the United States -, despite these dumping and subsidy duties. What these AD/CVD cases have also done is push production into new countries – meaning that they have led to increased global production and capacity. Consider:

  • In a March 21, 2017, article in the Financial Post, it was reported about Canadian Solar that :”The company said it has also increased production from its manufacturing facilities in Southeast Asia and Taiwan to serve the U.S. market and avoid import “
  • In a January 10, 2017, article in Taiyang News, the following is stated about Chinese producer Solar Trina: “Trina Solar has begun production of solar panels at its newly opened Vietnam factory. The facility with capacity of 800 MW annually is located in Quang Chau Industrial Park in Viet Yen district, northern Ban Giang province, reported The Voice of Vietnam.” The article continues: “After Malaysia, Vietnam is now coming up as one of the most sought after locations for Chinese solar power companies to set up their manufacturing units. Some of the biggest names, including Trina Solar, Jinko Solar and the like have voluntarily withdrawn from the European Commission’s minimum import price (MIP) undertaking which slaps anti-dumping and anti-subsidy duties ori solar panels produced in China. Most of them are keen to operate from locations beyond China to be able to circumvent these duties and even more the customs in the much larger US solar market.”
  • In a March 29, 2016, article in PY Magazine, it is reported that “Trina Solar reports that it has begun production at its PY cell and module factory in Rayong Thailand, which has the capacity to produce 700 MW of cells and 500 MW of PY modules annually.” It continues “Southeast Asia has become a major destination for Chinese and Taiwanese PY cell and module makers seeking to avoid U.S. and EU import duties on their “
  • In an October 26, 2015, press release, it is announced that Chinese producer JA Solar Holdings, , Ltd. opened a 400MW cell manufacturing facility in Penang, Malaysia. As stated in the release: “These cells will primarily be used to manufacture JS Solar Modules outside of China to provide competitive product solutions to certain overseas markets.”
  • In an October 6, 2016, PV Magazine article, it was noted that JA Solar further expanded its Malaysian operations. The article further notes: “The expansion comes in the face of falling module prices around the world, as an oversupply seems to be taking hold of the “
  • In a July 24, 2016, CLEANTECHIES article, it is reported that JA Solar is planning a $1 billion dollar module factory in Vietnam. As noted in the article: “The company already operates 8 factories across the {sic} Europe, the US and Japan. JA Solar, like several other·module manufacturers, facing import restrictions and duties in developed markets like the US and Chinese {sic}. Several Chinese and Taiwanese companies have opened factories in overseas locations-to bypass these restrictions.”
  • A January 25, 2016, China Daily article discusses Chinese panel producers moving operations to Thailand because “solar panels made in the kingdom do not invite heavy duties in the US and Europe.”.

In short, an unforeseen development of the antidumping and countervailing duty cases . . . has been the proliferation of CSPV cell and module manufacturing across the globe. This further supports the use of this global safeguard action. Without global relief, the domestic industry will be playing “whack-a-mole” against CSPV cells and modules from particular countries.

In short, imports have clearly “increased” within the meaning of the statute. Indeed, the increase has been massive; and the recent surge has been highly debilitating to the market structure. The way that the world’s largest producers have reacted to antidumping and countervailing duty claims demonstrates that global relief is required.”

The petition also shows enormous increases of solar cells from Mexico and Canada and with regards to Canada states as follows:

“Transshipment of Chinese-origin CSPV cells through Canada would explain the rapid growth in imports of CSPV cells and modules from Canada in recent years.”

The Petition also states:

“Further, the U.S. industry could not have foreseen that foreign producers, in response to [the antidumping and countervailing duty cases against China would move so rapidly and drastically to open new production facilities in third-countries resulting in no relief for the U.S. industry from the application of the orders in the antidumping and countervailing duty cases. As shown by the import data presented in Exhibit 7, the surge in imports from third-countries after the imposition of the AD and CVD orders is completely unprecedented and unforeseeable.  For example, between 2014 and 2016, imports from Malaysia surged 67 percent/while overtaking China as the largest source of imports. In addition, imports from Korea surged by 827 percent while increasing to become the third largest source of imports.  Imports from Mexico, now the fourth largest source of imports, surged 77 percent. Imports from Thailand, now the fifth largest source of imports, surged over 76,000 percent. Such a rapid and significant increase in imports from third-countries is an unprecedented and completely unforeseen development.”

Between the time the Petition was filed and the ITC institution of the case, Wuxi Suntech announced it opposition to the petition because the law firm that had represented Wuxi Suntech in the antidumping and countervailing duty case against China brought the Section 201 case on behalf of Suniva.  In addition, Sunrun, an importer and user of solar cells, entered a notice of appearance to point out that Solarworld does not support the petition and that Suniva represents less than 20% of US production, but the ITC went forward anyways.  Just today, however, Solar World announced that it is supporting Suniva’s Section 201 Petition.

NEW TRADE CASES

ANTIDUMPING AND COUNTERVAILING DUTY CASES

TOOL CHESTS FROM CHINA AND VIETNAM

On April 11, 2017, Waterloo Industries Inc. filed major Antidumping and Countervailing Duty cases against hundreds of millions of dollars of imports of certain tool chests and cabinets from China and Vietnam.

US importers’ liability for countervailing duties on imports from China will start on September 8, 2017, 150 days after the petition was filed, and for Antidumping Duties from China and Vietnam will start on November 7, 2017, 210 days after the petition was filed.

The entire investigation will take one year and antidumping and countervailing duty orders can last for 5 to 30 years.

If anyone wants a copy of the relevant parts of the AD and CVD complaints along with a list of the targeted Chinese exporters/producers and US importers, please feel free to contact me.

COLD-DRAWN MECHANICAL TUBING FROM CHINA, GERMANY, INDIA, ITALY, KOREA AND SWITZERLAND

On April 19, 2017, ArcelorMittal Tubular Products, Michigan Seamless Tube, LLC, PTC Alliance Corp., Webco Industries, Inc., and Zekelman Industries, Inc. filed major Antidumping and Countervailing Duty cases against hundreds of millions of dollars of cold-drawn mechanical tubing from the six countries in 2016.  The petition alleges antidumping duties ranging as follows:

China: 88.2% – 188.88%

India: 25.48%

Italy: 37.23% – 69.13%

Germany: 70.53% – 148.32%

Republic of Korea: 12.14% – 48.61%

Switzerland: 40.53% – 115.21%

The cold-drawn mechanical tubing covered by the complaint is used to produce numerous different products in the United States, including auto parts and machinery.

As stated above, these trade cases move very quickly and many importers are blindsided because of the speed of the investigations.  In the Mechanical Tubing case, the ITC conducted its preliminary injury hearing on May 10, 2017 and briefs were filed soon after.  US importers’ liability for countervailing duties on imports from China and India will start on September 16, 2017, 150 days after the petition was filed, and for Antidumping Duties will start on November 15, 2017, 210 days after the petition was filed.

Commerce has already issued quantity and value questionnaires to the Chinese producers in the AD and CVD cases with responses for both cases due June 5th.

The entire investigation will take one year and antidumping and countervailing duty orders can last for 5 to 30 years.

If anyone wants a copy of the relevant parts of the AD and CVD complaints along with a list of the targeted Chinese exporters/producers and US importers, please feel free to contact me.  Atttached are the relevant parts of the petition, INJURY EXCERPT SCOPE IMPORTERS EXERPT MECHANICAL TUBING FOREIGN PRODUCERS EXCERPT MECHANICAL TUBING.

100 TO 150 SEAT CIVIL AIRCRAFT

On April 27, 2017, in the attached notice, AIRCRAFT, the Boeing Company filed an antidumping and countervailing duty case against 100 to 150 Seat Civil Aircraft from Canada.  The Canadian respondent company is Bombardier.  With all extensions, the Commerce Department’s Preliminary determination in the CVD case, which is when liability begins, is due September 24, 2017 and the Commerce Department’s preliminary AD determination, when liability begins, is due November 23, 2017.

With a sympathetic Trump Administration in power, there will be a sharp rise in AD and CVD cases against China and other countries.

LIGHTHIZER CONFIRMED—NAFTA FIGHT

On May 11, 2017, Robert Lighthizer was confirmed by the Senate as the next USTR.  On May 15th he was sworn into office by Vice President Pence.

With Senators and Congressmen, especially from agricultural states, calling for new trade agreements, USTR will have a lot of work to do.

NAFTA FIGHT

On May 18, 2017, in the attached letter, nafta NOTIFICATION, USTR Lighthizer informed Congress of the President’s intention to renegotiate NAFTA.  In the letter, Lighthizer specifically stated:

In particular, we note that NAFTA was negotiated 25 years ago, and while our economy and businesses have changed considerably over that period, NAFTA has not.  Many chapters are outdated and do not reflect modern standards. For example, digital trade was in its infancy when NAFTA was enacted. In addition, and consistent with the negotiating objectives in the Trade Priorities and Accountability Act, our aim is that NAFTA be modernized to include new provisions to address intellectual property rights, regulatory practices, state-owned enterprises, services, customs procedures, sanitary and phytosanitary measures, labor, environment, and small and medium enterprises. Moreover, establishing effective implementation and aggressive enforcement of the commitments made by our trading partners under our trade agreements is vital to the success of those agreements and should be improved in the context of NAFTA. . . .

We are committed to concluding these negotiations with timely and substantive results for U.S. consumers, businesses, farmers, ranchers, and workers, consistent with U.S. priorities and the negotiating objectives established by the Congress in statute. We look forward to continuing to work with the Congress as negotiations with the NAFTA countries begin, and we commit to working with you closely and transparently throughout the process.

On May 18, 2017, John Brinkley published an article in response to the Lighthizer letter:

White House’s NAFTA Renegotiation Letter To Congress Is Surprisingly Rational

U.S. Trade Representative Robert Lighthizer seems to be trying to inject some rationality into President Trump’s trade policies. With the White House in turmoil over the Russia investigation and FBI Director James Comey’s firing, he might just get by with it.

Lighthizer on Thursday formally notified Congress of the administration’s intention to renegotiate the North American Free Trade Agreement with Canada and Mexico. The notification started the clock ticking on the 90-day period that has to elapse before the renegotiations can start.

In a letter to congressional leaders, Lighthizer made some surprisingly sensible remarks about what needed to be done – surprising because it included none of the bluster and hostility that President Trump has directed at America’s NAFTA partners, Canada and Mexico.

The letter said NAFTA needed to be improved in the areas of intellectual property rights, digital trade, state-owned enterprises, customs procedures, food safety, workers’ rights and environmental protection.

All that is true. NAFTA doesn’t address digital trade, because it didn’t exist in 1993 when the deal was signed, but it now dominates every aspect of international commerce in goods and services.

Workers’ rights and environmental protection are addressed in side agreements that aren’t enforceable. Making those standards tougher fully enforceable would lessen the incentive for US companies to move to Mexico.

The letter also said trade rule enforcement “should be improved in the context of NAFTA.” It’s hard to imagine how that might happen.  NAFTA allows a private company from one of the three countries that has operations in one of the others to file a complaint with the NAFTA secretariat against the host country if the company believes its rights have been violated. This Investor-State Dispute Settlement (ISDS) chapter allows for a hearing before a three-judge arbitration panel. Since 1994, the United States has prevailed in every NAFTA ISDS complaint that it has filed or has been filed against it and that has proceeded to a final ruling. It’s going to be hard to improve on that.

When two governments go head-to-head in a trade dispute, they usually take it to the World Trade Organization. The trend there is that the complaining government almost always wins.  The U.S. has won 91% of the cases it has filed in the WTO and lost 84% of those filed against it. Its overall batting average is just over .500. There is nothing that can be done in NAFTA to affect that.

Maybe the best thing the administration could do for American businesses when it convenes the renegotiation with Mexico and Canada is to focus on ways to make it easier for small companies to qualify for duty-free treatment under NAFTA. Lighthizer’s letter seemed to suggest the administration was interested in doing that. It’s easy for big corporations to comply with the myriad rules and regulations that cover imports, exports and free trade agreements; they can hire armies of lawyers and trade specialists to manage compliance with them. Most small firms can’t do that and many find that compliance isn’t worth the time and money. So, they don’t export. Or they export without applying for duty-free treatment under NAFTA. They just pay the tariff. A 2015 Thomson Reuters Global Trade Management survey of small business owners found that complying with rules of origin and other regulations was the principal difficulty that they faced in exporting their products.

To qualify for duty-free treatment under NAFTA, an exporter most certify that a certain percentage of a product’s value originated in the U.S., Mexico or Canada. There are two problems with this. One is that small manufacturers don’t always know where all their parts and components came from and it can be difficult to track them all down. They have to call their suppliers, who may have to call another supplier. The other problem is that the U.S. government allows exporters to use one of two processes for determining regional content and, for most people, neither of them is easy to navigate. . . .

Making this process easier would increase imports and reduce the trade deficit, although not by  much.

If the U.S. negotiators can focus their efforts on these constructive and necessary improvements to NAFTA, rather than on the threats and ultimatums that Trump and his nationalist faction in the White House have made, they might end up with an agreement that all three countries will be happy to sign.

On May 25th, the US Pork Producers issued the attached white paper, NAFTAReport05-24-17, arguing that if NAFTA negotiations lead to the disruption of agricultural exports generally – and pork exports specifically – to Canada and Mexico, that would “have devastating consequences for our farmers and the many American processing and transportation industries and workers supported by these exports.”

The White paper cites an Iowa State economist who states that if Mexico were to respond to a US withdrawal from NAFTA with a 20% duty on pork, the US port industry would lose the entire Mexican market.

Nick Giordano for the National Pork producers went on to state:

“A loss in exports to Mexico of that magnitude would be cataclysmic for the U.S. pork industry. Pork producers will support updating and improving NAFTA but only if duties on U.S. pork remain at zero and pork exports are not disrupted.”

On May 24th, USTR Lighthizer pledged that boosting agricultural exports remains a top priority for the Trump administration. He added that he and Agriculture Secretary Sonny Perdue are under specific marching orders to protect current market access for U.S. farm products in the revised NAFTA.  Lighthizer specifically stated:

“The president has specifically told each of us that this is a very, very top priority.  One, not to do any damage and two, to add to the bottom line. So we expect to do that.”

BORDER ADJUSTMENT TAXES

The only good news about Border Adjustment taxes is the President Trump did not include Border Adjustment Taxes in his tax proposal to Congress.  Despite the decision not to put border adjustment taxes (“BAT”) in the Administration’s tax proposal, the House Republicans and Ways and Means Committee continue to push it.  See May 23rd Ways and Means hearing on Border Adjustment Taxes, at https://waysandmeans.house.gov/live/.

Archer Daniel Midland argued for the BAT, citing problems with Agriculture exports, but the retailers, including Target and WalMart, came out strongly against it.  One witness stated that US products are taxed twice, but imports are only taxed once and get a rebate when the product is exported to the US.

But it was also clear from the hearing that Congressmen are split on the Border Adjustment tax.

On May 23, 2017 Treasury Secretary Steven Mnuchin, however, in a closed-door meeting with Democrats on the Ways and Means stated that both he and President Trump are opposed to the Border Adjustment Tax.   One California Democrat, Judy Chu, on the Ways and Means Committee, directly asked Mnuchin if he supported  the  BAT.  As she stated Mnuchin’s concern was the impact on consumers:

“He actually said straight out that he doesn’t support it and the president doesn’t support it.  Unless he was lying to us yesterday, I really felt it was dead on arrival.”

On May 24th, Paul Ryan stated that the BAT needs to be changed and immediately imposing it in its full form would be “too disruptive”.

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/zero 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 in TAA for workers 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

Attached are newsletters from Chinese lawyer Roland Zhu and his trade group at the Allbright Law Office about developments in Chinese trade law.  Team’s newsletter-EN Vol.2017.16 Team’s newsletter-EN Vol.2017.17 Team’s newsletter-EN Vol.2017.18 Team’s newsletter-EN Vol.2017.19 Team’s newsletter-EN Vol.2017.20

SECTION 337 AND IP CASES

NEW SECTION 337 CASES AGAINST CHINA AND OTHER COUNTRIES

COLLAPSIBLE SOCKETS FROM MOBILE ELECTRONIC DEVICES

On April 10, 2017, in the attached ITC notice, SOCKETS MARINE ,PopSockets LLC filed a section 337 patent case against imports of Collapsible Sockets for Mobile Electronic Devices from the following Chinese companies:

Agomax Group Ltd., Hong Kong; Guangzhou Xi Xun Electronics Co., Ltd., China; Shenzhen Chuanghui Industry Co., Ltd., China; Shenzhen VVI Electronic Limited, China; Shenzhen Yright Technology Co., Ltd., China; Hangzhou Hangkai Technology Co., Ltd., China; Shenzhen Kinsen Technology Co., Limited, China; Shenzhen Enruize Technology Co., Ltd., China; Shenzhen Showerstar Industrial Co., Ltd., China; Shenzhen Lamye Technology Co., Ltd., China; Jiangmen Besnovo Electronics Co., Ltd., China; Shenzhen Belking Electronic Co., Ltd., China; Yiwu Wentou Import & Export Co., Ltd., China; and Shenzhen CEX Electronic Co., Limited, China.

ROBOTIC VACUUM CLEANING DEVICES

On April 18, 2017, in the attached ITC notice, ROBOTIC VACUM CLEANERS, iRobot Corporation filed a section 337 patent case against imports of Robotic Vacuum Cleaning Devices from the following US and Chinese companies:

Bissell Homecare, Inc., Grand Rapids, Michigan; Hoover Inc., Glenwillow, Ohio; Royal Appliance Manufacturing Co., Inc. d/b/a TTI Floor Care North America, Inc., Glenwillow, Ohio; Bobsweep, Inc., Canada; Bobsweep USA, Henderson, Nevada; The Black & Decker Corporation, Towson, Maryland; Black & Decker (U.S) Inc., Towson, Maryland; Shenzhen ZhiYi Technology Co., Ltd., d/b/a iLife, China; Matsutek Enterprises Co., Ltd., Taiwan; Suzhou Real Power Electric Appliance Co., Ltd., China; and Shenzhen Silver Star Intelligent Technology Co., Ltd., China.If you have any questions about these cases or about Trump and Trade, 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.

If you have any questions about these cases or about Trump’s Trade War on downstream industries, the Mechanical Tubing case, 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.

Best regards,

Bill Perry

US China Trade War–Rise in Trump/Sanders Protectionism, Steel Cases, New AD and 337 Cases, False Claims Act

 New York City Skyline East River Empire State Building NightTRADE IS A TWO WAY STREET
“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”
PRESIDENT RONALD REAGAN, JUNE 28, 1986
US CHINA TRADE WAR JUNE 7, 2016 

Dear Friends,

This is the second article of a several part series on how weak free trade arguments have led to the sharp rise of protectionism of Donald Trump and Bernie Sanders and the probable demise of the Trans Pacific Partnership (“TPP”).  The first article outlined the problem and why this is such a sharp attack on the TPP and some of the visceral arguments against free trade.  The second article will explore in depth the protectionist arguments and the reason for the rise of Donald Trump and Bernie Sanders.

Subsequent articles will describe the weak free trade arguments to counter the protectionism, the Probable Demise of the TPP, failure of Congressional Trade Policy and what can be done to provide the safety net that will allow Congress again to vote for free trade agreements so that the United States can return to its leadership in the Free Trade area.  Congress has to fix the trade situation now before the US and the World return to the Smoot Hawley protectionism of the 1930s.

In addition, set forth are several developments involving steel trade litigation, antidumping and countervailing duty reviews against Chinese companies, new antidumping and countervailing duty cases, new 337 cases against Chinese companies and finally a new False Claims Act settlement against a US importer for evasion of US antidumping duties.

If anyone has any questions or wants additional information, please feel free to contact me at my new e-mail address bill@harrismoure.com.

Best regards,

Bill Perry

REASONS FOR THE RISE OF TRUMP SANDERS PROTECTIONISM IN THE UNITED STATES

As part two of my series of articles on how weak free trade arguments have created the rise in protectionism and the probably demise of the Trans Pacific Partnership (“TPP”), in this segment I will describe some of the reasons for the rise of Trump and Sanders and the protectionism that goes with it.

The simple truth is that when weak academic, theoretical economic arguments for free trade meet the hard visceral arguments of bombed out US factories and the loss of millions of manufacturing jobs, the free trade arguments melt away.  Weak theoretical free trade arguments will not be enough to stop the wave in protectionism sweeping the United States.  More has to be done.

In a recent article in Time Magazine entitled “Welcome to the Election from Hell”, Frank Luntz, a well-known pollster for Fox and CBS, stated that because there is so much anger in the focus groups and the US electorate, he has lost control of the focus groups he uses to test ideas.  One Trump supporter stated that he is not mad, he is angry and then stated:

“Because anger is way more than mad.  Angry is what happens when you’ve been kicked around like a dog for too long, and you’re ready to fight back.”

This explains the rise of Donald Trump and Bernie Sanders- anger in the electorate and also explains why recent polls have Donald Trump running neck in neck with Hilary Clinton.  Both Trump and Sanders are political outsiders.  Hilary is the symbol of the establishment and from what we are seeing from the electorate, this is definitely an outsider’s year.

But why has trade become a center of the Presidential campaign?  What explains the sharp rise in protectionism?

LOSS OF JOBS EXPLAINS THE RISE IN PROTECTIONISM

Jim McDermott in a May 11th article in the New York Post entitled, “Trump, Sanders Voters Don’t Want Handouts — They Want Jobs” stated:

“A popular knock on voters who support Donald Trump or Bernie Sanders because they have been “left behind” by free trade, globalization and technological progress is that they want a handout from Uncle Sam.

But the truth is the opposite: These voters want to work. They want jobs. And that’s the key to understanding their support for Trump or Sanders. . . .

In this political season, I’ve been asking some of them and their friends, and their now-adult kids, which presidential candidates they find appealing. Only two find support:  Sanders, the Vermont socialist, and Trump, the New York billionaire. Both candidates appeal to a working class that is frustrated, fed up and downright angry.

Neither can be bought.

To understand the simmering discontent of working-class folks who are attracted to  one (or both) of these candidates, you need to imagine you’ve either lost a job or  cannot break into the work force. Viewed from these perspectives, an academic debate about whether free trade results in net job losses or gains is mostly meaningless. These people want a good job, or at least a job no worse than the job they lost. Their economic futures seem to be on life support.

We can’t ignore the centrality of work in people’s lives. Most people want to work. Most people want to contribute to society and take care of their families. When the government adopts free-trade policies that pick winners (the better educated who gain new jobs) and losers (manufacturing workers), the government also needs to cushion the blow for the losers.

Since this hasn’t happened for the last couple of decades, anger has been building and is now finding a political outlet. Many Americans start to wonder: Our government helps rich Wall Street bankers but not Main Street homeowners? Supports elite universities but not vocational schools? Lowers taxes on the wealthiest Americans?

Our government has an obligation to help people adjust to seismic policy changes, like free trade. In the last couple of decades, trade agreements have resulted in, for example, the technology industry gaining ground, and the steel industry losing ground.  Besides picking winners and losers, free-trade policies introduce major economic anxiety into many previously stable families. . . .

Sanders and Trump tap into this disillusionment. They’re paying attention to the working class. They appear to actually understand, on a visceral level, the challenges faced by these Americans — and at least they seem to understand these voters aren’t moochers.  In different ways, they’re offering seething working-class Americans pathways to reclaiming what they’ve lost.

Until we admit that we have come precariously close to ending true social mobility in America, we’ll continue to see angry working-class voters approaching their boiling point. . . .”

The labor unions, such as the AFL-CIO, echo Mr. McDermott’s point.  The Unions say they do not want Trade Adjustment Assistance (“TAA”) for workers.  They want no more trade agreements.  TAA for workers is not good enough.  The Labor Unions want jobs for their workers.

As explained more below, it is the collateral destruction created by Trade Agreements, which puts the TPP directly at risk.  It is also the failure of Congressional policy when it comes to Trade Adjustment Assistance, in part, that has created this problem.  Congress gives $711 million in trade adjustment assistance to retrain workers for jobs, a very important program, but the jobs, in fact, may not exist.

But to save the companies and the jobs that go with them, Congress gives only $12.5 million total nationwide to help companies adjust to import competition and allow them to continue to exist and prosper along with jobs that go with them.

Trade Agreements, such as the TPP, do not create huge tidal waves of imports, but flash floods, which concentrate in one area and can wipe out US companies in an entire industry when they have no guidance on how to compete, survive and navigate through those flash floods.

But more on that below and in the next segment.  In this segment we need to analyze the tidal wave of rising protectionism in the United States.  If one combines the Trump and Sanders voters, that is a clear majority of the US voting electorate, and the one point that Trump and Sanders have in common is no more trade agreements and protecting the US workers from import competition.  Too many jobs have been lost.

In an April 25, 2016 CNN article, entitled “Resetting Red and Blue in the Rust Belt,” Jeremy Moorhead describes interviews with voters in Buffalo New York, Erie, Pennsylvania and Youngstown Ohio.  No Presidential candidate has ever been able to win an election without taking the state of Ohio, so it is critical to every Presidential candidate.  Jeremy Moorhead states:

“The voters of the Rust Belt have shaken up the 2016 presidential campaign: Hoping to jolt a political system they see as ineffective and out of touch, they have repeatedly revolted by supporting unlikely, anti-establishment candidates.

In both Donald Trump and Bernie Sanders, these voters see a potential for change they haven’t felt in generations. They say they are willing to shed party allegiances and reimagine their priorities this year, even voting for a self-described democratic socialist, or for a flame-throwing real estate developer who has never served in government.

In doing so, they have become the engine of one of the most extraordinary elections in modern U.S. history.

Frustration with the economic and political system is especially strong in the Rust Belt, a section of the country in the Northeast and Midwest once at the heart of the United States’ manufacturing boom. Decades after the decline of heavy industries like steel production and coal mining, the region continues to struggle with decaying infrastructure, population decline and high unemployment.

Voters there are worried about economic stagnation and crime plaguing their communities.  They are disappointed in Washington’s elected officials. They are calling out for swift, radical change. . . .

BUFFALO NEW YORK

Buffalo demonstrates Trump’s remarkable appeal across the country to non-traditional Republican voters. Here, there are working- and middle-class voters, former supporters of President Barack Obama and individuals who have supported Democrats in the past now drawn to Trump’s promise of dramatic change.

In the First Ward of South Buffalo on the corner of Ohio and Michigan Avenues, there is a favorite spot among locals called the Swannie House. Wiles has owned the place for 33 years and sits on a stool in the corner of the bar every day, his feet elevated on the window sill because of a bad back. It’s “the perfect corner because you hear everything,” he says.

These days, it seems everyone wants to talk about one thing: Donald Trump.

“It doesn’t matter if you’re black, you’re green, you’re white, you’re a Martian with tentacles. It doesn’t matter,” Wiles, 60, says. “They’re all talking about Trump.” . . . .

YOUNGSTOWN OHIO

Downtown Youngstown looks like a booming college town.  . . .

But away from the center of downtown, things get bleak — fast.

Along the former industrial corridor of Steel Valley, giant structures that used to be steel mills are now rusting and vacant. There are abandoned homes all across the city, a reminder of the thousands of residents who fled the area in the 1970s and ’80s when the mills shut down.

Although Ohio’s unemployment rate mirrors the national figure of 5%, it is much higher in Youngstown: 8.2%.  . .  .

ERIE PENNSYLVANIA

Spend a day talking to the residents of Erie — some 90 miles southwest of Buffalo — and you’re likely to learn two things. First, the General Electric plant in Lawrence Park is laying off 1,500 workers. Second, Presque Isle was recently voted in USA Today as the number one freshwater beach in the country.

Erie bled thousands of jobs over the years as manufacturing-based companies left the area, moving to the South or overseas in search of cheaper labor. . . . .”

On April 4, 2016, David Goldstein for the Portland Press Herald in an article entitled, “Blue Collar Voters: Trade is Killing Us,” stated:

“Establishment voices of economists, government and business officials argue that trade deals are critical in a global economy, and great for America. But critics such as organized labor call them “death warrants.”

And in blue collar communities in Wisconsin and across the industrial Midwest, that economic angst, coupled with some sense of betrayal, helps explain the roiling politics of 2016. . . . .

Wisconsin has lost more than 68,000 manufacturing jobs since the mid-1990s when the first of several controversial trade pacts with Mexico, China and others took hold. . …

That’s the case here in South Milwaukee, a community of more than 20,000 people whose economy is built around the sprawling Caterpillar plant, which builds huge steam shovels and other mining equipment. Its predecessor, Bucyrus International, built shovels that were used to dig the Panama Canal.

Now, Caterpillar has laid off about 600 of its 800-plus workers over the past two years because of a business slowdown.

“It’s had a pretty large impact,” said Brad Dorff, an assembler at Caterpillar and the local Steelworkers Union president. “Whether it’s small grocery stores, a hardware store down the street, local taverns; they used to get a lot of business from the people that live in this community who were making a good living, a good wage working here.”

Wisconsin’s heavy manufacturing sector, once one of the country’s strongest, has been taking a lot of punches in recent years. General Motors, General Electric, Chrysler, Joy Global Surface Mining and Manitowoc Cranes have all cut jobs or closed operations in recent years for a variety of reasons.

Hometown companies such as Kohler, the plumbing supply manufacturer; and Trek Bicycles have offshored jobs to India, China and Taiwan.

Meanwhile, Madison, the state capital, will lose 1,000 jobs over the next two years as the 100-year-old iconic Oscar Mayer meat processing plant shuts down. And just east on I-94 in Jefferson, Tyson Foods will cease operations at its pepperoni processing plant, cutting 400 jobs. . . .

The turmoil feeds into a debate over trade that’s playing out in the 2016 campaign. . . .

In Wisconsin, voters are about evenly split on whether free trade agreements have helped or hurt, according to a recent Marquette University Law School poll.

In Michigan and Ohio, a majority of primary voters in both parties believed trade kills jobs in the U.S. rather than creates them.

That’s the feeling inside union halls and communities that lie in the shadow of shuttered factories. Trade deals like NAFTA (North American Free Trade Agreement) and TPP (Trans-Pacific Partnership) spell only uncertainty and distress.

“We’ve watched a lot of our friends lose their jobs,” said Dorff, inside the local steelworkers union hall just blocks from the Caterpillar plant. “They have homes that now they can’t afford. They have families they have to support. They lost their insurance. Their kids have diabetes and they’re trying to get medication. It literally breaks your heart.”

The Business Roundtable, an association of corporate executives of major companies, say that international trade supports 1 in 5 Wisconsin jobs, and that cheaper manufacturing costs overseas lowers prices for consumers in this country.

“It is an economic fact of life that both businesses and their employees benefit when we sell more products overseas, and consumers enjoy a wider range of products at lower prices,” Jerry Jasinowski, former president of the National Association of Manufacturers, said in a recent statement.

But since NAFTA, which removed tariff barriers between the U.S. Canada and Mexico, went into effect in 1994, and Congress’ granting of permanent normal trade status to China in 2000, a key question has been how much have those decisions contributed to job losses at home.

Economists generally say that overall, trade creates more prosperity, and that displaced workers will find other work. But competition from China has meant the loss of 2.4 million jobs, according to a recent report by the National Bureau of Economic Research, a private nonprofit research group.

It pointed out that industries are often concentrated in certain parts of the country – the Midwest, for instance – and that local economies have not had the capacity to absorb those workers the Chinese competition has displaced.

Julie Granger, senior vice president of the Metropolitan Milwaukee Association of Commerce, said that in a global economy, the notion that “free trade encourages the loss of local jobs … is not always the most responsible way to look at it. If we are not engaged in the global economy, we will lose more jobs.

There’s no going back. It’s the same story in Milwaukee as it in other cities: many of lowest skilled jobs simply were disappearing.”

So is organized labor, long the backbone of the working class, a force in Wisconsin politics and a persistent critic of the trade deals. From 2014-2015, union membership as a percentage of the Wisconsin workforce fell to 8.3 percent from nearly 12 percent, according to the U.S. Bureau of Labor Statistics.

But organized labor has been under siege in Wisconsin for a while.  Take the General Motors plant in Janesville, Wis. GM wrung significant concessions out of the United Autoworkers to help keep the plant open. But the automaker closed it eventually anyway in 2009, putting 850 people out of work.”

The article quotes Roger Hinkle, Wisconsin AFL-CIO employment training specialist:

“Free traders always point to free trade being good for everybody.  There’s a mountain of victims who don’t have to look at some theoretical report to feel, Yes.  I was directly affected by this.“

The ironic point in this article, however, is the closure of Caterpillar.  Caterpillar is dependent on cheap steel as a raw material input, and they have been a major opponent of all the steel trade cases brought by the Union and US Steel because high prices for steel, their raw material input, makes them less competitive with companies, such as Komatsu, which have access to the lower cost steel.

As explained in more detail below, the recent decisions of the Commerce Department to impose large antidumping and countervailing duties on imports of steel from China and other countries has had an extremely negative impact on downstream US industries that use steel as a raw material input.

In fact, of the 130 outstanding antidumping and countervailing duty orders against China, over 80 of them are directed at raw material inputs—chemicals, metals and steel, which go directly into downstream US production and have a direct impact on their cost.  Raw Material trade cases rob Peter to pay Paul.

Although Congressional representatives and Senators do not care if trade protectionism causes consumer products to go up by a few dollars at Wal Mart, what happens if these higher duties on imports means that companies in their Districts and States have to close and the jobs are lost because the companies cannot compete in the downstream markets.

STEEL TRADE CASES

COLD ROLLED STEEL

On May 17, 2016, in the attached fact sheet, cold rolled, Commerce made a final dumping and countervailing duty determinations in the Cold-Rolled Steel Flat Products case from China and Japan cases.  Because the Chinese companies refused to cooperate in the investigation, they received an antidumping rate of 265.79% and a countervailing duty rate of 256.44%.  Japanese Steel was hit with an antidumping rate of 71.35 percent.

Commerce was able to hand down such high margins because the Chinese and Japanese respondents refused to cooperate with the Department allowing it to very high impose duties on the basis of adverse facts available on an expedited basis.  Chinese companies refused to cooperate because since the Commerce Department considers China a nonmarket economy country and refuses to use actual prices and costs in China to determine dumping, it is impossible to win the case.

On May 20, 2016, the Wall Street Journal issued an editorial entitled, “Obama Front-Runs Trump on China” stating:

“The Obama Administration may not sound like Donald Trump when talking about trade with China, but it isn’t above using protectionism for political gain.  On Tuesday the U.S. Commerce Department increased a tariff on “dumped” Chinese cold-rolled steel to 522%, a move that will hurt American manufacturers who need the steel to remain competitive.

The tariff may score some populist points with voters in an election year.  It also may be a ploy to get lawmakers to ratify the Trans-Pacific Partnership trade agreement before President Obama leaves office.  But past experience suggests that such gambits inflame protectionist sentiment rather than tamp it down.

President George W. Bush imposed tariffs of up to 30% on a broad range of Chinese steel products in 2002.  The Consuming Industries Trade Action Coalition says the tariffs cost the US economy 200,000 jobs and $4 billion in lost wages. . . . .

[Low Chinese steel prices are] good news for the U.S. Since steel is an important raw material for many industries, China’s trade partners benefit from its wasteful policies.  Lower prices make companies that use steel more competitive and bring down prices for consumers.

Daniel Pearson for the CATO Institute conservatively estimates that that American companies using steel produce $990 billion in value added, more than 16 times the output of the U.S. steel industry, and also employ 16 times more workers.  If tariffs on Chinese imports raise the U.S. price of steel, these companies’ costs will be higher than foreign competitors,’ hurting their ability to grow and provide more jobs for Americans.

The article goes on to complain that US Steel companies do not make the same range of products as Chinese companies and that the Cold Rolled determination “is a warm up for the fight over granting China market economy status in December.”

The Editorial concludes:

“The larger question is whether the steel tariffs herald a new and more bitter era of trade retaliation.  Previous skirmishes have been damaging but stopped short of full escalation.  But Mr. Trump and Hilary Clinton have run for President as protectionists, and Mr. Obama’s surrender to steel interests is a bad omen.”

CORROSION RESISTANT STEEL

On May 25, 2016, in the attached factsheet, factsheet-multiple-corrosion-resistant-steel-products-ad-cvd-final-052516, Commerce announced its affirmative final determinations in the antidumping duty (AD) and countervailing duty (CVD) investigations of imports of corrosion-resistant steel products (CORE) from China, India, Italy, Korea; its affirmative final determination in the AD investigation of imports of CORE from Taiwan; and its negative final determination in the CVD investigation of imports of CORE from Taiwan.

Again, since the Chinese companies refused to cooperate because of the nonmarket economy status of China, Chinese companies received an antidumping rate of 209.97% and a countervailing duty rate of 241.07%.

Antidumping and Countervailing duty rates for market economy countries, however, were much lower with India dumping rates between 3 to 4% and countervailing duty rates between 8 to 29%.  Italy received rates of between 12 to 92%, Korea 8 to 47%, and Taiwan antidumping rate of 3.77% and 0% countervailing duty rate.  As market economy companies, Commerce must use actual prices and costs in those countries to calculated antidumping rates and to value subsidies.

On June 1, 2016, the Wall Street Journal in an article entitled “Steel Tariffs Create a Double-Edged Sword” reported that there is already an impact on downstream US production:

New tariffs on imports are boosting steel prices in the U.S., offering a lifeline to beleaguered American steelmakers but raising costs for manufacturers of goods ranging from oil pipes to factory equipment to cars. . . .

The Article goes on to state that the U.S. benchmark for “hot rolled coil index has risen more than 60% per ton” and that:

is creating problems for some steel buyers . . .

Steelcase Inc. Chief Executive James Keane said a tariff on a special kind of Japanese steel could cost one of its subsidiaries [Polyvision] $4 to $5 million a year . . . where it employs 200 people.  If nothing changes, we would have to close our Oklahoma plant.

The Article also reports that US “Car companies have been lobbying against steel tariffs.”

The problem with the Wall Street Journal Editorial and Article is that they assume President Obama has discretion not to impose the tariffs.  These cases were not brought under Section 201, the Escape Clause, which provides for Presidential approval or disapproval of the duties, but under the US antidumping and countervailing law where there is no discretion.  In contrast to most countries around the World, including Europe, Canada and yes China, the US antidumping and countervailing duty law do not have a public interest test.  Since the Chinese and Japanese companies did not cooperate, pursuant to the US antidumping and countervailing duty law, the Administration had no choice but to impose very high antidumping and countervailing duties on those imports.

If the US International Trade Commission (“ITC”) goes affirmative in its injury determination and by statute it cannot give any weight to arguments by downstream producers, antidumping and countervailing duty orders will be issued and those orders can stay in place for 5 to 30 years.

STEEL 337 STEEL CASE

On May 26, 2016, the ITC instituted the section 337 case against Chinese steel import.  In the attached notice, USITC Institutes 337 Steel Case, the ITC stated:

The investigation is based on a complaint filed by U.S. Steel Corporation of Pittsburgh, PA, on April 26, 2016.  The complaint alleges violations of section 337 of the Tariff Act of 1930 in the importation into the United States and sale of certain carbon and alloy steel products through one or more of the following unfair acts:  (1) a conspiracy to fix prices and control output and export volumes, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; (2) the misappropriation and use of U.S. Steel’s trade secrets; and (3) the false designation of origin or manufacturer, in violation of the Lanham Act, 15 U.S.C. § 1125(a).  The complainants request that the USITC issue a general exclusion order, a limited exclusion order, and cease and desist orders.

The last two counts of the notice are traditional issues subject to section 337 cases.  It is count 1 that raises the interesting issues.

The last time the ITC found a Section 337 violation based on an antitrust cause of action was in 1978 in Certain Welded Steel Pipe &Tube, No. 337-TA-29.  Although the ITC found a violation, the President vetoed the determination, in part, because of pressure from the Justice Department, antitrust division.

The antitrust cause of action, however, has not been eliminated from section 337.  Section 337 does not specifically define what is an antitrust violation, but presumably it should overlap the Sherman Act.  The US Steel compliant specifically references the Sherman Act.

Recently former U.S. International Trade Commission Chairman Daniel Pearson stated that this is the widest 337 complaint he has ever seen, but went on to state that a sudden closure of the U.S. market to foreign steel would have dire consequences for the domestic economy.  Pearson specifically stated:

“I don’t believe I’ve ever seen a 337 petition that is this broad. To me, it sounds a lot like overreach. There’s no way that I could see someone closing off all imports of steel into the U.S. and not have enormous effects on consumer welfare and other factors that are specified in the statute. I’m flummoxed by this.”

337 is broadly tailored to address “unfair methods of competition or unfair acts.” Still, Pearson speculated that the ITC may well reject the petition and informally advise U.S. Steel to more squarely focus its arguments on the trade secret prong.

The ITC, however, did not reject the petition and instituted the case.

Pearson’s concern about the case is the broad nature of the company’s desired remedy, the general exclusion order. He stated:

“U.S. Steel is not happy with imports, and they may have decided to just take this shot and see what happens.  I have no idea whether or not they think they will be successful; I would rather guess not.”

But to date US Steel has been successful.

My fear, however, is that Chinese steel companies will think that this is like an antidumping and countervailing duty case and they can choose not to cooperate.  Failure to cooperate in a 337 case could lead to a total exclusion order against every steel product produced by every single Chinese steel company that does not participate in the case and that exclusion order from the US market could be in place for up to 30 years.

The antitrust claim in the 337 case by its conspiracy claim has already expanded and brought every single Chinese steel company into the case and a refusal to cooperate in the investigation could well lead to their exclusion from the US market for years to come.

NEW ANTIDUMPING AND COUNTERVAILING DUTY CASES AGAINST CHINA

On May 25, 2016, in the attached relevant pages of the attached petition, REVISED AMONIUM SULFATE PETITION, PCI Nitrogen, LLC filed an antidumping and countervailing duty case against ammonium sulfate from China.

JUNE ANTIDUMPING ADMINISTRATIVE REVIEWS

On June 2, 2016, Commerce published the attached Federal Register notice, JUNE REVIEW INVESTIGATIONS, regarding antidumping and countervailing duty cases for which reviews can be requested in the month of June. The specific antidumping cases against China are:  Artist Canvas, Chlorinated Isocyanurates, Furfuryl Alcohol, High Pressure Steel Cylinders, Polyester Staple Fiber, Prestressed Concrete Steel Rail Tie Wire, Prestressed Concrete Steel Wire Strand, Silicon Metal, and Tapered Roller Bearings.

The specific countervailing duty case is: High Pressure Steel Cylinders.

For those US import companies that imported :  Artist Canvas, Chlorinated Isocyanurates, Furfuryl Alcohol, High Pressure Steel Cylinders, Polyester Staple Fiber, Prestressed Concrete Steel Rail Tie Wire, Prestressed Concrete Steel Wire Strand, Silicon Metal, or Tapered Roller Bearings during the antidumping period June 1, 2015-May 31, 2016 or the countervailing duty period of review, calendar year 2015, the end of this month is a very important deadline. Requests have to be filed at the Commerce Department by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in Antidumping and Countervailing Duty cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Commerce Department’s Administrative Review, its antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the antidumping and countervailing duty case is over because the initial investigation is over.  Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.

While in China recently, I found so many examples of Chinese solar companies or US importers, which did not file requests for a review investigation.  In one instance, although the Chinese companies obtained separate rates during the initial investigation, the Petitioner appealed to the Court and through a Court determination the Chinese companies lost their separate rates.  Several Chinese companies and US importers did not know the case was appealed, and the importers now owe millions in antidumping duties because they failed to file a request for a review investigation in December.

CUSTOMS

FALSE CLAIMS ACT

On April 27, 2016, in the attached news release, california-based-z-gallerie-llc-, the Justice Department announced that Z Gallerie LLC agreed to pay $15 million to resolve allegations that the company engaged in a scheme to evade antidumping duties on imports of wooden bedroom furniture from the People’s Republic of China (PRC), in violation of the False Claims Act.  The relator , the private company that reported the fraud, will obtain $2.4 million of the $15 million.  As the Justice Department stated in its release:

“This settlement reflects the Department of Justice’s commitment to ensure that those who import and sell foreign-made goods in the United States comply with the law, including laws meant to protect domestic companies and American workers from unfair competition abroad,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will zealously pursue those who seek an unfair advantage in U.S. markets by evading the duties owed on goods imported into this country.” . . .

The particular duties at issue in this case are antidumping duties, which protect domestic manufacturers against foreign companies “dumping” products on U.S. markets at prices below cost.  Imports of wooden bedroom furniture manufactured in the PRC have been subject to antidumping duties since 2004.

The settlement announced today resolved allegations that Z Gallerie evaded antidumping duties on wooden bedroom furniture imported from the PRC from 2007 to 2014, by misclassifying, or conspiring with others to misclassify, the imported furniture as pieces intended for non-bedroom use on documents presented to CBP.  For example, Z Gallerie allegedly sold certain Bassett Mirror Company products, including a six-drawer dresser and three-drawer chest, as part of a bedroom collection; however, these goods were misidentified on CBP documents, using descriptions such as “grand chests” and “hall chests,” in order to avoid paying antidumping duties on wooden bedroom furniture. . . .

“Under the new Trade Facilitation and Trade Enforcement Act, CBP will likely see an increase in these types of settlements as the streamlined processes take effect concerning allegations of duty evasion,” said CBP Commissioner R. Gil Kerlikowske. “The Act reinforces CBP’s existing authorities and tools to collect and investigate public allegations of duty evasion improving the overall effectiveness and enforcement of CBP law enforcement actions concerning illicit trade activity, specifically in the area of antidumping and countervailing duty evasion schemes.”

“Companies that intentionally mislabel shipments or misrepresent the value of goods being imported into the United States to avoid paying the appropriate duties do so in an attempt to create an unfair advantage over businesses that play by the rules,” said Special Agent in Charge Nick S. Annan of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE HSI) in Atlanta.  “This type of activity hurts legitimate U.S. businesses and, by extension, our overall national economy.  Uncovering these types of schemes will continue to be a major investigative priority for ICE HSI.”

The allegations resolved by the settlement were originally brought by whistleblower Kelly Wells, an e-commerce retailer of furniture, under the qui tam provisions of the False Claims Act.  The act permits private parties to sue on behalf of the United States those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government or cause or conspire in such conduct.  The act also allows the whistleblower to receive a share of any funds recovered.  Wells will receive $2.4 million as her share of the settlement.

IP/PATENT AND 337 CASES

NEW SECTION 337 CASES FILED AGAINST CHINA

On May 5, 2016, Aspen Aerogels Inc. filed a Section 337 case against Composite Aerogel Insulation Materials and Methods for Manufacturing from China.  The proposed respondents are: Nano Tech Co., Ltd.,  China and Guangdong Alison Hi-Tech Co., Ltd., China.

On May 19, 2016, Intex Recreation Corp. and Intex Marketing Ltd. filed a new section 337 case against imports of Inflatable Products and Processes for Making the Same from China.  The respondent companies in China and Hong Kong are Bestway (USA) Inc., Phoenix, Arizona; Bestway Global Holdings Inc., China; Bestway (Hong Kong) International Ltd., Hong Kong; Bestway Inflatables & Materials Corporation, China; and Bestway (Nantong) Recreation Corp., China.

Complaints are available upon request

If you have any questions about these cases or about the US trade policy, trade adjustment assistance, customs, 337, IP/patent, products liability, US/China antitrust or securities law in general, please feel free to contact me.

Best regards,

Bill Perry

US CHINA TRADE WAR–DAMAGE CAUSED BY AD ORDERS, TRIUMPH AND TRAGEDY OF TAAF, TPP DEVELOPMENTS, NEW TRADE/CUSTOMS LAW

US Capitol North Side Construction Night Washington DC ReflectioTRADE IS A TWO WAY STREET

“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”

PRESIDENT RONALD REAGAN, JUNE 28, 1986

US CHINA TRADE WAR DECEMBER 10, 2015

Dear Friends,

Attached is the first half of the December blog post, which covers the collateral damage caused by US Antidumping Orders on downstream US production by the numerous antidumping orders against raw material inputs from China, which directly damage and in some cases destroy downstream US production.  The Article describes why the Import Alliance is so important to counter this trend.

The second article is on the Triumph and Tragedy of Trade Adjustment Assistance for Companies, the only truly successful trade remedy the US government has in its arsenal to help US companies injured by imports.

This update goes into detail on the Trans Pacific Partnership (“TPP”) and when it might come up for a vote in Congress, the impact of Presidential politics, especially against Donald Trump, on the TPP, the ITC TPP investigation and the appointment of Congressman Dave Reichert of Washington State as the Chairman of the Subcommittee on Trade, House Ways and Means Committee.

Finally, on December 9th, Senate Finance Committee and House Ways and Means announced Agreement on the Trade Facilitation and Trade Enforcement Act of 2015.  Copies of the Bipartisan bill and Conference Report are attached below.

If anyone has any questions or wants additional information, please feel free to contact me.

Best regards,

Bill Perry

THE IMPORTANCE OF THE IMPORT ALLIANCE FOR US MANUFACTURING AND PRODUCTION—THE DAMAGE ANTIDUMPING CASES CAUSE TO DOWNSTREAM AND UPSTREAM PRODUCERS

US Law firms representing domestic producers in antidumping (“AD”) cases like to grab the mantle of helping US producers stay in business and saving US jobs.  They do not want Congress or the general public to look at the collateral damage created by US AD orders against China on downstream US production.  In truth, US AD cases against China have destroyed more jobs than they have saved.

All AD orders can do is delay the decline of the US industry, they cannot save the companies.  But in delaying the decline, these same AD orders destroy downstream value added production, where the US is often among the most efficient producers in the World.

These points were made by importers in the Import Alliance at meetings with Congressional Trade Staff and a Congressman on Capitol Hill on November 18th in Washington DC.  The Import Alliance has four objectives.  The first two objectives are:

(1)       Eliminate retroactive liability for US importers and join the rest of the World in making antidumping and countervailing duty orders prospective.

(2)      Work for market economy treatment for China in 2016 as provided in the US China WTO Agreement for the benefit of US importers and downstream companies.

As of November 17, 2015, as the US International Trade Commission (“ITC”) states in the attached list, NOVEMBER 172015 AD CVD ORDERS, there are 128 outstanding antidumping and countervailing duty orders against China.  More than 70 of those Antidumping and Countervailing Duty Orders are against raw material inputs, chemicals, metals and steel, that go into downstream US production.

The outstanding chemical AD and countervailing duty (“CVD”) orders against China cover imported products such as polyvinyl alcohol used to produce adhesives and polyvinyl buturyl for auto safety glass.  Another product is sulfanilic acid used to provide Optical Brighteners in the US Dye Industry, which, in turn, resulted in the antidumping order against Stilbenic optical brightening agents.  Other chemicals covered by AD and CVD orders are potassium permanganate in place since 1984 used to purify water, potassium permanganate salts, chloropicrin, barium chloride, glycine used to produce the cooling effect in candies, furfural alcohol, persulfates, barium carbonate, Tetrahydrofurfuryl alcohol, Carbazole violet pigment 23, chlorinated isocyanurates used in swimming pool chemicals, certain activated carbon used to purify various chemicals and to produce products used in nuclear plants, certain polyester staple fiber, sodium hexametaphosphate, sodium nitrite, citric acid, xanthan gum, monosodium glutamate, calcium hypochlorite and melamine.

Often these AD and CVD orders cover products that are not even produced in the United States.  Because of this situation, many US producers dependent on the raw materials simply close US production and move overseas.

The following Chinese metal products are covered by AD and countervailing duty (“CVD”) orders: magnesium ingots, magnesium, and pure magnesium, magnesium carbon bricks used in downstream magnesium dye casting industry and to produce light weight auto parts.  All light weight auto part production has moved to Canada and Mexico because of the antidumping orders on Chinese magnesium.  Other Chinese metal products covered by antidumping and countervailing duty orders are silicon metal critical for use in US foundries, silicomanganese, foundry coke, ferrovanadium, and  graphite electrodes used in the steel industry and downstream metal production, aluminum extrusions, the order has been expanded to cover many downstream products produced from aluminum extrusions, including curtain walls/sides of buildings, lighting equipment, geodesic domes, refrigerator handles, and subcomponent auto parts, electrolytic magnesium dioxide used to produce batteries, which, in part, led to the closure of Panasonic’s battery plant in the US, and refined brown aluminum oxide.

The Magnesium antidumping order, in particular, has led to enormous job loss in the downstream industries.  The Magnesium AD order protects one company in Utah and between 200 to 400 jobs by wiping out thousands, if not tens of thousands of jobs in the downstream industries.

In 2004-2005 43 US companies sold magnesium die castings in the US market.   As of two to three years ago, according to National Association of Dye Casters (“NADCA”), less than 12 US companies now produce magnesium die castings in the United States.  NADCA estimates that 31 US companies have ceased pouring magnesium in the United States because of the antidumping order against magnesium from China.  US companies, such as Lunt in Illinois, simply went out of business because of the Magnesium from China Antidumping order.  In 2010, when NADCA did the survey, it estimated a job loss of 1,675 direct jobs.  Now the jobs loss has swelled to over 2,000 and closer to 10,000 supporting jobs.

Where did the magnesium jobs and companies go?  Many companies and projects simply moved to Mexico or Canada.  Magnesium is used to produce light weight auto parts.  Many OEM magnesium parts manufacturers moved all their production to Mexico. Five Tier 1 steering wheel manufacturers, for example, have magnesium die casting and wheel assembly plants in Mexico, including TRW, AutoLiv, Takata, Key Safety Systems and Neaton.  GM intends to import Buick cars from China into the US.  Could the Magnesium AD order be one of the reasons?

After Chinese chemical and metal products, almost every steel product from China is covered by an AD order and often also a CVD order, including carbon steel plate, hot rolled carbon steel flat products, circular welded carbon quality steel pipe, light walled rectangular pipe and tube, circular welded carbon quality steel line pipe, circular welded austenitic stainless pressure pipe, steel threaded rod, oil country tubular goods, prestressed concrete steel wire strand, seamless carbon and alloy steel standard line and pressure pipe, high pressure steel cylinders, prestreessed concrete steel rail tire wire, non-oriented electrical steel, and carbon and certain alloy steel wire.  Almost every steel product from China is covered by an AD and CVD orders, except for galvanized steel products and cold rolled steel, which are presently the subject of ongoing AD and CVD investigations.

As one person working in the Trade Adjustment Assistance for Companies program remarked to me, the Antidumping and Countervailing Duty orders against Steel explain why so many companies in the TAA program use steel as an input.

If these Chinese products were truly dumped, then AD orders should be issued.  Since Commerce considers China a nonmarket economy country (“NME”) and refuses to use actual prices and costs in China to determine dumping, however, it does not know whether the products are dumped.  For more discussion of the 2016 China NME problem, see my last blog post and the dumping canard argument and many other prior posts and my next newsletter.

Congressmen may not care that retail products go up several dollars because of AD orders, but what happens when the AD orders in place injure downstream US producers, sometimes literally closing the companies down and destroying downstream jobs.  Does that make a difference to Congress?

Also the AD and CVD orders on Solar Cells and Solar Products has led to problems for REC Silicon in Moses Lake, Washington, which produces the upstream product, polysilicon, used to produce solar cells.  China has retaliated against the United States producers by bringing its own AD and CVD cases against the United States for US exports of polysilicon, wiping out the US polysilicon from the China market.  As stated in the last blog post, REC Silicon has deferred a $1 billion investment and possibly could close its plant in Moses Lake.

Because of the impact of AD and CVD orders on downstream US production, the Import Alliance has two other objectives:

(3)       End user production companies should have standing in antidumping and countervailing duty cases.

(4)       The United States should join the rest of the World in antidumping and countervailing duty cases, including Canada, the EC and yes China, and have a public interest test.

This is also why the Import Alliance for America is so important for US importers and US end user companies.  The real targets of antidumping and countervailing duty laws are not Chinese companies.  The real targets are US companies, which import products into the United States from China or use raw materials in downstream production process.

As mentioned in prior blog posts, we are working with APCO, a well-known lobbying/government relations firm in Washington DC, on establishing a US importers/end users lobbying coalition to lobby against the expansion of US China Trade War and the AD and CVD laws against China for the benefit of US companies.

Ten US Importers have agreed to form the Import Alliance for America.   On November 18th, Importers in the Alliance met with a Congressman and Congressional Trade Staff in Washington DC in the first of several meetings to educate the US Congress and Administration on the damaging effects of the US China trade war, especially US AD and CVD laws, on US importers and US downstream industries.  For more information, see the Import Alliance website at http://www.importallianceforamerica.com.

THE TRIUMPH AND TRAGEDY OF TAA FOR FIRMS/COMPANIES

But what is the answer to this import problem?  What is the answer for US companies caught in the cross hairs of import competition from China and many other countries and facing potential bankruptcy?

Not more protection. Antidumping and countervailing duty cases cannot be brought against the World.  As stated in many past blog posts, all antidumping and countervailing duty cases do is slow the decline in the US industry, not cure the disease.  A great example of this is the US Steel Industry and the demise of such well-known steel companies as Bethlehem Steel, Lone Star Steel and Jones and Laughlin.  Many of these companies have simply ceased to exist despite 40 years of protection from steel imports under the US antidumping and countervailing duty laws.

Instead, I firmly believe the answer lies in the small program—the TAA for Companies (also called TAA for Firms) (“TAAF”). The Triumph of TAAF is that it has been reauthorized for 5 years.  The tragedy is that its budget has again been cut to $12.5 million nation-wide.

TAA for Companies (TAAF) is probably the most effective trade remedy the United States has in its arsenal, but it is not given the resources it needs to do the job.   I believe in this program and sit on the board of the Northwest Trade Adjustment Assistance Center, the regional office in the Northwest that administers the program.  Since 1984, NWTAAC has been able to save 80% of the injured companies that got into the program.  For more information see www.nwtaac.org.  The big news is that TAAF nationwide recently had a great validation and, at the same time, a bewildering set back.

In case you don’t know about TAAF, this is a program that offers a one-time, highly targeted benefit to domestic companies hurt by trade.  The benefit is not paid to the companies, but to consultants, who help the company adjust to import competition.   The program is amazingly effective.   Between 2010 and 2014, 896 companies with more than 90,000 employees were certified as trade impacted by TAAF after experiencing a 16% drop in sales and 17% drop in jobs.   During this 5 year period, participating companies in TAAF increased average sales by 40% and employment by 20%, achieving impressive double-digit productivity gains.   Essentially, all of the 15,090 jobs lost to imports before company participation in the TAAF program were regained by creating more than 15,140 new jobs by the end of the five year period, and 75,000 jobs were retained by helping these companies stay in business.   These impressive results occurred with TAAF program annual costs of approximately $15.3 million per year.

To put that in context, the very much larger TAA for Worker Program’s appropriation for FY 2015 was $711 million.  The TAA for Worker (TAAW) Program spends roughly $53,000 per year to retrain a single employee AFTER a job has been lost due to trade.   The mission for each program is very different – TAAF’s primary mission is to save the company AND the jobs, while TAAW’s mission is to retrain workers after the jobs have already been lost.   Now you should ask which is the smarter investment?

Arguments are made that TAAF costs the US government money.   When a company adjusts to trade and survives or even prospers, that company and all of its workers pay taxes.  The taxes on average wages for about 8,300 jobs would pay for this whole program. Companies in the TAAF program, however, regained 15,000 jobs and retained 75,000 jobs.  The real costs to government, however, are when companies don’t survive and good jobs are lost.

In fact, the TAAF program actually saves the US government millions of dollars each year by helping companies stay in business while saving their higher paying manufacturing jobs.  For every job saved, resources aren’t wasted on expensive training and other costly benefits, but can instead be used more productively to help trade impacted firms adapt to changes in the global economy as large FTA’s like the upcoming TPP are implemented.

An example using the TAAF program statistics from above describes what happens when TAAF program resources are cut.   If workers applied for benefits through the TAA for Workers (TAAW) Program for the 15,000 jobs lost due to imports, it would cost more than $795 million to retrain them using the $53,000 average cost figure.   The TAAF program not only saves the company but saves the high paying jobs that go with that company, and keeps tax revenues rolling in to contribute to local and national tax bases rather than acting as a cost burden.

The more stunning fact – if the TAAF program saves just 300 jobs per year on a national basis for which TAA for Worker resources of $53,000 aren’t required for retraining efforts, the program easily pays for itself up to its $16 million authorization level.  That is an extremely low bar to set considering that TAAF retained more than 75,000 jobs and created an additional 15,140 jobs during the last five year period.  This shows the short sightedness in cutting the program.

For more information, see the TAA video from Mid-Atlantic TAAC at http://mataac.org/howitworks/ , which describes in detail how four import injured companies used the program to change and turn their company around and make it profitable.  One of the companies was using steel as an input, and was getting smashed by Chinese imports.  After getting into the program, not only did the company become prosperous and profitable, it is now exporting products to China.  This is the transformative power of TAA for Companies.

Amazingly, TAAF came into being over 40 years ago, before “globalization” was even a word.  On the eve of TPP – it’s never been so relevant.  The idea then, and now, is that changes in trade circumstances (often sudden and unpredictable) put U.S. companies and jobs in jeopardy.  In other word, government action through trade agreements, such as the TPP, change the US market and the market conditions under which companies operate in the United States.  Since government action through the trade agreement has changed the US market, I believe the US government has an obligation to help US companies adapt to the changing US market.

Global trade has evolved over the past 40 years and perhaps it’s time for trade policy to adapt to those changes.   The original mission for TAA was more concerned with the impact of increased imports on US workers, and the vast majority of funds have been dedicated to the TAA for Workers program.   The landscape has changed as more than 5 million manufacturing jobs have been lost in the last 40 years, and the mission for TAA must now shift to maintaining a robust core of manufacturing companies and jobs. Without a vibrant core of manufacturing firms, the US won’t have the capacity or capabilities to achieve growth through export expansion no matter how many free trade agreements are passed, and all the training in the world is not going to bring back those manufacturing jobs.

Earlier this summer, as explained in detail in past blog posts, Trade, including Trade Promotion Authority (“TPA”) and TAA were the hot topics on Capitol Hill.  During this process Congress authorized the TAA program for five years – a length of time and expression of confidence that nobody expected.  The series of events in the Congress were highly dramatic – it was a breakthrough in bipartisanship.

Many Senators and House Representatives played a significant role in pushing the trade legislation, including TAA, through Congress.  The Senators included Republicans Mitch McConnell and Orrin Hatch and Democrats Ron Wyden, Patty Murray and Maria Cantwell.   In the House, Republican Representatives, including Paul Ryan, Dave Reichert, and Jaime Herrera Beutler, voted for the TAA program along with over 90 other Republicans.  Democratic Representatives, including Suzanne Bonamici and many from the New Dem Coalition, such as Representatives Ron Kind, Derek Kilmer, Rick Larson, and Suzan DelBene, helped push the TAA and TPA legislation through Congress.

But, in the very next breath Congress cut the program’s appropriations to $12.5 Million. That’s $12.5 Million for the entire country – an investment of only $250,000 per state to help trade impacted manufacturing companies.

A couple of points to make here:

At $12.5M, TAAF will be able to serve less than 1 in 1,000 companies injured by import competition. Does anyone truly believe that import competition is seriously affecting less than one in 1,000 companies, especially with the coming passage of the TPP?

The inequity of funding for TAA programs must be addressed – FY 2015 appropriations for TAA for Workers was $711 million; TAA for Companies was $15 million.  Both programs play an important role in trade policy, but does it make sense to use the vast majority of funds for retraining efforts after jobs have been lost?  Or, should more of the funding be dedicated to saving both companies and jobs through the TAAF program?

As indicated below, the Labor Advisory Committee to the TPP, which is composed of Unions, estimates that TPP could cost the United States up to 330,000 jobs in the Manufacturing Sector.  Although this may be too pessimistic, the TPP will create losers, companies that do not do as well, and without a robust TAAF program how can those companies and jobs be saved?

TAAF has been evaluated repeatedly by GAO, CRS, and various outside evaluators, which conclude that instead of dying, TAAF companies have a 6% annual growth rate. That’s after an at least 5% decline year on year (the threshold for entering the program), which is an impressive turn-around for distressed companies.  TAAF has proven its worth, and the basic model is the most effective trade remedy that works in the 21st century.  Moreover, the TAAF solution does not change the US market or create the collateral damage associated with US antidumping and countervailing duty cases.  Instead, it teaches the company how to change, adapt and swim in the new market conditions caused by imports.

More importantly, TAAF changes the mindset of the injured companies away from Globalization victimhood to being competitive in the international market.  One Economic Development Council here in Washington State has the motto Compete Every Day, with Every One in Every Country Forever.  That is the type of mindset that turns companies around.  That is the type of mindset TAA for Companies promotes.

TPP TEXT AND TRADE ADVISORY REPORTS

On November 5, 2015, the United States Trade Representative Office (“USTR”) released the text of the Trans Pacific Partnership Agreement (“TPP”).  This is an enormous trade agreement covering 12 countries, including the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, and covers 40% of the World’s economy. To read more about the TPP and the political negotiations behind the Agreement see past blog posts on this site.

The text of the Agreement is over 6,000 pages. We have downloaded the text of the various Chapters, which are listed below.  We have broken the Agreement down into three parts and have added consecutive page numbers to the Agreement in the right hand lower corner to make the Agreement easier to navigate.

For specific tariff changes on specific products, look at attached Chapter 2 National Treatment and Market Access for Goods, Chapters 1 – 2 – Bates 1 – 4115  This is the largest document because it includes all imported items by tariff number.  But this is the section that will impact most companies.  The other parts of the text covering Chapters 3 to 30 is posted on the blog, Chapters 3 – 30 – Bates 4116 – 5135. along with the Appendices, Annex 1 – 4 – Bates A-1-1074

On November 5th, the Treasury Department released the attached text of the Currency Manipulation side deal, Press Release – 12 Nation Statement on Joint Declaration Press Release – Joint Declaration Fact Sheet TPP_Currency_November 2015

On December 2nd and 3rd, 2015 various trade advisory groups operating under the umbrella of the United States Trade Representative (“USTR”) Group issued reports on the impact of the TPP on various industries and legal areas.  Attached are some of the reports,  Agricultural-Policy-Advisory-Committee ATAC-Animals-and-Animal-Products ATAC-Fruits-and-Vegetables ATAC-Grains-Feed-Oilseed-and-Planting-Seeds ATAC-Processed-Foods ATAC-Sweeteners-and-Sweetener-Products Intergovernmental-Policy-Advisory-Committee-on-Trade ITAC-2-Automobile-Equipment-and-Capital-Goods ITAC-3-Chemicals-Pharmaceuticals-Health-Science-Products-and-Services ITAC-5-Distribution-Services ITAC-6-Energy-and-Energy-Services ITAC-8-Information-and-Communication-Technologies-Services-and-Electronic-Commerce ITAC-9-Building-Materials-Construction-and-Non-Ferrous-Metals ITAC-10-Services-and-Finance-Industries ITAC-11-Small-and-Minority-Business ITAC-12-Steel ITAC-14-Customs-Matters-and-Trade-Facilitation ITAC-15-Intellectual-Property ITAC-16-Standards-and-Technical-Barriers-to-Trade Labor-Advisory-Committee-for-Trade-Negotiations-and-Trade-Policy Trade-and-Environment-Policy-Advisory-Committee.pdf.   All the reports can be found at https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/advisory-group-reports-TPP.

Almost all of the reports are favorable, except for the Steel Report, which takes no position, and the Labor Advisory Report, which is opposed because it is the position of the Unions.  Some of the relevant reports for various industries are as follows:

For Agriculture, see Agriculture Policy Advisory Committee, Animals and Animal Product, Fruits and Vegetables, Grains and Processed Foods.  See also Standards and Technical Barriers to Trade.  For Pharmaceuticals and Health Care, see Chemicals and Health Science products, plus Services.  For Banking see financial and services.  For Energy and Mining, see Energy and Energy Services plus Non-Ferrous Metals. For Intellectual Property, see IP Report and Information and Communications Technologies.  For Telecom, see Communication Technologies and also Standards. For Environmental, see Trade and Environment Policy Advisory Committee. For Customs and Trade, see Customs and Trade Facilitation.

TO TPP OR NOT TO TPP THAT IS THE QUESTION

On  October 5th, in Atlanta Trade ministers from the U.S. and 11 other nations, including Japan, Canada, Mexico, Australia, New Zealand, Peru, Chile, Brunei, Singapore, Vietnam and Malaysia, reached an agreement on the Trans-Pacific Partnership (“TPP”), which will link up 40 percent of the world’s economy.  Some of the key issues in the TPP are:

Cut Tariffs on 18,000 products

New special 2 year safeguard for certain domestic industries that face a surge in imports

State-owned companies with TPP Countries must conduct commercial activities in accordance with market- based considerations

Vietnam must allow formation of independent labor unions

Malaysia will face trade retaliation if it does not improve its forced labor and human trafficking record

Bar countries from requiring the localized storage of data or surrender valuable source codes as condition of market entry

Require parties to commit to sustainable forest management and conserve at risk plants and animals.

On November 5, 2015, the United States Trade Representative Office (“USTR”) released the text and appendices of the Trans Pacific Partnership Agreement, which are over 6,000 pages long and are attached above. The clock has started to run, which means President Obama could technically sign the Agreement 60 days later or on February 3rd,.  Potentially Congress could take up the bill 30 to 90 days later.

But the big question is when will Congress take up the Agreement and can it be ratified.  Two weeks ago on Capitol Hill in discussions with legislative trade staff, they said the TPP has to start from the House of Representatives.  So that means that Paul Ryan, the new Speaker of the House, will probably have the final say, along with Senators McConnell and Hatch.

The new Chairman of the Subcommittee on Trade, House Ways and Means, Congressman Dave Reichert, stated recently that a House floor vote on TPP could be possible in late spring or early summer.  Given the timeline established by TPA requirements, the President will be able to sign TPP Feb. 3 and then send the implementing legislation to Congress after March 4.  Chairman Reichert stated that Congress would have 90 days to consider the agreement, but he would rather not see the House vote pushed into the end of July, adding that it would be possible for the pact to enter into force by January 2017.  Congressman Reichert expressed confidence that sufficient votes would be there to meet the simple majority threshold required under TPA, but he acknowledged that votes on trade agreements are always close.  See article below on the appointment of Congressman Dave Reichert of Washington State to the Chairmanship of the Subcommittee on Trade, House Ways and Means.

As Chairman Reichert further stated, “We’re probably looking somewhere around the May time frame—we’re thinking late spring, early summer.”  But he also indicated that there were many issues to be discussed before scheduling the vote.

In talking to a number of Congressional Trade Staff two weeks ago, they still have not read the entire 5,000 plus pages of the Agreement and digested it enough to know what is in it.

Reichert also stressed that the timing of any vote would be a leadership decision, stating:

We’re taking a measured approach, we’re studying the document and we’re working with other members of Congress and talking with our constituents to see where the troubles might exist for them on a particular product and also working closely with the ambassador [U.S. Trade Representative] Mike Froman.

Reichert also indicated that the International Trade Commission (“ITC”) report on the impact of the TPP agreement on the U.S. economy, which is due by May 18, would also have an impact on the vote.

Reichert further stated:

We are in study mode and talking with members who have issues and concerns about some of the language in TPP.  We’re just going to be moving forward, talking with constituents, talking with members, finding ways we can address these concerns.

Two notable areas of concern are the intellectual property rights protections for pharmaceutical drugs and the carve-out of tobacco from investor state dispute settlement.  The TPP has only 5 years of protection for biologic drugs when the Pharmaceutical companies wanted 12 years.

Reichert further stated, “If we lose some votes [because of the tobacco issue], we’ll have to work on our Democrat friends to pull through and support the effort to recover those losses”

As one Republican Trade Staffer, who is very close to the decision-making, told me, “We honestly do not know when the TPP will come up.”  The staffer went on to state that before the Agreement was finalized, USTR would state that “Substance drives the timeline.”  As the Staffer further stated, now “Addressing members’ [Congressional representatives’] concerns sets the timeline.”

One Democratic trade staffer in the Senate stated that he believes that the Presidential election will have an impact on the timing of a TPP vote in the Congress. If the TPP is looked upon as a positive by the US electorate, the Republicans may want to keep the issue on the table to use against Hilary Clinton in the election.  But if the TPP is looked upon as a negative, Congressional Republicans may want the vote to take place in Spring or Summer 2016 to take it off the table in the Presidential election.

Senate Republican trade staffers made the same point to me, “Maybe there will be no vote on TPP in 2016.”

Any issue this big coming up in a Presidential election year is by its very nature political so President politics will have an impact.  As indicated below, however, Presidential politics cuts several ways.  On the Democratic side, Bernie Sanders is adamantly against the TPP and Hilary Clinton has said she is opposed because she wants the union votes. On the Republican side, all the candidates, except Donald Trump, are in favor of the TPP, but Trump adamantly opposes it.

PRESIDENT OBAMA PUSHES FOR TPP

On November 10, 2015, President Obama made his case for the TPP on Bloombergview.com:

A Trade Deal for Working Families

By Barack Obama

As President, my top priority is to grow our economy and strengthen the middle class. When I took office, America was in the middle of the worst recession since the Great Depression — but thanks to the hard work and resilience of the American people, our businesses have created 13.5 million jobs over the past 68 months, the longest streak of private-sector job creation in history. The unemployment rate has been cut nearly in half — lower than it’s been in more than seven years. We have come back further and faster from recession than nearly every other advanced nation on Earth.

That’s real progress. But as any middle-class family will tell you, we have more to do. That’s why I believe the Trans-Pacific Partnership is so important. It’s a trade deal that helps working families get ahead.

At a time when 95 percent of our potential customers live outside our borders, this agreement will open up new markets to made-in-America goods and services. Today, exports support 11.7 million American jobs. Companies that sell their goods around the world tend to grow faster, hire more employees and pay higher salaries than companies that don’t. On average, export-supported jobs pay up to 18 percent more than other jobs.

These are good jobs — and this agreement will lead to even more of them. It would eliminate more than 18,000 taxes that various countries put on made-in-America products. For instance, last year, we exported $89 billion in automotive products alone to TPP countries, many of which have soaring tariffs — more than 70 percent in some cases — on made-in-America products. Our farmers and ranchers, whose exports account for roughly 20 percent of all farm income, face similarly high tariffs. Thanks to the TPP, those taxes will drop drastically, most of them to zero. That means more U.S. exports supporting more higher-paying American jobs.

At a time when our workers too often face an unfair playing field, this agreement also includes the highest labor standards of any trade deal in history. Provisions protecting worker safety and prohibiting child labor make sure that businesses abroad play by the same kinds of rules we have here at home. Provisions protecting the environment and combating wildlife trafficking make sure that economic growth doesn’t come at the expense of the only planet we call home.

And these commitments are enforceable –meaning we can hold other countries accountable through trade sanctions if they don’t follow through. So, these tough new rules level the playing field, and when American workers have a fair chance to compete, I believe they’ll win every time.

I’ve said many times that the Trans-Pacific Partnership is the right thing for our economy, for working Americans and for our middle class. But I’m not asking you to take my word for it. Instead, I’ve posted the agreement online. If you build cars in places such as Detroit, you can see for yourself how your products will have a better shot of hitting the road in places such as Japan. If you’re a farmer or rancher, you’ll see how your products will face fewer barriers abroad. If you’re a small-business owner, you’ll see how this agreement will mean less paperwork and less red tape.

Along with the text of the agreement, we’ve posted detailed materials to help explain it. It’s an unprecedented degree of transparency — and it’s the right thing to do. Not every American will support this deal, and neither will every member of Congress. But I believe that in the end, the American people will see that it is a win for our workers, our businesses and our middle class. And I expect that, after the American people and Congress have an opportunity for months of careful review and consultation, Congress will approve it, and I’ll have the chance to sign it into law.

Together, we’ve overcome enormous obstacles over the past seven years. We’ve taken an economy that was in free fall and returned it to steady growth and job creation. And we’ve put ourselves in a position to restore America’s promise not only now, but for decades to come. That’s what I believe this agreement will help us do.

UNIONS PUSH AGAINST IT

On December 4th, Union leaders from the United Steelworkers, United Mine Workers of America and the Service Employees International Union, who sit on the president’s Labor Advisory Committee for Trade Negotiations and Trade Policy, came out against the TPP in the report released by USTR, arguing that although the TPP creates some limited opportunities for increased exports, it will also increase trade deficits in several industries — such as auto, aerospace, textiles and call centers — and will kill US jobs.  As the Union members on the Labor Advisory Committee state in the attached report, Labor-Advisory-Committee-for-Trade-Negotiations-and-Trade-Policy:

The LAC strongly opposes the TPP, negotiated between the United States (U.S.), Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. We believe that the Agreement fails to advance the economic interests of the U.S. and does not fulfill all of the negotiating objectives identified by Congress in the Trade Priorities and Accountability Act of 2015. The threat to future economic gains here in the U.S. and the standard of living of our people will be put in jeopardy by the Agreement. These threats will grow over time based on the potential for open-ended expansion of the TPP to countries ranging from Indonesia to China.

The LAC report goes on to state:

On behalf of the millions of working people we represent, we believe that the TPP is unbalanced in its provisions, skewing benefits to economic elites while leaving workers to bear the brunt of the TPP’s downside. The TPP is likely to harm the U.S. economy, cost jobs, and lower wages. . . .

The LAC entered the TPP process hopeful and optimistic that the TPP would finally be the agreement that broke the elite stranglehold on trade policy and put working families at the front and center. Unfortunately, we believe the TPP fails to strike the proper balance: of course it is difficult to convince Vietnam to implement freedom of association before the TPP enters into force once Vietnam has already agreed to provisions that will force it to pay higher prices for medicines and subject even its most basic laws to challenge by foreign investors in private tribunals. Given the misguided values enshrined in the TPP, it is no surprise that the economic rules it will impose will actually make it harder to create a virtuous cycle of rising wages and demand in all 12 TPP countries.

While the TPP may create some limited opportunities for increased exports, there is an even larger risk that it will increase our trade deficit, which has been a substantial drag on job growth for more than twenty years. Especially at risk are jobs and wages in the auto, aerospace, aluminum and steel, apparel and textile, call center, and electronic and electrical machinery industries. The failure to address currency misalignment, weak rules of origin and inadequate state-owned enterprise provisions, extraordinary rights provided to foreign investors and pharmaceutical companies, the undermining of Buy American, and the inclusion of a labor framework that has proved itself ineffective are key among the TPP’s mistakes that contribute to our conclusion that the certain risks outweigh the TPP’s speculative and limited benefits. . . .

The LAC urges the President in the strongest possible terms to reverse course now. Do not send this TPP to Congress. Instead, the TPP should go back to the negotiating table. We want to work with you and our counterparts in the other TPP countries to create a truly progressive TPP that uplifts working people, creates wage-led growth, diminishes income inequality, promotes infrastructure investment, protects intellectual property without undermining access to affordable medicines, and respects our democracy. . . .

The LAC went on to state with regards to Manufacturing:

Manufacturing—General

The Trans Pacific Partnership will seriously undermine the future of domestic manufacturing production and employment. As was noted in an initial evaluation of the TPP published in the Wall Street Journal, the combined U.S. trade deficit in manufacturing, including automobiles and auto parts, would increase by $55.8 billion under the TPP. Utilizing the conservative estimate of the Department of Commerce that each $1 billion in trade correlates to 6,000 jobs, the TPP will cost, at a minimum, 330,000 jobs in the manufacturing sector. That estimate does not include the indirect cost in terms of jobs or on wages and living conditions of all the primary and secondary workers who will be negatively affected by the agreement. Indeed, we believe that the job loss potential of the TPP is much higher.

The report is one of 27 from various advisory committees on trade policy, environment and industries released by the Office of the U.S. Trade Representative on December 4th, many of which backed the TPP.

Meanwhile on December 4, 2015, the United Auto Workers (“UAW”) called on Congress to reject the TPP, stating that the agreement threatens domestic manufacturing jobs.  The international executive board of the UAW, one of North America’s largest unions with more than 750 locals, unanimously voted against the TPP, saying the deal repeats many of the same mistakes as other free trade deals before it, such as the North American Free Trade Agreement, that led to stagnant wages, rising income inequality and plant closings in the U.S.

On November 10, 2015, the Blue Green Alliance, a coalition of labor and environmental groups, continued to attack the TPP as a threat to U.S. jobs and climate change policies.  Members of the Alliance include the AFL-CIO, the Sierra Club and the United Steelworkers, each of which has taken a leading role in steering the fight to defeat the TPP.  Although the Union attacks are well-known, the Sierra Club Executive Director Michael Brune aimed his attack at the TPP’s investor state dispute settlement mechanism, which he claimed will give corporations even more power to challenge governments’ air, water and climate protection rules.

PRESIDENTIAL POLITICS—WALL STREET JOURNAL GOES AFTER TRUMP ON TPP AND TRADE

Meanwhile, trade issues and the TPP have been the subject of Presidential politics, with George Melloan writing an opinion piece for the Wall Street Journal on November 3, 2015 comparing Donald Trump to Herbert Hoover and the Smoot-Hawley Tariff:

Donald Trump, Meet Herbert Hoover

Today’s ardent foe of free trade has a soul mate in the president who signed Smoot-Hawley into law.  Donald Trump sees unpredictability as a virtue, so one can only guess what his policies would be if he makes it to the Oval Office. Yet because he continues to lead the Republican pack with the election only a year away, maybe it’s time to make some guesses. Those guesses may or may not be well-informed by Mr. Trump’s incessant monologues. But if he is taken at his word, he is one of the most ardent opponents of free trade ever to seek high office in the U.S.

Mr. Trump rants that as President he would punish Ford Motor Co. for building a plant in Mexico by slapping a 35% tariff on Ford cars and parts imported from that plant. China and Japan are trade enemies and he would fix their wagons, too, by putting trade negotiations with them in the hands of wheeler-dealer Carl Icahn. His pugnacious hostility toward trading partners could be brushed off, but opinion polls suggest that what he says has a lot of resonance with the electorate. . . .

The tariff act they [Smoot Hawley] wrote was initially meant to benefit farmers. But after the shock of 1929, industry and labor demanded protection as well.

Both Hoover and the Republican Congress were compliant. In its final form Smoot-Hawley covered some 20,000 items. The average tariff on dutiable goods jumped to 50% from an already high 25%. U.S. trading partners responded in kind and world trade began to shut down. . . .

But on June 17, 1930, Hoover, pressured by his fellow Republicans, signed it anyway.

The rest is history, as they say. The combined effects of declining global trade and New Deal experiments with central planning meant that Americans would suffer a decade of hard times. No Republican would man the Oval Office for another 20 years.

Could such a thing happen today? Probably not, at least not in the same way. It is now widely understood and accepted that the well-being of the American people is predicated on the smooth flow of global trade and capital. Almost every product Americans buy, including homes, is a composite of parts made in many places in the U.S. and abroad.

Apparently the only prominent American who doesn’t understand that is Donald Trump. He seems to think, as did many people 85 years ago to their sorrow, that the mutually beneficial exchange of goods and services across borders is a zero-sum game, indeed a form of warfare.

Some of us have assumed that the hotel and casino tycoon’s populist demagoguery will ultimately blow itself out. But what if it doesn’t?

On November 8th, Mary Anastasia O’Grady authored another article for the Wall Street Journal, “Memo to Trump: Nafta Helps Americans”, stating:

Levying tariffs on Mexico to pay for a border wall would launch a trade war. . . .

Without the North American Free Trade Agreement (Nafta), manufacturing would be in even worse shape. But don’t tell Donald Trump that. If elected President, he promises to “make America great again” by, among other things, blowing up the 1994 trade pact. . . .

In other words, Mr. Trump plans to launch a trade war with Mexico. This is as preposterous an idea as it is dangerous. Let’s start with the painfully obvious: A tariff is not paid by the exporter but by the importer, who passes it on to the consumer. . . .

It’s hard to see how any of this could be good for Americans. According to “NAFTA Triumphant,” a report last month by the U.S. Chamber of Commerce, annual U.S. trade with Canada and Mexico is now $1.3 trillion, nearly four times greater than before the agreement. Agricultural exports to Canada and Mexico have gone up by 350%, and U.S. service exports have tripled. More than a third of U.S. merchandise exports are now bought by Nafta partners.

A trade war would hurt American manufacturing because it would fracture the highly integrated North American economy. All three Nafta partners are competitive globally because they are able to allocate capital to its highest use anywhere on the continent. . . .

A September 2010 National Bureau of Economic Research working paper found that 40% of the content of U.S. imports from Mexico is produced by U.S. workers. . .  .

Mr. Trump’s plan also fails from a security perspective. Mexican states that are engaged economically with their northern neighbors are growing faster than the rest of the country. They are also creating good jobs and raising living standards, necessary factors to stem the flow of Mexican migrants north. . . .

Mr. Trump’s trade agenda is absurd and would invite a depression. He’s either too uneducated in economics to know that or too cynical to care.

On November 12, 2015, the Wall Street Journal went after Trump again on trade, commenting on the Republican debate:

Mr. Trump called it a “terrible deal,” though it wasn’t obvious that he has any idea what’s in it. His one specific criticism was its failure to deal with Chinese currency manipulation. But it took Rand Paul to point out that China isn’t part of the deal and would be happy if the agreement collapsed so the U.S. would have less economic influence in Asia.

Mr. Trump said on these pages Tuesday that he would label China a currency manipulator on his first day as President, triggering tariffs on thousands of Chinese goods. The businessman thinks economic mercantilism is a political winner, but we doubt that starting a trade war that raises prices for Americans would turn out to be popular. Many of Mr. Trump’s supporters care more about his take-charge attitude than his policies, but GOP voters will have to decide if they want to nominate their most protectionist nominee since Hoover. . . .

On November 12, 2015 in an Editorial, the Wall Street Journal stated:

Donald Trump Is Upset

The candidate says we were unfair to him on trade. . . .

Mr. Trump: “Yes. Well, the currency manipulation they don’t discuss in the agreement, which is a disaster. If you look at the way China and India and almost everybody takes advantage of the United States—China in particular, because they’re so good. It’s the number-one abuser of this country. And if you look at the way they take advantage, it’s through currency manipulation. It’s not even discussed in the almost 6,000-page agreement. It’s not even discussed.”

So when he is asked about TPP, Mr. Trump’s first reference is to China, which isn’t in TPP, and he now says the world should have known that he knows China isn’t part of it because amid his word salad he said that the deal “was designed for China to come in, as they always do, through the back door.”  .. . .

Our editorial point was what everyone who understands East Asian security knows, which is that China would be delighted to see TPP fail. China is putting together its own Asian trade bloc, and those rules will be written to its advantage. TPP sets a standard for trade under freer Western rules. China could seek to join TPP in the future, but it would have to do so on TPP’s terms, not vice versa.

TPP would help China’s competitors by giving them greater access on better terms to the U.S. market. Production is likely to shift from China to Vietnam and other countries. In October the Financial Times quoted Sheng Laiyun, the spokesman for China’s National Bureau of Statistics, as saying that, “If the TPP agreement is finally implemented, zero tariffs will be imposed on close to 20,000 kinds of products. . . . That will create some pressure on our foreign trade.” Some back door.  ***

As for currency manipulation, we gave Mr. Trump a forum for his views in our pages on Tuesday. He doesn’t understand currencies any better than he does TPP. Currency values are largely determined by central banks and capital flows. If China made the yuan convertible and let it float, the initial result would probably be a falling yuan as capital left the country. A trade deal with a binding currency provision could also subject the U.S. Federal Reserve to sanctions as a “manipulator” every time it eased money in a recession.

All of this bears on Mr. Trump’s candidacy because he is running as a shrewd deal-maker who can get the economy moving again. Starting a global currency and trade war “on day one” would get America moving toward recession—or worse.

IMPACT ON NON MEMBER COUNTRIES

USTR Froman in late October stated the TPP has had a “magnetic effect” on outside parties realizing that the TPP stands to set the rules of the road in the coming years, stating:

TPP was designed to be an open platform that will grow over time and help raise standards across the region and around the world.  It’s becoming clear that even nonmembers are going to have to compete in a TPP world and raise their game, and that’s good for everybody.

Froman’s statement came one day after Indonesian President Joko Widodo formally expressed interest in joining the TPP because of his fear of being left adrift in the region.

Assistant Secretary of State Daniel Russel said that the TPP strategy has been to raise trade standards and China could eventually be included in:

The world would be a better place, by far, if China were willing to meet the very high standards of TPP.  The broader impact on China is going to drive a virtuous cycle of better regulatory practices, greater transparency and openness of the Internet. What TPP brings to the member countries are things that I believe all people, including Chinese people, want.

During a recent TPP conference here in Seattle, a State Department expert on the TPP negotiations stated that the objective of the TPP is not to block or contain China.  Instead, the TPP objective is to entangle China in the higher standards and rules set by the TPP.  In other words, to join the TPP, China will have to meet the very high standards and rules set by the Agreement, which could go even higher in future negotiations.

On November 18, 2015, at the first meeting between President Barack Obama and his 11 TPP counterparts since the negotiations were completed on Oct. 5, TPP leaders stated:

“While our focus is on approval and implementation of the results of negotiations with our current partners, we have also seen interest from a number of economies throughout the region.  This interest affirms that through TPP we are creating a new and compelling model for trade in one of the world’s fastest growing and most dynamic regions.”

ITC TPP INVESTIGATION

In the attached notice, ITC TPP INVESTIGATION FED REG, on November 17, 2015 at the request of the USTR, the U.S. International Trade Commission (“ITC”) launched its formal investigation to assess the TPP’s overall economic impact, as mandated by the legislation to renew Trade Promotion Authority passed earlier this year.  As the Commission states in the notice, the purpose of the investigation is to assess the likely impact of the Agreement on the U.S. economy as a whole and on specific industry sectors and the interests of U.S. consumers.

The important dates during the investigation include a public hearing on January 13, 2016 and pre‐hearing briefs and statements due on December 29, 2015.  Post-hearing briefs and statements are due January 22, 2016.  The ITC will transmit its report to Congress on May 18, 2016.

CONGRESSMAN DAVE REICHERT OF WASHINGTON BECOMES CHAIRMAN OF THE SUBCOMMITTEE ON TRADE HOUSE WAYS AND MEANS—GOOD NEWS FOR WASHINGTON STATE AND FOR FREE TRADE IN GENERAL

On November 18, 2015, in the attached an announcement, REICHERT ANNOUNCEMENT CHAIRMAN, Congressman Dave Reichert, a Republican from Washington State, made the following statement after being named as the new Chairman of the Ways and Means Subcommittee on Trade:

I am very honored to have the opportunity to lead the Trade Subcommittee and champion some of the issues that have the greatest impact on Washingtonians. Washington State is one of the most trade-dependent states in the country with 40 percent of our jobs and more than $90 billion in annual exports connected to trade. In the Eighth District alone, 77,100 jobs are supported by trade, and our growers, producers, and businesses export approximately $8.6 billion in goods and services each year.

With the release of the text of the Trans-Pacific Partnership and our ongoing negotiations with the EU, this is a critical time for trade. As a longtime advocate of expanding trade opportunities, I will continue fighting on behalf of our workers, farmers, and businesses across the country, because I firmly believe through high-standard trade agreements we see expanded opportunities for all.

Representative Reichert is the first Member of Congress from Washington State to serve as Chairman of the Ways and Means Subcommittee on Trade.

From personal knowledge, I can confirm that the selection of Representative Dave Reichert as Chairman of the Trade Subcommittee, House Ways and Mean, is important for Washington State and for Free Trade proponents and advocates everywhere.

This is a very powerful position in Washington DC in the Trade network.  Not only the TPP, but amendments to the US Antidumping and Countervailing Duty law, Trade Adjustment Assistance and the US Customs law go through his Committee.  Chairman Reichert was recently named to the Conference Committee with the US Senate on the pending Customs and Trade bill, the Trade Facilitation and Trade Enforcement Act, H.R. 644, presently in Congress.  The Conference Committee met December 7, 2015 on Capitol Hill and as indicated below, came to Agreement on the Bill on December 9, 2015 for passage in Congress by the end of the year.

The issue of Retroactive Liability for US importers and market economy treatment for China in 2016 are squarely in the jurisdiction of the Trade Subcommittee, House Ways and Means, which Congressman Reichert now chairs.

Rep. Reichert is co-chair of the Friends of TPP Caucus, member of the President’s Export Council, and founder of the Congressional Freight Caucus.  Congressman Reichert also signed the discharge petition, as described in my last newsletter, to move the Ex-Im Bank through the House of Representatives.

On November 25, 2015, in an interview on his new position and the TPP, Chairman Reichert stated that he is focused mainly on making sure that the TPP meets many of the negotiating objectives laid out in the Trade Promotion Authority:

Right now, we are all in the process of comparing TPA language to the TPP language and discussing it with our constituents and getting into more discussions as people learn more and more about what’s actually in TPP.

The Chairman also made clear that he is holding off on a full endorsement of the TPP until he and his colleagues have carried out their analysis:

I am a pro-trade guy, but I am not going to support this agreement until we have thoroughly vetted it.  This has to be a deal that protects and creates American jobs and gives us the opportunity to have this global influence.

Reichert said that persuading skeptical Republicans will be a key job to bring the TPP to the Floor, but opposition from heavyweights, such as Paul Ryan or Orrin Hatch, will make it more difficult to get TPP through both chambers of Congress.  But Chairman Reichert pointed out that the TPP chapters, which cause some Republicans to oppose the bill, could also yield some unlikely allies from the other side of the aisle:

We may lose those members that are really affected by the tobacco provisions but on the other hand on the Democrat side, we may be able to gain some support for votes that we might lose on the Republican side.  There’s a lot of work to do in trying to find a direction through this to ensure that we have the votes to pass it [TPP] when it finally comes to the floor.

CONGRESSIONAL ANNOUNCEMENT ON DEAL FOR NEW TRADE AND CUSTOMS ENFORCEMENT BILL

On December 9, 2015, in the attached announcement, AGREEMENT NEW CUSTOMS BILL, Senate Finance Chairman Orrin Hatch, House Ways and Means Chairman Kevin Brady and Senate Finance Committee Ranking Member, Ron Wyden, announced a final agreement on the Trade Facilitation and Trade Enforcement Act of 2015.

Some of the key provisions of the bills are stringent enforcement measures for evasion of antidumping and countervailing duties. As Senator Hatch stated:

“Strong enforcement is a key element in our trade arsenal and thanks to this legislation the Administration will have a number of new tools to hold America’s trading partners accountable. Even more, this measure promotes legitimate trade facilitation and works to preserve one of America’s most important economic assets: intellectual property, helping to prevent counterfeit and illicit goods from entering our nation. We’ve put together a good package, and I look forward to working with my colleagues to get this report across the finish line and signed into law this year.”

As Senator Wyden also stated:

“This enforcement package is about jobs. Too often, our laws and enforcement policies have proven too slow or too weak to stop the trade cheats before jobs are lost. The Leveling the Playing Field Act Congress passed earlier this year helped ensure that workers and businesses harmed by unfair trade have faster access to relief. This conference report, which includes the ENFORCE Act, will help ensure that this relief is effective and that trade cheats cannot evade the consequences of violating our trade laws. The bill we released today represents bipartisan trade enforcement priorities that were years in the making. It takes trade enforcement to a new level to protect workers and businesses in Oregon and around the country. Congress is now on the verge of passing the strongest package of trade enforcement policies in decades.”

Under the new finalized bill, U.S. Customs and Border Patrol will be held accountable for effectively acting to prevent evasion of anti-dumping and countervailing duties through a new process with strict deadlines and judicial review.

Attached are a copy of the bill, the conference report and summary of the bill, CONFERENCE REPORT TRADE FACILITATION AND TRADE ENFORCEMENT ACT OF 20152 JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE Summary of TRADE FACILITATION AND TRADE ENFORCEMENT ACT OF 2015.

If you have any questions about these developments or about the TPP, US Antidumping or other trade laws, trade adjustment assistance, customs, 337, patent, US/China antitrust or securities law in general, please feel free to contact me.

Best regards,

Bill Perry

 

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