Trumping Chinese Steel…Or So We Thought

By 

Jordan Victor

Throughout the 2016 presidential campaign, candidate Donald Trump lambasted China for, “what’s happening to steel and the cost of steel, and China dumping vast amounts of steel all over the United States, which essentially is killing our steel workers and our steel companies.” This was a sentiment that was supported by then candidate Hillary Clinton as well. Both candidates were correct in that cheap Chinese steel has been flooding into the U.S. market. 

Source: US Census Bureau 

Cheaper Chinese steel imports are making it increasingly difficult for US companies to compete. As a result, American companies are being put in a position to lower their prices in turn hurting their profits and causing a loss of jobs. Since 2000, the steel industry has lost 48,000 jobs, as well as continuing the increase in steel imports since the beginning of this year. The expansion of steel imports into the US is only exacerbating the situation for US companies who are being forced to lower their prices. Coming upon nearly 10 months since President Trump’s inauguration, based on his campaign speeches, one would expect wide ranging actions to deal with this major campaign issue. In the absence of such actions, private and public stake holders alike are looking to the President’s trip to China for signs the Administration will change its course. However, with the President’s visit concluding with 37 major deals, with none involving steel, being announced it appears the steel industry may have to keep waiting for its long sought after aid.

Perceptions of inaction by the Administration are bolstered by its actions towards other trade issues such as the renegotiation of the North American Free Trade Agreement (NAFTA). Currently, the Trump Administration has been aggressively renegotiating the terms of the agreement to better suit its “America First” policy. Considering this, an immediate review of Chinese steel imports followed by action from the U.S. Department of Commerce, as well as possible filings with the World Trade Organization (WTO), should be at the top of the agenda for the Administration. However, these expectations have not been met and it leaves many in the industry and across the country with many questions.

The inaction surrounding the issue has led to 23 executives of pipe and tube manufacturing companies to plead their case in a letter sent to the Administration on August 28th of this year. In the letter, the executives articulate that “time is running out for the industry and its workers, and we urge you take immediate action under the provisions of U.S. law that allow you to intervene to ensure that domestic producers can meet the national security needs of our great country by imposing a combination of quotas and tariffs.” Chief among these questions are why extensive steps are not being taken to thoroughly review and act against China. Finally, if the Administration is so keen on renegotiating NAFTA to focus on providing advantages to struggling U.S. firms, why has the Administration taken this approach on NAFTA and not steel? In an article from August of this year, CNN reporter Patrick Gillespie attempts to answer the question of why the Administration has been so absent on the issue. In his piece, he lists geopolitics, NAFTA talks, and negative benefits of actions as possible answers. Yet, without a firm answer from the Administration, we can only speculate as to why.

On April 20, 2017 President Trump signed an executive order to initiate a review of whether imports of steel create a threat to U.S. national security. This action has a prima facia value of taking important steps to curb the threat of foreign steel imports to domestic companies. However, as of November 1st, the completed review has yet to be released. The delay in releasing this review has raised concern both in the private and public sector. Senate Minority Leader Chuck Schumer criticized the Administration’s response “when it comes to being tough on China to level the playing field for American steel and aluminum workers.” Senator Schumer continued his criticism by labeling President Trump “nothing more than a paper tiger” regarding this issue. In an effort to push the Administration to take substantive actions, Senator Schumer is blocking two key appointees to the Department of Commerce. Joining the Senator’s calls for action are representatives of the American steel industry. Leo Gerard, President of United Steelworkers, has called on congress to act saying, “The time to act is now, and workers are telling politicians their first-hand stories of the devastation in the industry and the critical importance of providing relief.” Moreover, in a public statement, the union cited that, “Despite reports the investigation has been completed, the public release of the document has not occurred, and no relief has been provided.”

The lack of strong action by the Administration is bewildering, especially considering the steps taken to renegotiate NAFTA. After four rounds of negotiation, U.S. Trade Representative Robert Lighthizer has proposed numerous positions that he and the Administration believe will dramatically decrease US trade deficits, eventually leading to economic benefits for those who have been left behind by the deal. Two of these dramatic positions include; raising the regional Rules of Origin for cars to 85% from 62.5% and a five-year sunset clause. The Rules of Origin content requirement raise is aimed to bring back automotive manufacturing back to the United States. While the later of these two proposals is designed to ensure an approval of the deal after every five years. The merits of these positions can be debated, but the point being that the Administration has gone to the lengths of pushing such stringent proposals, even with the threat to cancel the deal if they are not met. Again, we must ask, why for NAFTA and not for steel? Candidate Trump maligned both NAFTA and Chinese steel practices. Without having specific expectations, it is still odd to see little to no movement in reviewing international steel practices that we do see in the NAFTA renegotiations.

Further evidence of the stonewalling occurring in the review of the steel industry can be found in the dispute settlement apparatus of the World Trade Organization (WTO). Not only has the aforementioned review not been released, the WTO has yet to receive a formal complaint from the US, targeting these practices, especially those from the People’s Republic of China. The most recent complaint filed by a US administration was by the Obama Administration in 2016. If this was still the beginning months of the new Administration, the concern may not be so transparent. The US Department of Commerce was commissioned to perform a review with a report that was expected to be released in June of this year. It now the beginning of November and the review has yet to be released. When questioned by Bloomberg about the delay, Commerce Secretary Wilbur Ross replied “here are plenty of other trade issues besides steel.” Ross goes on to concede “the policy decision has been made to postpone that until the tax bill,”. This response signals that the Administration is not making steel one of its top economic priorities despite its prevalence on the campaign trail. Even if the Administration chooses to move forward with the dispute settlement process it is a lengthy process that will give nine to twelve months of steel companies waiting for a final answer. The completion of the WTO dispute resolution process usually lasts roughly nine months to complete without an appeal and twelve months with one.

The Trump Administration will have the opportunity to show that it is serious about the issue of steel imports into the United States during his 13 day trip to Asia. He will arrive in China on November 8th, where he will meet with Chinese President Xi Jinping and can bring up the issue of steel as directly to the Chinese leader. Even if steel is not directly discussed, the U.S. steel industry will be on the lookout for how President Trump approaches China’s industry subsidies. However, according to the New York Times’ Mark Landler, Commerce Secretary Wilbur Ross “tried to cut a deal with China last summer, under which the Chinese would voluntarily reduce their capacity in steel production.” Even with this proposal possibly breaking ground on the steel import question, “When Mr. Ross presented the agreement to Mr. Trump, he angrily vetoed it, saying he wanted to impose tariffs on countries that export steel to the United States.” President Trump’s refusal of this deal, the lackluster action thus far and the increasing prominence of North Korean nuclear development, the prospects of steel being directly discussed does not seem to be likely. However, even without discussing specifics of steel, the Administration can make progress on the issue by highlighting the subsidies that have heavily contributed to the surplus of Chinese steel.

President Donald Trump, during his candidacy, promised to take on Chinese steel practices. However, we have yet to see any concrete actions to tackle the growing issue. The lack of such action has created concern in the private and public sectors alike. Both politicians and representatives of the steel industry have been lobbying the Administration and Congress to take action. Despite these calls, the review ordered by President Trump in April has yet to be released. With Secretary of Commerce Wilbur Ross announcing a delay of its release, these calls should be expected to get louder. It is also a wonder why the Administration has taken so few steps to remedy the issue when they have followed up with very strong positions on renegotiating NAFTA. The administration is willing to leave the deal if its positions are not acquiesced to, but, again, minimal solid action has been taken on steel. Furthermore, there has been no formal complaint filed with the WTO dispute resolution mechanism that is designed to hear exactly these concerns. In what the industry sees as a failure, President Trump has only exacerbated the situation with his freshly finished trip to China where, “Xi did not offer concessions on substantive issues on Trump’s trade agenda, such as Chinese steel production.” The longer the Trump Administration ignores the calls of its private and public constituents the more noise they will hear from them asking to quote then candidate Trump, “What the hell is going on?”

 

Jordan Victor is currently a research intern with the Global Research Institute of International Trade. To learn more about Mr. Victor, click here.

 

Image courtesy of Suat Eman at FreeDigitalPhotos.net

 

The views expressed in this piece are solely those of the author and do not necessarily reflect the opinions of the Global Research Institute of International Trade (GRIIT). 

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