Agency Officials, Lawmakers, Industry Discuss Responses to Steel Dumping

Froman said that the U.S. has been working with allies, including Canada, Mexico, Japan, and the United Kingdom, to seek steel capacity reduction commitments from prolific steel-producing countries. Deputy USTR Robert Holleyman and Commerce Under Secretary for International Trade Stefan Selig next week will attend a high-level meeting on steel capacity of the Organization for Economic Cooperation and Development, to seek an international commitment to help reduce excess steel capacity, Froman said.

“At the same time, we’re using every bilateral mechanism to press China for progress, which has been insufficient today,” Froman said (here). The U.S. will work with China on the issue “as cooperatively as possible” while pushing for “serious trade responses” in the global market, Froman said, indicating that dumping would be a discussion topic during the eighth annual U.S.-China Strategic and Economic Dialogue this summer. “What’s clear though, is that aggressive enforcement efforts and international engagement are absolutely necessary and not entirely sufficient,” Froman said. U.S. “tariffs on steel imports are zero, and have been since the mid-1990s. Our market is open. So we need to raise standards in other countries and tackle emerging issues. We need uptick and improved rules of the road on trade.” The TPP will impose “broad antidiscrimination, transparency, and subsidy rules” on state-owned enterprises, ensuring that the U.S. can act against anti-competitive practices, Froman said.

More than 30 industry executives, along with four senators, two House lawmakers, and several union members and local politicians were scheduled to testify during the two-day hearing about the harmful effects that overcapacity and illegally dumped steel imports—commonly of products originating in China—have had on U.S. industry, and offered solutions of how U.S. government and industry could offset the persisting impacts. Among the cross-section of testifiers, pushes for use of all available U.S. trade enforcement tools and calls to maintain the WTO’s treatment of China as a non-market economy recurred throughout the hearings.

“While I hope our efforts will ultimately result in an international agreement, we need to be clear-eyed about what it will take to get other countries to come to the table, and about what an agreement should look like,” House Ways and Means Committee Ranking Member Sandy Levin, D-Mich., said in remarks prepared for his testimony (here). “Countries with massive overcapacity issues won’t come to the table if they think the alternative to an agreement is more or less the status quo.” The U.S. should seek binding rules, beyond weak commitments such as one by China stating that the country plans to reduce its steel capacity by 100 to 150 million tons, after its inventory has risen by about 1 billion pounds over the past 15 years, Levin said. In addition to discouraging the granting of “market economy” status to China, Levin urged agencies to leave open the possibilities for WTO and Section 201 safeguard duties if the glut of U.S. steel imports continues.

Sen. Sherrod Brown, D-Ohio, in prepared remarks (here) said a WTO case is the “only meaningful way” to address the roots of Chinese steel overcapacity, urged USTR to renegotiate the automotive rules of origin in TPP, and called on the Obama Administration to quickly pursue any industry Section 201 safeguard petitions, assessing tariffs as necessary. Under NAFTA, 62.5 percent of a vehicle must be made in North America to reap the benefits of the agreement, but under TPP, 45 percent of a car must be made in members’ territories to qualify for benefits. Brown said the lower threshold would bring less U.S. steel into cars manufactured in TPP countries, adding that failure to renegotiate the TPP automotive chapter could mean “further devastation” to the U.S. steel industry.

Sen. Rob Portman, R-Ohio, agreed with Levin and Brown that the U.S. should support a continued non-market economy status policy for China in antidumping cases, and applauded the Administration for how it’s handled Chinese calls for WTO recognition of “market economy” status so far. “So far, I’ve been encouraged by the Administration’s policy of inaction on this issue - because it forces China to bring a challenge to the WTO and puts the onus on Beijing to prove that its centralized economic model is actually a market economy,” Portman said in remarks prepared for hearing testimony (here). “But we need to keep communicating to them why this is necessary.” Portman, a former U.S. trade representative, said China’s state-owned enterprise structure is a major driver for steel dumping.

Froman and several other hearing participants heralded new trade enforcement tools provided through the customs reauthorization bill signed into law Feb. 24, as well as through the recently signed Leveling the Playing Field Act and the Trade Preferences Extension Act. For instance, the customs legislation creates a process for CBP to investigate allegations of duty evasion, and creates a Trade Remedy Enforcement Division to accept allegations and issue evasion-related trade alerts, among other things. CBP is required to follow a strict timeline for completing those evasion investigations. The new tools are “facing their first test under these new rules,” Senate Finance Ranking Member Ron Wyden, D-Ore., said in remarks prepared for the hearing (here). “While I also welcome redoubled efforts to address the underlying overcapacity problem through international dialogue, unfortunately too often global talks have gone nowhere. Talk is no substitute for action.”

Under the new customs enforcement framework, Commerce is sharing information with CBP about possible instances of fraudulent trans-shipment, mislabeling and other evasion schemes, Commerce Secretary Penny Pritzker said in prepared remarks (here). “This will help CBP detect and prevent attempts of foreign steel producers and their importers to evade the remedies afforded under U.S. law,” she said. To fully enforce trade laws, Commerce needs to engage more with industry leaders and communities, Pritzker said.

Taking matters into its own hands, steel company ArcelorMittal has reduced purchasing, supply and operating costs, revised its salaried employees’ healthcare plans, frozen hiring and is working on negotiating a new labor contract with United Steelworkers, to stay competitive, company Executive Vice President of Sales and Marketing Daniel Mull said during the hearing. “For our efforts, we’re likely to be successful if the U.S. government vigorously enforces U.S. trade remedy laws and joins other governments to address the excess Chinese steel that is being dumped on world markets,” Mull said during the hearing. World governments should jointly press China to reduce its excess steel capacity “the way a market-based economy would, rather than exporting it,” Mull said. “And we need to be sure that other governments, particularly in the developing world, don’t follow the Chinese example of subsidizing the development of their steel industries.”