Leibowitz on Trade: It’s an Interconnected World

While the news is full of headlines about the coronavirus, I hope to provide you with a bit of perspective on its impact on businesses and on international trade in our still-interconnected world.

I start with four developments in the last week that illustrate my point about the world’s interconnectedness.

First, on Thursday last week, new antidumping and countervailing duty petitions were filed at Commerce and the International Trade Commission, naming 15 countries for exporting prestressed concrete steel wire strand at prices “less than fair value” and/or benefiting from government subsidies. Filing of petitions is a common occurrence, but it is relatively unusual for so many countries to be named. The expense of preparing petitions increases with the number of countries involved. This could be a major case. The first phase of the case is the preliminary injury determination at the International Trade Commission. The ITC preliminary determination of injury is due by June 1, 2020. Requests to participate in the proceeding are due by May 1, and written comments must be submitted by May 12.

Second, members of Congress led by Sen. James Inhofe (R-OK) wrote to Secretary of Commerce Wilbur Ross, urging consideration of Section 232 tariffs against imported crude oil, an offshoot of the recent price war between Saudi Arabia and Russia over production limits. The oil industry is hurting because of a collapse in crude prices around the world. The letter may have been an incentive for President Trump to broker an OPEC agreement to reduce production by 15 percent.

Third, a group of Representatives from Ohio and Pennsylvania wrote a letter asking/demanding that the president issue a proclamation imposing Section 232 tariffs on “derivative” products made from grain-oriented electrical steel (GOES). In January, President Trump issued a proclamation on steel and aluminum derivative products, imposing tariffs on imports of the listed products effective Feb. 8, 2020. In this letter, Representatives declared their “grave concern” about “blatant circumvention” of the Section 232 tariffs on increasing imports of laminations and cores from Canada and Mexico into the United States. AK Steel, headquartered in Ohio and now a wholly-owned subsidiary of Cleveland-Cliffs, is the only U.S. producer of GOES. The CEO of Cliffs has threatened to shutter AK Steel if relief from imports cannot be assured.

Fourth, the virus is affecting trade. I have written previously about widespread efforts to waive tariffs on steel, aluminum and China to permit imports of vital machinery and protective gear for medical professionals and other essential workers (sanitation, grocery workers, members of supply chains, etc. There are a number of initiatives that address this concern, including:

• A new International Trade Commission investigation to identify imported products related to the effective response to the coronavirus. The report, which is due on April 30, will identify the products by 10-digit tariff classification code and list the general duty rate, as well as any special tariffs (China Section 301 tariffs, retaliatory duties related to the Boeing-Airbus dispute, Section 232, etc.), whether such duties have been suspended, and the significant source countries for the products.

• The USTR granted about 200 product exclusions in eight tariff classifications from the China tariffs last month on products relevant to the response to the coronavirus. USTR has asked for public comments about other products that should be considered for product exclusions.

• In a recent reversal, earlier this month the maker of Purell hand sanitizers was granted a China product exclusion for two components of the dispenser mechanism for Purell. USTR had rejected the requests last month. The reversal came quickly—while there is no explicit appeal mechanism for denial of an exclusion request, obviously there are ways…

These seemingly isolated developments (and several others I could mention) are related in this respect—each one illustrates how interconnected we are with everyone in the world. If there were any doubts about that before the outbreak, they are resolved now. Both the spread of the virus and the response to it require closer cooperation between the nations of the world and between all of us in the United States.

The AD/CVD petition reminds all of us of the array of tools to address imports that private sector companies view as unfair. Prestressed concrete steel wire strand is a steel product (the “concrete” in the name is what it goes into) extensively used in modern construction projects. It is a product unknown to most consumers. If prohibitive duties are imposed on strand, construction projects will increase in cost, meaning there will likely be fewer of them. Trade works for most people (for example apartment dwellers who live in buildings built with low-cost strand) but they do not know it. On the other hand, people who work at steel plants making strand don’t like imports to compete with their product—and they know what to do about it. The law does not balance those competing interests but generally sides with the steel workers

The crude oil issue thankfully was resolved at least for a time by the OPEC deal—it is curious that the United States worked with the world’s largest cartel to achieve a short-term solution. Of course, oil prices have not recovered while most people are sitting at home.

The congressional letter on GOES is business as usual in Washington. Members of Congress are rightly concerned about protecting jobs, because laid off workers don’t like incumbents at election time. But trade relationships are worthy of consideration also. And the legal authority for imposing tariffs on new products without a new fact-finding investigation is front and center right now. Yet the congressional letter did not mention that very controversial issue, which has given rise to several cases.

As for the virus, the priority should be clear—if our front-line workers in health care, distribution, groceries and sanitation need protective gear and medical equipment, then they should get it anywhere they can and our government at all levels should help them or at least get out of the way. Once this crisis is contained, we can discuss where we made mistakes and fix them.

All these developments remind us that trade is and will always be with us—it hurts some people and helps others, but trade always seems to help more people than it hurts.

Please stay safe.

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