Leibowitz on trade: Consumers win one at the ITC

Cleveland-based Cliffs and the United Steelworkers (USW) union argued that low-priced imports were hurting Cliffs and threatened to cause cessation of tin mill production in Ohio and West Virginia. The ITC “final injury” determination was the last hurdle standing in the way of tariffs as high as 400% being imposed on imports from China. The tariffs found by the Commerce Department against Canada and Germany were much lower.

The ITC is an agency presided over by six commissioners, appointed by the president and confirmed by the Senate for nine-year terms. And the terms continue until a successor is confirmed. Only four commissioners are currently in place. By statute, no more than three commissioners may be from the same political party. Of the four sitting commissioners, three are Democrats and one is Republican. The one Republican was appointed by Barack Obama, and one of the three Democrats was appointed by Donald Trump. The two vacancies, if filled by President Biden, could not be Democrats. 

In antidumping and countervailing duty investigations, the Commerce Department determines whether “dumping” or subsidies exist, and the ITC determines whether “material injury” or threat of injury exists by reason of imports found to have been dumped or subsidized. “Material injury” is normally not a difficult standard to meet. Congressional supporters of domestic industry petitioners fight for their constituents through letters and appearances before the ITC. That support was vigorously expressed in the final ITC injury proceeding.

The ITC negative injury vote on tin mill products was described in news articles as a “minor miracle.” That may be a bit overstated but not by much. The antidumping and countervailing duty laws in the United States lean heavily in favor of petitioning domestic producers and against domestic consumers.

Occasionally, the ITC votes against the petitioners. But, usually, those negative votes are based on an absence of injury from international competition—domestic producers are in fact profitable and globally competitive. The Commission does not generally weigh harm to domestic producers against the harm of new tariffs to domestic consumers (as the tin mill products consumers have argued in the current case).

Based on the law, ITC negative injury votes are unusual. And negative determinations by the Commerce Department, which determines whether dumping (selling below average total cost or the home market selling prices) or subsidization is occurring, are almost nonexistent. 

The rarest ITC vote is the unanimous negative determination, which occurred in the tin mill products cases. The reasons for the negative votes will not be known until the Commission issues its report next month. But the vote was taken in public session last Wednesday. 

Clearly, the Commission was troubled by the vigorous arguments against these duties advanced by the Consumer Brands Association and others. The anti-tariff side argued that the effect of new tariffs would be to eliminate thousands of US jobs by jacking up prices for the raw material for food packaging materials. The consumers also argue that domestic producers cannot supply domestic demand, making imports a necessity. However, the law does not permit the Commission to find that duties should be foregone if there is a domestic shortage.

Looking at the structure the Commission and the laws governing antidumping and countervailing duties, it is hard to conclude that the vote last week constitutes a sea change in the Commission’s attitude toward trade remedies. The ITC may consider the profitability of a US producer of tin mill products, Cleveland-Cliffs, more significant in deciding against injury than any weight given to relative harm from tariffs. 

The losing party may appeal the determination (once it is published in March) to the US Court of International Trade. These cases generally take a year or more to be decided, which means that nothing will happen before the 2024 elections. In the meantime, as I’ve noted before, the statutes governing these proceedings must be reformed if the harm to domestic producers from not imposing new duties on imports is to be weighed against the harm to consuming industries from imposing them. 

In the current climate, serious reform of the “trade remedy” laws to give consuming industries more of a say is hardly likely. So the vote of the ITC to nix the tariffs that Cliffs and the USW were seeking is a rare victory for downstream industries.

CORRECTION: This article has been updated to reflect that Cleveland-Cliffs is not the sole domestic producer of tin mill products. U.S. Steel also makes tin mill products. But it did not participate in this trade petition, which was initiated by Cliffs and the USW.