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Another U.S. Industry Turns To Trade Law As Its Last Resort And Faces The Wrath of Importers
By Richard A. McCormack
editor@manufacturingnews.com
And now it is the U.S. solar industry's turn to deal with the strife associated with filing a trade case against China, pitting producers against importers in a vicious fight.
When SolarWorld filed an antidumping and countervailing duty petition with the federal government against Chinese manufacturers of crystalline silicon photovoltaic cells in October, the opposition quickly mounted a counter attack. Chinese producers rushed to hire Washington attorneys to fight the petition. They were joined by American importers that benefit from the Chinese incentives and subsidies. They formed a coalition that hired more lawyers and PR agents to flood the wires with press releases and lobbying campaigns.
Other high-profile U.S. industries have sustained similar campaigns: steel, semiconductors, textiles, furniture and tires, among others. Over the past four years, many other smaller industries have filed trade cases against China with the federal government in order to save themselves including clothes hangers, wood flooring, artists canvases, coated paper, magnets, school notebooks, cement, steel wheels, steel fasteners, stainless steel pressure pipe, magnesium carbon bricks, copper pipe and tube, citric acid, high-pressure steel cylinders, aluminum extrusions, wire, oil country tubular goods, electric blankets, innersprings for beds, graphite electrodes, kitchen appliance shelves and even tow-behind lawn groomers.
It is part of a long trend of beleaguered U.S. industries on the verge of being wiped out by cheap Chinese products having to instigate a trade case to take a final stand. An industry will cull together a million dollars or more to file a case, only to suffer the wrath of free-trade ideologues and a public relations machine funded by foreign interests, retailers and importers to discredit them. They must prove material damage. A final decision from the U.S. International Trade Commission takes a year.
For U.S. domestic producers in trade cases, the process can be degrading and complex. It involves trips to Washington, D.C., where lawyers speak in a language of numbers -- 301, 201, 421, 337, 701 or 731. They are accused of starting trade wars, involving industries far beyond their specific fight. When the United Steelworkers union filed its tire case, the Chinese countered with a case against the U.S. poultry industry.
But if a U.S. industry does not put up a fight, it will be gone, say those who represent domestic producers. The U.S. tire industry is still in business after the Steelworkers union's successful case against China last year. Despite all of the brouhaha from tire importers and retailers, that case was upheld by the World Trade Organization this summer. The U.S. steel industry remains viable after a similar experience in the mid 2000s.
"The fight matters," says one trade attorney involved in the tire petition. "It is worth the fight, but it is always a fight."
When John Bassett, president and CEO of Vaughan-Bassett Furniture Co. filed a petition against Chinese dumping with the International Trade Commission in 2004, he was shocked when 21 law firms were hired by the opposition. "There is one law firm on our side and there are 21 on their side," Bassett said.
The trade remedy route is the last resort for many companies and industries battling with Chinese producers. "Since nobody is making manufacturing policy at a high level, companies have to do it with the only tool we have, which is a self-remedy, self help, one case at a time -- ad hoc system," said one trade attorney involved in recent cases. "It's really difficult and it would be great if the government said, 'We're with you.' "
Even a top government official who was in charge of trade law said trade cases are an ineffective strategy for reversing the manufacturing crisis in America. "As a practical matter, as the person who is responsible for administering the dumping laws, I can honestly tell you they don't work," said President George W. Bush's Undersecretary of Trade Grant Aldonas in 2004. "We don't have the tools right now the way these laws are written to go after a problem like China." None of the laws have changed since Aldonas made that statement.
The trade laws do not solve the bigger issue of how to encourage U.S. production, regain industrial competitiveness and create good-paying American jobs that will pay down the country's mounting debt created by a generational embrace of a post-industrial "new" economy that is based on the wonders of the Internet, services and the financial sector.
Opponents in the cases filed by U.S. producers frequently raise the same issues: that the additional cost of duties applied to Chinese imports will undermine many more U.S. jobs in the retail, sales and marketing industries, and that consumers will be hurt the most by having to pay higher prices.
And so it is the case in the latest petition filed by SolarWorld on Oct. 19 before the International Trade Commission. SolarWorld has argued that Chinese imports have surged beyond comprehension -- up 350 percent over the past two years; that in July 2011 alone, imports of Chinese crystalline silicon PV panels and modules exceeded the volume imported in all of 2010; that Chinese prices have dropped by 50 percent over the past year; and that countless Chinese incentives, preferential loans and lines of credit worth tens of billions of dollars, subsidized utilities, and land and tax rebates have led to the demise of at least seven major American solar manufacturing plants and the loss of thousands of jobs. This has occurred just as the market is on the verge of explosive growth.
They argue that 95 percent of Chinese production is not intended for Chinese domestic consumption, but for export. China's total solar capacity is 32 times greater than its domestic demand for solar. "This is unlike some other industries where China is primarily producing for domestic use and then ruining our markets by sending its excess here," says SolarWorld's lead attorney Timothy Brightbill, a partner with Wiley Rein LLP. "They are sending everything here -- not their excess. Nearly everything they produce is for export. We reached a point where somebody had to take action."
Those favoring the trade case have formed the "Coalition for American Solar Manufacturing," which now includes 150 companies representing more than 11,000 American workers.
Opponents have coalesced into the recently created "Coalition for Affordable Solar Energy" (CASE) and have gone on offense, noting that as of November 30 the group has recruited 132 solar companies as members, representing 13,134 jobs, or 13 percent of the U.S. solar industry workforce.
"Today, the solar industry is 100,000 employees of which 57 percent are in the installation business, 21 percent are in sales and distribution and only 14 percent are in manufacturing," says Kevin Lapidus, senior vice president of legal and government affairs for SunEdison, based in St. Louis and a lead member of CASE. "This is a situation where one company representing 2 to 3 percent of the U.S. industry is taking an action that will undermine the remaining 97 to 98 percent of the industry. So when you talk about U.S. jobs, this is a matter of one company that is going to ruin it for the 97 to 98 percent of the U.S. workforce."
Petitioning the U.S. government for a trade remedy has potentially serious consequences for the companies that initiate the case, say others involved in previous actions. "We have seen many times companies with a significant interest at stake and a real aggressive mentality at the beginning of the process fade away and go quietly into the night because of strong-arming by customers who source some of their product offshore," says Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.
Policymakers in the administration and Congress reflexively state that America's industrial interests are being preserved because of "safeguards" that are written into trade agreements. They argue that such safeguards act as sentries at the gate, and that all an industry has to do when it is being overwhelmed by subsidized imports is to flip a switch and go back to the full duty or apply penalties. "But most of the people involved in formulating U.S. trade policy know that it is complete nonsense, and yet they continue down that road," says Tantillo. "You will hear it soon with the Trans-Pacific Partnership -- they will say: 'Don't worry about Vietnam. We know they have inherent advantages, but we're going to put in a nice safeguard.' And I raise my hand and ask: 'Can you show me where the United States has used a safeguard arrangement under a free trade agreement?' The room gets very quiet. They completely overlook the real world mentality that in a lot of instances filing a case means taking on your customer and your customer has tremendous leverage. You can win your trade remedy case and lose your business."
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