US Steel case a critical test for American trade laws, protections

In spite of President Trump’s pledge to halt predatory foreign trade and bring back American manufacturing, foreign steel imports continue to flood the U.S. market. The massive volume is placing the very existence of American steel producers in doubt. In June, imports of steel hit their highest monthly total in over two years, capturing an incredible 30+ percent of the U.S. market.

Foreign companies might be surging steel into the United States anticipating that the President will soon apply tariffs or quotas to halt their unfair trade practices as a result of the investigation he ordered under Section 232 of the 1962 Trade Act. Or perhaps the surge is an attempt by the Chinese and others to deliver a coup d’grace to a struggling but critical American industry before the President can act.

Whatever the cause, there are large distortions in the global steel market affecting American producers due to dirty trade tricks and foreign overcapacity.

{mosads}Steel is the basic building block of an advanced industrial economy. China produces more than half the world’s steel, even though its economy represents about 15 percent of world GDP. The United States by contrast is about 24 percent of world GDP. Yet our steel production capacity is a fraction of China, which exported more steel last year than the total made in America. Something is clearly amiss.

In effect, China has declared war on our steel industry. The goal? To dominate even further global manufacturing by putting most of the U.S. steel and steel-related companies out of business — and their 75,000 American workers out of jobs.

In spite of becoming much more efficient over the last several decades, the U.S. steel industry has still lost 16,000 jobs just in the last two and a half years alone. Thus it should surprise no one that 25 steel CEOs recently sent a letter to the president pleading for relief from the foreign steel onslaught under the section 232 investigation.

Some steel companies, however, have not pinned their hopes on presidential action alone but have filed multiple legal cases under U.S. trade law. For example, United States Steel Corporation, one of the country’s oldest manufacturers, decided two years ago to take direct action by filing a trade case with the U.S. International Trade Commission (USITC) against seven Chinese steel companies and their distributors under Section 337 of the 1930 Trade Act.

The filing is an attempt to remedy instances of malfeasance on the part of Chinese steel companies, specifically conspiring to fix prices illegally, mislabeling products and shipping them through third countries, and stealing proprietary trade secrets.

As might be expected, the Chinese companies are gaming the U.S. trade law case with the same abandon that they employ when flouting their obligations under the World Trade Organization. Most recently, the Chinese companies have filed for the dismissal of the transshipment cause of action, claiming that U.S. Steel does not have ‘hard proof’ but only circumstantial evidence that transshipments occurred. Hard proof, of course, can only come from them or their commercial allies — and they ain’t talking. U.S. Steel is not a government agency and cannot execute a search warrant in a pre-dawn raid on companies in China or third countries to obtain the hard proof.

It should be clear that the evidentiary standard advocated by the Chinese companies is a self-serving ruse intended to get the administrative law judge to shut down the case — leaving them free to plunder the U.S. market. This typical Chinese bullying tactic cannot be allowed to stand if there is to be any justice under U.S. trade law. U.S. Steel’s successful use of Section 337 would set a powerful precedent for other beleaguered companies and industries, particularly since the remedy is the exclusion of offending products from the U.S. market, not just anti-dumping duties.

The administrative judge in the case has already dismissed U.S. Steel’s complaint once, only to be reversed on appeal by the USITC commissioners. She should reject the Chinese dismissal petitions and allow the case to proceed.

It is high time that the American legal, administrative, and political systems take action in favor of American companies. Legal arguments by the Chinese are mere window dressing to allow them to subvert our rule-of-law system while advancing their own economic interests.

Americans cannot afford to be played by the Chinese any longer. The future of our economy hangs in the balance.

Kevin L. Kearns is president of the U.S. Business and Industry Council, which has represented domestic American manufacturers since 1933. Follow him on Twitter @KevinLKearns.