A friend and colleague of mine recently made a very interesting observation about global trading.
She said to me, “Lisa, if you think of importing as a privilege, it will be a lot easier to deal with the nonsense that our government subjects companies to.” My friend’s comment seems very poignant particularly after reading this article from Purchasing Magazine. The article talks about how U.S. Trade Representative Susan Schwab made some recent comments at the World Economic Forum claiming China was violating WTO rules because “Beijing, the world’s largest producer of many industrial commodities, is driving up costs for companies outside China by limiting its export of such key steel ingredients coke, tin, zinc and rare earths; such semiconductor materials as antimony and silicon; tungsten for mining and construction; and fluorspar, magnesium carbonate and talc.”
When China implemented a number of export reforms (as a response to US political pressure because of the trade imbalance) as we reported back in early January, Chinese exports slowed and according to Schwab, created an oversupply situation in China allowing other Chinese producers (such as ceramics and fiber optic producers) to buy these input materials cheaply. These export reforms were designed to steer Chinese companies away from low value-add manufacturing into higher value-add manufacturing. Good for the Chinese, right?
Well, now for the flip side. As many of you saw, and we have reported last week, there are a number of anti-dumping cases going on now (involving metals) in which the Chinese, among others, have been accused of selling “below fair market.” Voila! — one of these products, mattress innersprings, a value-add product, made of steel of all things, was targeted by a few US innerspring producers. The result is that Chinese mattress innerspring manufacturers are no longer exporting to the US and US mattress manufacturers are forced to buy from the “higher-priced” domestic suppliers. Remind me again how that helps the US economy?
So let’s see if I have this straight. Our government does not want China to limit certain exports used to make steel because that would mean US steel producers would have to pay more for key input materials, putting them at a disadvantage to other global steel producers. But US steel producers, in turn, sell steel wire to the mattress innerspring manufacturers, who can no longer be cost-competitive because Chinese-priced springs are coming in “under market value.” Hence the anti-dumping case. When I look through the list of anti-dumping investigations under review, I see a very mixed list of raw materials and value-add products. What message are we trying to make to the WTO? “We’ll decide which products are in violation of WTO rules”? “We’ll decide which industries in the US require the lower priced input materials”? In the meantime, if you feel you can’t sell competitively in the US, go ahead and file an anti-dumping petition. It’s a very mixed if not downright disconcerting message.
This comment from Spend Matters sums it up nicely: “I’m going to bet that if there is an anti-dumping duty on springs, there won’t be one on mattresses containing those springs. I remember once there was a 200% anti-dumping duty on laptop displays but not on laptops containing those displays. Guess what happened to the US laptop building industry?”
It’s quite a political game, these gyrations between WTO violations and anti-dumping petitions. Actually, it makes me wonder if “Big Steel” has got this administration by the short and — oh, I won’t go there…