The U.S. steel industry won an important victory late Friday afternoon when the Department of Commerce announced that it would impose punitive tariffs on manufacturers in Korea and eight other nations who have dumped steel pipes in the United States at artificially low prices (producers from India and Turkey were also hit with countervailing duties to offset illegal subsidies). The background for this decision is explained in our May report on surging steel imports, which showed that the U.S. steel industry is facing its worst import crisis in more than a decade, with more than half a million U.S. jobs at risk.
Commerce’s decision last week concerned imports of Oil Country Tubular Goods (OCTG), steel pipe that is used to build out the infrastructure needed to support the booming American oil and gas fracking industry. Imports of unfairly cheap and subsidized steel pipes have decimated domestic producers and threaten the jobs and incomes of thousands of steelworkers and their families. U.S. Steel had already announced the closure of two U.S. plants making OCTG pipe, and many more jobs and plants are at risk. Among the nine countries included in the OCTG case, Korea was by far the largest supplier of imported steel pipe sold at artificially low prices.
In a closely related development, a Wall Street Journal story published last Thursday asked “Is Korean Steel Really Chinese?” This is an important issue in the larger steel crisis. Our May report showed that the major cause of the global steel crisis is the growth of excess global steel production capacity. Chinese producers account for more than a third of total excess global capacity, which now exceeds half a billion metric tons. Much of this capacity is targeted on the U.S. market, one of the largest and most open in the world.
One way in which excess global steel supplies are finding their way into the United States is through the growth in global supply chains, which have permitted some foreign producers to continue exporting unfairly traded products to the United States by sending that product through third countries for further processing before export. Many basic steel products from China (as well as downstream products such as OCTG pipe) are now subject to anti-dumping and countervailing duties in the United States. As U.S. steel imports from China have fallen in recent years, China’s steel exports to Korea and other countries have surged, as shown in the chart below.
Major steel exporters’ imports of finished and semifinished steel from China, 2009–2012
|Year||South Korea||Japan||Russian Federation||Turkey|
Source: Economic Policy Institute analysis of United Nations Comtrade Database (UN 2014)
The Wall Street Journal reported that Chinese steel exports to Korea rose 29 percent, to 5.3 million tons, through May of this year. This is an important issue which requires future attention from both the administration and Congress. U.S. trade laws, which have not undergone major revision since 1998, may need to be revised to improve the enforcement of fair trade laws, and specifically to control unfairly traded goods from China and other countries that have been transformed in third countries, such as Korea.
The Commerce decision regarding duties on OCTG imports is the first in a two-part decision-making process. Next, the International Trade Commission will decide whether domestic steel producers were harmed, or if they are threatened with injury from unfairly traded imports, and, if so, will make the tariffs permanent.
Commerce’s decision to assess duties on Korean OCTG imports is a victory for steel workers, U.S. steel producers, and the millions of people whose jobs depend on the U.S. steel industry. In February, Commerce issued a negative preliminary determination that OCTG from was not being dumped (“sold in the United States at less than fair value”). U.S. steelworkers were forced to mount a “nationwide call to action,” to “ensure that our trade laws are fully enforced.” They were joined in this effort by U.S. Steel and many public officials, including more than 150 members of Congress and 57 Senators who signed letters to the Commerce Department about this issue. As Steelworkers President Leo Girard pointed out, this national campaign “should not be necessary to ensure that our trade laws are enforced.” U.S. officials should enforce U.S. fair trade laws to the fullest extent allowable under U.S. and international law. And the time has come for a complete re-assessment of U.S. trade laws to close loopholes and ensure that the law is enforced to the full extent intended by Congress and the president.