07 Jul Leo Gerard: American Workers Seek Enforcement, Not Protection
American workers have made a simple request of politicians for decades: stop the trade violations that kill American manufacturers and jobs.
American factories and workers are willing to compete. They are able to compete. But the playing field must be level. American workers and employers can’t win when their rival is not a company but a country. U.S. manufacturers and unions have filed untold numbers of cases against trade law violators, and they almost always win. As a result, the United States now has 28 separate tariffs on a variety of Chinese steelproducts, and in January it filed a complaint with the World Trade Organization about China’s aluminum policies.
But China and other countries continue to violate and circumvent the rules. So now, President Donald Trump is contemplating invoking a section of the Trade Expansion Act of 1962 to ensure America can produce its own steel and aluminum for national security. Badmouthing this effort as protectionism are importers and 1 percenters. They’ve tried to characterize American workers and their employers as crybabies seeking protection. But no one is asking for protection. American workers and manufacturers want trade law enforcement to establish fair competition and ensure national security interests.
Those who have been screaming “protectionism” like banshees since Trump announced that his administration would investigate whether to impose tariffs or restrictions on imports of aluminum and steel for national security contend free trade enriches all countries involved. But what they don’t say is who gets that money. In the United States, it has all gone to the already filthy rich.
Sure, the price of paper and furniture is cheaper at Walmart, but that’s pretty meaningless to the North Carolina furniture builders who lost their jobs when their factories moved to China and the Maine paper workers who lost their jobs when their mills closed because of underpriced, government-subsidized Chinese imports.
And it’s not just individuals. Free trade has devastated hundreds and hundreds of small American towns that depended on that now-closed factory or mill to employ the populace and pay municipal taxes.
Workers at the Century Aluminum Co. plant in Hawesville, Ky., know that well. They’ve watched their region deteriorate as the nearby Whirlpool factory moved to Mexico, costing 1,100 workers their jobs.Cheap unfairly traded Russian imports put a local steel mill out of business. Underpriced Chinese imports closed down the area’s furniture factories. And a glut of subsidized Chinese aluminum on the international market shuttered an Alcoa smelter in nearby Indiana last year, costing 600 workers their jobs.
Still threatened is the Century Aluminum smelter, the last left in the United States that makes the specialty metal needed to protect soldiers in Army Humvees from improvised explosive devices (IEDs). Twice over the past five years, Century has issued notices to its workers in Hawesville that it would close permanently. Luckily for the town of 1,000 residents, Century has been able to reverse course on both occasions. Still, it has furloughed more than 300 workers and scrapped unused machinery for cash. It is one of only five smelters still operating in the United States, just two of which are running at full capacity. That is down from 23 smelters 24 years ago.
Sometimes a town that loses a major employer gets a new one. But all too often it’s just not enough. When Ormet Corp. closed its smelter in Hannibal, Ohio, in 2013, more than 600 workers lost their jobs. Now a power plant is planned. But it will employ only about 20.
American aluminum and steel workers are highly skilled. The plants where they work – or once worked – are efficient and emit far less pollution than their Chinese counterparts. All things being equal, they should be able to compete. But all things aren’t equal.
Many foreign competitors receive aid from their governments that is banned under trade rules they agreed to abide by. This includes free loans from state-owned banks, free land from local governments and state-subsidized raw materials.
Because of such blatant and outrageous trade law violations, U.S. Steel last year asked the government to stop all imports of Chinese steel. In its petition, U.S. Steel described in detail Chinese officials stealing trade secrets and Chinese companies engaging in a practice called trans-shipping, which is sending steel through a third country where it is falsely marked as originating to illegally duck tariffs.
U.S. Steel was one of five companies, including a specialty steel firm and an aluminum corporation, that the Chinese government cyber attacked. The U.S. government has criminally charged five Chinese military officials with economic espionage for breaking into U.S. Steel computers and swiping information on company strategies.
Soon after the Chinese cyber-attack, one of the country’s largest steel firms, Baosteel, used U.S. Steel trade secrets to produce specialty metal for the car industry, then exported some of it to the United States, in direct competition with U.S. Steel.
This pattern of cheating certainly has not stopped. Within recent days, it was announced that a Chinese state-owned bank was giving a $2.9 billion bailout to the largest aluminum producer in the world, China Hongqiao, which is staggering after allegations of fraud.
Such government-subsidized Chinese aluminum and steel flooding the international market and depressing prices kills American jobs. Bob Prusak, president of Magnitude 7 Metals, put it this way, “My company just purchased an aluminum producer that was in bankruptcy. We’re trying to restart that facility. It is impossible for us to do that if other companies receive seemingly endless subsidies or benefits from markets protected through tariff and non-tariff barriers.”
That aluminum smelter is in New Madrid, Mo., and was owned by Noranda. At one point, Noranda employed 900 workers there. Its closure last year threatens to destroy the town of 3,000, located in what is already among the poorest parts of the state.
Enforcement of international trade law – not protectionism – could help Magnitude 7 Metals restore those jobs and save the area from devastation. Enforcement would help ensure that the United States can produce the specialty aluminum that Commerce Secretary Wilbur Ross said is essential for production of F-35 fighter jets. Enforcement would help ensure that the United States can continue to produce the steel used in transformers crucial to electrical transmission. Only one domestic steel mill remains capable of forging that steel.
No American aluminum smelter or steel mill can remain in business just supplying the military. It must operate in a viable commercial environment. For that to happen, international trade rules must be enforced. A good first step in that direction would be imposing Trade Expansion Act penalties that are as strong as American defense must be.