December, 2003: Player

By Greg Rushford

Published in the Rushford Report

Protectionist Piggies of 2003

            It’s time again for the annual exercise in poor taste and name-calling called the Protectionist Piggy of the Year. It is not easy to win a Piggy award. One has to be willing not only to put self-interest above the public good — a low bar, in  Washington, D.C. — but must demonstrate a true willingness to hurt the innocent. You also have to get away with this in the press.

            In 2003, there were many worthy candidates. The U.S. cotton lobby that lives generously on taxpayer-funded subsidies thanks to the Farm Bill — a truly immoral largesse that distorts global market prices for cotton and helps further impoverish already desperately poor farmers in some of the world’s poorest countries —  is certainly high on the list. But the cotton crowd has been roundly denounced in the press throughout 2003, and thus is knocked out of the running.

            Sen. Jay Rockefeller (D-WVA) is a past Piggy winner for his public statements attacking the integrity and patriotism of respected economists like Anne Krueger. Now the International Monetary Fund’s deputy managing director, Krueger’s sin was to point out the intellectual weaknesses the steel lobby’s case. This year, Rockefeller said that the World Trade Organization ruling that President Bush’s steel tariffs were incompatible with U.S. obligations pursuant to the WTO was “a disgrace.” Angered that the dispute panel had dared to rule against the  U.S. steel lobby, Rockefeller threatened that “the time has come to begin to re-assess our place in the WTO system.” But simple over-the-top political rhetoric isn’t enough to win a Piggy award.

            For the same reason, Rep. Pete Visclosky (D-IN) is disqualified. The vice chairman of the Congressional Steel Caucus, this year called the WTO’s ruling against the Bush steel plan evidence of  “bias against the United States and its working families” — and then admitted that he had not actually studied the decision. Just saying dumb things isn’t enough to win a Piggy, particularly for a congressman.

            Nor is it usually enough merely to file and win an antidumping case, no matter how convoluted the economics. Exercising one’s legal rights is perfectly acceptable conduct.

            However, Ira Rennert is the exception. Rennert, who owns the New York-based Renco Metals, Inc., is famous for his lavish lifestyle. This is the fellow with a McMansion as big as two football fields, perched on 63 acres fronting the beach in the Hamptons, with servants’ quarters for a dozen, 41 bathrooms, and much more. Rennert also owns the Magnesium Corp. of America, which is based in Salt Lake City  and is notorious for being one of America’s largest corporate polluters.

            In 1992, Rennert filed the first of several antidumping cases targeting magnesium from Canada,  Ukraine,  Russia,  Israel, and China. It’s the Canadian action that brings us to the 2003 Piggy award.

            Somehow, three years ago Rennert persuaded the International Trade Commission to stick antidumping tariffs on the Quebec-based Magnola Metallurgy, Inc. Talk about strange. Magnola had not been a party to the original antidumping litigation, and had never been found to have been “dumping” in the United States by the Commerce Department. In fact, Magnola hadn’t even sold any ingots south of the border. The start-up company was only preparing to enter the U.S. magnesium market in 2001, having spent some $700 million to develop a state-of-the-art plant. But the ITC still voted in 2000 that revoking the original antidumping order against Canadian magnesium would be likely to lead to a “recurrence” of material injury to Rennert’s  Utah  operations.

            Thanks to the ITC, Magnola ended up being hurt, through no fault of its own.

            On March 24, 2003 Magnola Metallurgy announced that it was shutting down its Quebec plant, thus putting 380 workers on the street. Nobody in the press made the connection between the lost jobs and Rennert’s senseless antidumping litigation.

            Accordingly, Ira Rennert is the Protectionist Piggy of 2003.

ITC Commissioner

Charlotte Lane’s first vote

            Speaking of dicey corporate actors and strange U.S. trade decisions, consider McWane Inc. Headquartered in Alabama , the privately-owned McWane makes cast iron sewer and water pipes. According to investigative reports that have appeared in the New York Times, on the Canadian Broadcasting Corp., and on PBS’ Frontline, McWane has an unenviable record — repeated safety violations, nine workers maimed or killed since 1995, plants declared in violation of pollution laws and emission limits more than 450 times.

            This year McWane filed a petition with the International Trade Commission pursuant to Section 421(b) of  U.S.  trade law, alleging its business was being disrupted by imports of certain ductile iron waterworks fittings from   China. McWane’s Washington  trade lawyer, Paul Rosenthal, first asked the ITC to find “critical circumstances” that would grant immediate provisional relief to his client. Any delay, Rosenthal argued in his initial filing, would cause real damage to McWane, which might have to close one of its plants.

            But in October, the ITC voted 4-1 not to grant provisional relief, noting that at a staff conference a McWane official had taken “a different position on plant closure.” The company official basically had “backed off” his lawyer’s claim, commissioners found. The official had testified that McWane “will not announce an immediate shutdown,” but would be downsizing some operations, commissioners found. “He did not indicate the nature of the downsizing or when it would occur, the needed investments that would be withheld, or when plants would be idled and for how long.”

            With such skimpy evidence, the commissioners had little choice but to reject the call for provisional relief.

            The only commissioner to vote that McWane deserved immediate relief was Charlotte Lane, who has just come on the job and cast her first vote in this case. “First, any delay in granting relief will hasten the closing of production facilities,” Lane insisted. “The deterioration of the domestic industry should be addressed sooner rather than later, else dire consequences may result.”

            Lane owes her seat on the ITC to the political backing she has received from Sen. Jay Rockefeller and domestic steel interests. No doubt, the commissioner’s first vote pleased her supporters, including William Klinefelter, the legislative and political director of the United Steelworkers of America who testified on McWane’s behalf.

Steelworkers do Miami 

            By contrast to the tepid performance concerning trade education that was turned in by the U.S. business community in  Miami last month, you have to hand it to the United Steelworkers of America. Some 2,000 steelworkers — wearing T-shirts saying things like “Gephardt,” “United We Stand,” and  “Proud to be American, Proud to be Union,” some sporting “Dump Bush” buttons — came to Miami to protest against the Free Trade Area of the Americas. I spent several hours with them at the Marriott Biscayne hotel, and later ran into a bunch of them celebrating at Hooters. These are decent people, easy to like (at least as long as the conversation focuses on football and hunting, and not the   U.S.  trade laws).

            And the steelworkers sure are good at doing basic grassroots democracy. They packed a ballroom in the Marriott to listen intently, for example, to speakers urging a social safety net for retirees’ medical care. They don’t think much of Republicans. One speaker drew cheers when he thundered that the “Republican Party’s prescription medicine bill is aimed at defrauding the American public.” 

            Although his steel plan did more for them than any other president, George W. Bush doesn’t get much thanks from this crowd. Talk to the average steelworker, and you hear that Bush is too dumb, too reactionary, and doesn’t seem to know what he’s doing in Iraq.

            USW President Leo Gerard urged his union “brothers and sisters” to support the thousands of anti-capitalist students who had come to Miami  to protest the FTAA. Like the steelworkers did at the WTO ministerial meetings in  Seattle  in 1999, the USW was willing to spend money to fuel the unruly street protests. At least $10,000 in USW funds were channeled to the young people, the Miami Herald reported. As in Seattle, the union folks — in clear contrast to the kids they funded — marched in peaceable routes, with marchers wearing orange shirts to keep order.

            It turned out that the star of the USW meetings in the Marriott was a corporate leader. Gerard introduced his friend Wilbur Ross, the chairman of the International Steel Group who is credited with saving steel jobs by buying the formerly bankrupt mills of Acme Steel, LTV, and Bethlehem Steel.

            Gerard introduced Ross, who was wearing a blue shirt, no tie, and a ball cap, to the audience by joking that “he’s short and balding and he walks slowly, but he’s very smart.”

            Gerard went on to say of Ross, “He and I have developed a close relationship. We share the same view on trade.”  Indeed.

            Ross told the cheering steelworkers what they wanted to hear. Among his best lines:

            “At ISG, labor is our partner, not our adversary.”

            “Too many executives are closing plants in the U.S.  and going to the Third World and exploiting workers.”

            “Nafta was a bill of goods that really meant to advantage for the Americans.”

            “The FTAA is a dumb deal.”

            “If we aren’t really careful, the FTAA would fleece the average American.”

            “I would like to unify our hemisphere against China  and  Europe.”

           

            Perhaps Ross’ best line concerned his opinion of   U.S.  trade negotiators and free-trade economists: “They remind me of virginal professors of anatomy; they have read all the books, but haven’t really been there.”

 

Protesting the FTAA, but why?

              During the Free Trade Area of the Americas meetings in Miami last month, I asked one earnest young man who stood for hours in the sun passing out “No to FTAA” literature. The pamphlet was endorsed by the usual anti-globalist suspects, including the Steelworkers, John Sweeney of the AFL-CIO, the American Federation of State, County and Municipal Employees, the United Mine Workers of America.

            “What’s the FTAA?” I asked.

            “It’s an organization that basically exists to help corporations send good-paying American jobs south.”

            “So who’s the president of this FTAA?” I asked.

            “I don’t know. I think a Board basically runs it.”

            Where do they find these young people? Such dedication, and such little knowledge.

How “unfair” is China?

            Secretary of Commerce Don Evans regularly accuses   China of being an “unfair” trader. Perhaps the secretary ought to look at what’s going on under his nose at Commerce. A thumbnail capsule of the strange antidumping action against Chinese honey offers some important lessons. First, the case illustrates how screwy the U.S. antidumping regime really is. Second, it serves as a reminder of why so little really seems to change in Washington, whether the Democrats or Republicans are in charge.

            When Bill Clinton was president in 1995, the U.S. honey industry filed an antidumping petition accusing China of being an “unfair” trader. Checking this out, Commerce Department officials sent lengthy

questionnaires — in English — to 28 Chinese companies like the Shanghai Bee Product Factory, asking for detailed information on their pricing. Then the officials ignored the responses of 24 of the Chinese honey firms on grounds they hadn’t the resources to analyze them. Nevertheless, Commerce still found the Chinese companies guilty of pricing their honey “unfairly,” assigning them antidumping duties of 141 percent. It was worse for the four remaining responding Chinese honey exporters whose data Commerce found time to analyze; they got margins up to 157%.

            Then,  Commerce officials offered the Chinese a deal. Rather than being forced out of the U.S. market entirely, we will suspend the tariffs and replace them with a “reference price” that we set. You can keep selling your honey to Americans, as long as it is priced no lower than our reference price, Commerce officials told the Chinese.

            Of course, if private citizens were to engage in such a price-fixing scheme, they would face antitrust prosecution. But governments can do such things.

            After the original 1995 antidumping case lapsed in 2000, the U.S. honey producers filed another dumping case in October of that year, which the new Bush administration inherited in early 2001. Wait a minute, said the Chinese. How could we have been dumping when we have been selling our honey at prices you Americans have dictated?

            Good question. But incredibly, Don Evans’ Commerce Department found that its own “reference price” that the Chinese had been faithfully following was still a “dumped” price.

            The issue is on appeal at the Court of International Trade in New York.

            Stay tuned.

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