The Rushford Report Archives

August, 2003: The Yankee Trader

By Greg Rushford

Published in The Rushford Report

            Here they go again, those nefarious Asians who keep conspiring to sell American consumers the cheapest possible television sets.

            The antidumping case Certain Color Television Receivers from China and Malaysia is worth looking at, if for no other reason than the money. In dollar terms, this is the biggest antidumping case ever filed against China . Last year, US imports of color television sets from China were $271 million. And Malaysia exported television sets worth $247 million to America in 2002.

            But mainly, the case recalls the old saw about history repeating itself, the first time as tragedy and the second as farce. While David Hartquist, a partner in Collier Shannon Scott who represents the US petitioner in the case, certainly would not put it that way, he acknowledged a certain “déjà vu” feeling to the International Trade Commission staff during a May 23 hearing. “I mentioned to someone this morning as we were getting prepared that the first case I worked on when I came into private practice in 1976 was a color television case,” Hartquist related. “And this fellow turned to me and said, ‘My goodness, I graduated from elementary school that year.’” 

            Indeed, the trade war over television sets used to be arguably the most ferocious dumping act in town. Pat Choate railed in his Japan-bashing Agents of Influence about  “secret agreements” forged by high-powered foreign lobbyists in the 1970s, whereby President Jimmy Carter’s trade officials “sharply limited U.S. actions against Japanese television manufacturers who were ravaging American producers.” This was a crime story, Choate charged. “The objective was to destroy the American industry by selling goods extraordinarily cheaply, often at prices far below production costs.”

            What was really going on was that Japanese electronics manufacturers like Sony and Matsushita were making technological breakthroughs to bring ever-more-affordable television sets to American consumers, and American companies like Sylvania and Magnavox were not. But in Washington , the television fight fueled rising protectionist sentiment. This was the case that led Congress to strip the Treasury Department of its jurisdiction over antidumping laws, and give it to the Commerce Department in 1980. Lawmakers were angered that Treasury — which always seemed to be a tad embarrassed about being in the intellectually awkward business of enforcing US trade laws —  had not been protectionist enough. The idea was that Commerce officials would protect petitioning domestic industries, which they have done ever since with a vengeance.

            These days, the notion that the Japanese would take advantage of predatory pricing schemes to extract subsequent monopoly profits from US consumers seems quaint. Prices for television sets are cheaper than ever, and the Japanese have stiff competitors from Korea , Taiwan , Malaysia , and China .

            It’s the latter two countries that rankle Tom Hopson, the president of Five Rivers Electronic Innovations, which is based in Greeneville , Tennessee . Hopson says that Five Rivers is only American-owned “major U.S. manufacturer of color televisions” left in the United States . Actually, Five Rivers — which operates from the old Magnavox facilities —  makes cabinets. The company buys color picture tubes, printed circuit boards and other electronic components from places like China , and puts them together in television sets for companies like Samsung. 

            The rest of the US industry is composed of six foreign transplant assembly operations: Toshiba, in Tennessee ; Sharp, also in Tennessee ; Sanyo, in Arkansas ; Sony, in Pennsylvania ; Orion in Indiana; and Matsushita, in Washington State .

            Hopson has good reason to resent the new foreign competition. Hartquist and his colleague Laurence Lasoff calculate that imports of lower-priced television sets from China and Malaysia shot up from 209,887 units to 2.6 million from 2000-2002, “an explosive 1,166 percent.” Moreover, the Collier Shannon lawyers call it “ominous” that China is planning to increase capacity to bring even more cheaper television sets to Americans. “Just the capacity additions being brought on stream this year by the largest five Chinese manufacturers — 9.5 million sets — if dedicated to export to the U.S. would account for over one half of the total U.S. demand of 17 million sets sold in 2002,” Lasoff said in a press release when the case was filed in May.

            The Chinese and Malaysians have been taking business from Mexico , which exported $4.1 billion in televisions to the United States last year, thanks to the trade diverted south of the border because of Nafta. While American consumers might say to the Chinese and Malaysians, “thank you for the break,” Five Rivers has struck back with its antidumping petition. “At present, our choices are simple,” Hopson has told the ITC staff. “We either make a profit or close down.” The petition asks for tariffs for China up to 80 percent, and 46 percent for Malaysia .

            How does just one American company get standing to file an antidumping petition on behalf of the rest of the domestic industry? Well, two labor unions who represent many of the 3,993 domestic production workers with hourly wages of about $12-per-hour are in the case: the International Brotherhood of Electrical Workers (IBEW) and the International Union of Electrical Electronic, Furniture and Salaried Workers (IUE-CWA). According to data detailed in an ITC preliminary report on the case, there were 4,184 such jobs in 2000, representing a loss of 191 jobs throughout the domestic industry since then. But in testimony, union officials painted a darker picture.

            Troy Johnson, an IBEW official who is based in Washington , D.C. , has told the ITC staff of some 500 jobs lost in Sharp’s Memphis facility, which has moved much of its operations offshore. Sharp still employs more than 400 union members, but as of November 2002 some 500 American jobs had been lost, Johnson testified. “Despite its efficient workforce, Sharp simply could not compete with the recent surge of unfairly traded imports from China and Malaysia .” Johnson added that Philips has ceased TV tube production in Ohio , and that workers in Sanyo and Toshiba facilities have also been hard-pressed.

            The ITC voted in June that “there is a reasonable indication” that Five Rivers has been “materially injured” by the imports. The Commerce Department will jigger the numbers to find the foreigners guilty of dumping in October, and the ITC final determination on whether Five Rivers has been injured by the allegedly dumped television sets is expected sometime near the end of this year.

            While we wait for the U.S. antidumping screws to turn on the Asians, there is one additional player in this case who deserves mention. Kevin O’Connor, the vice president for Wal-Mart who oversees the division that buys and distributes electronics, has registered his company’s opposition to antidumping tariffs. This is indeed significant.

            Wal-Mart is the biggest company in America , number one on the Fortune 500 with $247 billion in sales, a workforce of almost 1.4 million, and some 3,000 stores. Wal-Mart sells millions of televisions, the majority of them on sale the day after each Thanksgiving.

            You’d think that such an importer would make its views known in many current antidumping cases that tax its foreign sources of supply. But to my knowledge, Wal-Mart has never before stood up for its consumers by associating itself publicly with opposition to antidumping tariff barriers.

            But Wal-Mart certainly is not shy about opposing protectionism in the color television case. “ I’ve never heard of Five Rivers, and to my knowledge we have never been solicited by them,” O’Connor told the ITC staff. “We are surprised and disappointed that Five Rivers would choose first to file a lawsuit rather than picking up the phone or attending our new supplier summit to attempt to solicit our business. I would think a manufacturer would try to sell us something and at least give us the chance to turn them down before claiming injury and asking for import relief.”