April, 2001: Players

By Greg Rushford
Published in The Rushford Report

Bob Lighthizer gets his woman.

Last month must have been satisfying for Washington steel lawyer Robert Lighthizer, a partner in Skadden, Arps. Thelma Askey’s career as an ITC commissioner has been killed. The International Trade Commission — which is supposed to be independent — is once again on notice: Steel lobbyists will go after you personally if you don’t vote their way. Domestic steel lobbyists like Lighthizer know that most ITC commissioners are relatively young, and will want other jobs after their terms are up.

This is a typical Washington morality tale with a simple plot: a band of backroom boys conspire against an honest public servant, precisely because they find that honesty (and in Askey’s case, her free-trade credentials) offensive. The steel guys don‘t consider it corrupting to use their political muscle to pack a quasi-judicial federal agency with commissioners who are expected to be compliant.

After being lobbied by George Becker of the United Steelworkers of America and other industry representatives who visited the White House last December, outgoing President Bill Clinton threw Askey out of work in January by refusing to re-nominate her to the ITC. Instead, Clinton gave this Republican slot to Michigan labor lawyer Dennis Devaney, who got a one-year recess appointment. Clinton also nominated Devaney for a full term on the ITC. Becker’s steelworkers were happy.

But in February, incoming President George W. Bush said that he would re-nominate Askey. Bush also pulled Devaney’s nomination (as part of a general housecleaning of some 60 Clinton nominations to various posts that the Republicans considered questionable). As I reported in March, domestic steel lobbyists were circulating an unsigned, intemperate memorandum with no letterhead on Capitol Hill. The memo basically complained that Askey could not be counted on to throw her vote the steel industry’s way in cases of importance to it. My sources said that Lighthizer was the man who had been circulating the memo on the Hill. Lighthizer, who prefers to work behind the scenes, wouldn’t comment.

Last month, a group of Senate Republicans sparked by Pennsylvania’s Rick Santorum (Lighthizer’s steel client USX is among Santorum’s biggest campaign contributors) somehow convinced Finance Committee Chairman Charles Grassley (R-Iowa) and unnamed George W. aides that Askey’s nomination wasn’t important enough to fight the steel guys over. The word went out: the Askey nomination is dead. Neither Grassley nor Santorum would take calls asking about Askey. Once again, my sources finger Lighthizer as the key Republican operative who got to Santorum. Again, no comment from Lighthizer.
While the White House wasn’t willing to go to the mat for Askey (or for the independence of the ITC), at least she will get a consolation prize. George W. is expected to nominate her as director of the U.S. Trade and Development Administration, a little independent federal agency that is sort of in the venture-capital business, helping companies pursue overseas business opportunities.
Maybe Brazil could use a little American help to finance some more steel mills?

Just kidding, Bob.

“U.S. Steel coalition” condemns Japan

Speaking of unexplained things connected to the world of steel lobbying that appear to have a Bob Lighthizer connection — and that he won’t take questions on — has anyone ever heard of something called the “U.S. Steel Coalition?”
Don’t try finding it in the Washington phone book. There is no listing. Don’t bother asking the American Iron & Steel Institute; a spokeswoman there declined to comment on the group. And a mysterious “U.S. Steel Coalition” press release that showed up on the PRNewswire last month doesn’t have any names attached to it.

The March 2 press release followed on the heels of a recent WTO dispute-resolution panel ruling that generally supported Japan’s charges that U.S. antidumping authorities had used arbitrary figures to hit Japanese steel makers with dumping tariffs. The press release called this an outrage. The “outrage” was that Japan would actually be proven right in exercising its legal rights.

“This case represents the fifteenth time in sixteen cases where the World Trade Organization (WTO) has ruled against actions taken by the United States under its trade laws, including all six of the cases involving the United States’ antidumping or countervailing duty laws,” the release declared.

“The [US steel] industry and workers are particularly outraged by Japan’s blatant disregard of international trade rules and agreements,” the release fumed (ignoring the fact that Japan won and the U.S. lost on most of the issues in the hot-rolled case).

“In one of the most cynical acts witnessed by the WTO, the Government of Japan attacked the American government’s trade measures as wholly unwarranted,” the release continued. Cynical? Never mind that Japan was legally right; this is Pearl Harbor all over again.

The release also accused the WTO judges of having “an apparent conflict of interest,” on the (flimsy) grounds that they were “government officials from countries currently subject to U.S. antidumping cases on hot-rolled steel.”
The tone and substance of the press release strongly suggest the Lighthizer touch. In February, I reported on a speech that Lighthizer gave on Capitol Hill. In his remarks, Lighthizer expressed outrage that the Japanese had the temerity to challenge his steel clients in the hot-rolled case then pending before the WTO panel. He accused the panelists of having conflicts of interests, the Japanese of winning too many WTO challenges, and so on. Point by point, the anonymous U.S. Steel Coalition press release dovetails with what Lighthizer said that day.

Lighthizer again declined to comment.

Go figure.

Bob Zoellick, Fair Trader

Robert Zoellick, as a private citizen and classic free trader, no doubt regarded the phrase “fair trade” with disdain. But when he goes to Quebec City later this month hoping to spur the Free Trade Area of the Americas talks, U.S. Trade Representative Zoellick goes as a dedicated “fair trader.”

As did his predecessors Mickey Kantor and Charlene Barshefsky in the Clinton administration, Zoellick’s official position on whether U.S. antidumping laws should be reformed is taken directly from the lobby agenda of the domestic steel- and textile industries: The United States is opposed to negotiations that would threaten U.S. protectionists from continuing to use antidumping suits to throw up barriers to imports.

“[It] is the goal of the United States to ensure that countries can maintain within the FTAA effective trade remedies based on the principles of fair, as well as free, trade.” That’s the U.S. position that Zoellick will take to Quebec, as posted on the USTR’s website.

Because he knows better, it would be interesting to draw Zoellick into a discussion of exactly what he means by the “principles of fair” trade. The USTR’s public explanation of these principles breaks down this way: The United States will not give any breaks on antidumping enforcement to the weaker economies in Latin America. The United States rejects all calls for more transparency that apply to the manner in which the United States administers its antidumping regime. The United States calls for more transparency from other countries, mainly from Brazil.

But what’s Zoellick’s real position?

Diplomats from Brazil report that in private Zoellick is being more forthcoming about the need for the U.S. to make concession on antidumping in the FTAA. Terrific. If this is true, the new USTR is being more honest with foreign governments than with the American people.

As Zoellick’s predecessors in the Clinton administration learned the hard way (assuming that they did learn privately from their mistakes), it is difficult to restore America’s tattered free-trade coalition by explaining trade in protectionist language.

Self Censorship at a great Hong Kong newspaper?

I first visited Hong Kong in 1969, and immediately became a huge fan of the South China Morning Post, the territory’s leading English-language newspaper. It is heartening to note that these days — going on four years after the 1997 British handover of Hong Kong to mainland China — the SCMP still routinely publishes articles of the sort that would land writers in jail on the mainland. It is not heartening that many people who live in Hong Kong and read the SCMP every day seem to think that this is a newspaper on the decline.

By definition, self-censorship is invisible to readers, as you don’t know what news the paper is not printing. But sometimes evidence of what seems to be going on at the SCMP crops up in public.

On February 25, veteran correspondent Jasper Becker filed an honest report on how mainland Chinese authorities repress the Falun Gong. “The state’s efforts to crush Falun Gong inside China reveal a system of social controls that functions as tightly as comprehensively as it did under Chairman Mao Zedong,” Becker’s 23-paragraph article began. The veteran correspondent then went on to describe in impressive detail how neighborhood watch committees, the Ministry of State Security, the local police, etc. have been engaged in massive spying on Falun Gong practitioners. It was a fine story, if chilling.

The last two sentences in Becker’s article mentioned that the Falun Gong is also secretive. “The secrecy, the tight organization and discipline of its members and clever use of propaganda and the isolation and demonisation of a handful opponents bear a resemblance to the style of the party,” Becker concluded.
So, what was the headline? “Falun Gong’s secrecy, discipline mirror that of Communist Party.” That wasn’t what Becker wrote about.

It sure looks like someone at the SCMP didn’t want to offend censorious readers in Beijing. Perhaps the headline writer hoped that mainland officials would think that Becker’s article was an investigation of the tactics the Falun Gong mediation group is using against the Communist Party, rather than the other way around. (Falun Gong members are being imprisoned on the mainland for such “crimes” as handing out literature and downloading materials from the Internet).
SCMP editor Robert Keatley did not respond to an e-mail asking for his explanation of the misleading headline.

If the SCMP under Keatley’s leadership really is in decline, this is a very bad omen for Hong Kong. Without a truly free press, Hong Kong simply cannot hope to continue to be a world class financial center, on a par with New York and London. If the press pulls its punches on the vital free-flow of political and financial information, Hong Kong will be no better than second-tier financial centers like Shanghai and Singapore.

ITC Strings Up U.S. Steel Wire Rope Producers

On March 21, a unanimous International Trade Commission dashed the hopes of U.S. producers of steel wire rope to keep their competition from India and China at bay with antidumping tariffs in the 40-50 percent range. The economics of this case are interesting, and somewhat unusual.

Former U.S. Representative Herb Harris and Jeffrey Levin, of Harris, Ellsworth & Levin, represented 11 U.S. producers, mostly in Pennsylvania and Missouri, who call themselves the Committee of Domestic Steel Wire Rope and Specialty Cable Manufacturers. Christopher Dunn and Sean Thornton, of Willkie Farr & Gallagher, represented Usha Martin Industries Ltd., an Indian wire-rope producer. Jeffrey Grimson, a lawyer in the D.C. office of Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, represented a coalition of Chinese wire-rope importers, along with Bruce Mitchell, a partner in the firm’s New York office.
Harris and Levin had an easy time proving “dumping” at the Commerce Department, as the competing imports were being sold in U.S. markets at prices roughly 50 percent cheaper.

The ITC commissioners’ reasoning won’t be known until their public report is filed on April 20. But it seems that when you say “steel wire rope,“ it depends what you mean by “steel wire rope.“ (Lawyers don’t find such distinctions at all confusing.)

Grunfeld, Desiderio lawyer Jeff Grimson explains that the underlying economic question was why the domestic petitioners’ prices didn’t fall, even though the foreign competition was so much cheaper.

Grimson’s Chinese importers, for example, sell the kind of low-quality wire rope that would be used to tie some crates together. But if you wanted wire rope that needed to be high-quality — say, to hang something safely from a construction crane — you would buy American wire rope. Indian wire rope is of higher quality, but Willkie Farr’s Sean Thornton explains that much of it is used to make galvanized products that aren’t made in the United States anymore, like the rope that ties down oil rigs in the Gulf of Mexico.

The ITC must have reasoned that if the two products weren’t really competing in a segmented market, the Americans couldn’t argue that they were being injured by the imports.

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