June, 2001: Players

By Greg Rushford
Published in The Rushford Report

The steel lobby goes after another honest woman

Earlier this year, they knocked Thelma Askey off the International Trade Commission. Now the domestic steel lobby — this time it’s West Virginia Democrat Sen. Jay Rockefeller — has made another personal attack on a woman who is highly qualified for a leadership role in international economics. Stanford University economics professor Anne Krueger has been tapped by President George W. Bush to serve on the Council of Economic Advisers. Krueger, a former vice president of the World Bank who is also a senior fellow at the Hoover Institute, is one of the country’s most respected economists. Krueger’s The Political Economy of the Rent Seeking Society, which appeared in the American Economic Review in 1974, is a classic.

Like the overwhelming majority of mainstream economists, Krueger is a strong critic of antidumping laws (Maybe there is some distinguished economist in some great American university, somewhere, who admires the economic logic of the antidumping laws, but I don’t know whom that would be.)

But Sen. Rockefeller, despite his namesake, isn’t into mainstream economics. He is worried what the Council of Economic Advisers might say about the wisdom of rolling back imports under Section 201 of U.S. trade law.

“[I]t is deeply puzzling and disturbing to me why you would nominate an individual to the Council who has demonstrated a highly pronounced and unapologetic bias against the domestic steel industry and U.S. trade laws,” Rockefeller said in a May 10 letter to President Bush.

The senator also took a poke at Krueger’s patriotism, on grounds she was “a paid consultant for the Japanese steel industry” in a recent hot-rolled case. “Expert witness” for the Washington law firm, Willkie Farr & Gallagher, which represented the Japanese in that case, would be a more accurate way to describe Krueger‘s involvement. Leading economists routinely testify in all sorts of litigation; it’s perfectly appropriate. As for Rockefeller’s charge that Krueger has a “bias” against antidumping laws — which implies (falsely) that she is intemperate — a more accurate way to put it is simply that Ann Krueger is an educated woman with a clear understanding of those laws‘ dubious economic foundation.

Rockefeller didn’t like it much that Krueger wrote a forward last year to Paying the Price for Big Steel, which was co-authored by Willkie Farr partners William Barringer and Kenneth Pierce. In her forward, Krueger wrote that the study “shows how the resort to antidumping and lobbying for subsidies and special treatment have become a way of life for the industry.” David Phelps, the president of the American Institute for International Steel, which supported the book, says that while Krueger was reimbursed for expenses, she wrote the forward for free. Besides, what Krueger wrote was right on the mark.

When the Barringer-Pierce book came out, Rockefeller and domestic steel lobbyists attacked it as a tool of Japanese propaganda (because Willkie Farr represents Japanese steel makers). But they have never had the confidence to refute it publicly, point by point.

The steel lobby’s achilles’ heel

Speaking of Sen. Rockefeller, I called his office to ask if the senator was aware how much foreign steel that is imported in America is imported by the domestic steel industry. A spokeswoman checked, and said that nobody in the office could answer the question.

Here’s the answer. While readers of sophisticated steel-industry publications like American Metal Market and Metal Bulletin already know what’s been going on, the rest of us will be startled.

Last year, the United States imported some 38 million tons of foreign steel. Of this, 8.5 million tons were semi-finished slabs that went directly to the integrated U.S. steel mills. The mills then hot-rolled and heated the slabs to make hot-rolled sheet.

In addition, the U.S. mills also bought perhaps 40-45 percent of the 5.9 million tons of imported hot-rolled sheet, which they turned into other products. The domestic industry also brings in some cold-rolled steel, some wire rod, and other products for which gathering accurate statistics is an imprecise art.

But the bottom line is that the U.S. steel industry itself buys at least 25 percent and perhaps as much as a third of all the foreign steel that comes into the United States. Domestic steelworkers need imports to do their jobs.

Many of the foreigners who sell steel to the U.S. mills are the same people who — when they sell steel products to anyone else — are constantly accused by the U.S. mills of being “unfair” traders, of engaging in “illegal dumping.” The U.S. mills never accuse the foreigners of selling steel to them at “unfair” low prices. The U.S. mills never suggest that they should be paying higher prices for their own foreign steel, or that the steel they need is “dumped.”

“These guys buy the cheapest iron ore, they buy the cheapest slabs, in order to make their companies more profitable, as well they should,” says David Phelps, who is president of the American Institute for International Steel. “However, when their customers do the same, it becomes illegal and unfair.”

I asked about the “fairness” of branding your own foreign suppliers as “unfair” traders at a May 14 press conference at the National Press Club held by the American Iron & Steel Institute. Surprise, surprise, the question is not AISI’s favorite one. All Andrew Sharkey, AISI’s president and CEO, would say was, “All steel products are subject to the trade laws.” As for “fair trade” litigation, Sharkey said that it was up to each company to decide whether to pursue antidumping actions or not.

This should be page one in the New York Times.

Is Zoellick in George W.’s inner circle?

It is always difficult for outsiders — and often even government insiders — to know precisely who-stands-where in the presidential pecking order. But what I would characterize as informed street talk suggests that while Commerce Secretary Don Evans — one of George W. Bush’s true best friends — is definitely in the inner circle, there is some doubt that U.S. Trade Representative Robert Zoellick is.

While Evans came to his job relatively untutored in international trade (and may never learn), he is putting together a stronger staff than Commerce has seen in quite a long time. For better or worse, Commerce seems destined to play a major role in the Bush administration.

Maybe Zoellick’s USTR will, too. But ever since his extremely well-received confirmation testimony before the Senate Finance Committee in January, the USTR has appeared a bit arrogant, and occasionally thin-skinned. This is certainly the impression that Zoellick has conveyed to reporters. Predecessor Charlene Barshefsky took a lot of criticism in the press, but you could always get her or someone at USTR to respond if it was important. Zoellick’s press strategy so far has been mainly to blow off the press.

Zoellick lost his composure by giving a snide, snippy response to a perfectly reasonable question on Vietnam posed by the respected Rep. Jennifer Dunn (R-Wash.) when the USTR testified before the Ways and Means Committee on May 8. Dunn politely asked about the timing of the U.S.-Vietnam bilateral trade accord, which Zoellick has been sitting on instead of sending it to Capitol Hill. Many in Washington believe that Zoellick’s delay is unwise and diplomatically counterproductive. Dunn was offering Zoellick an opportunity to make his case in reasonable terms.

Instead, Zoellick bristled. “I know that the communist government in Vietnam would like us to do this overnight,” he shot back. “The Communist government doesn’t have to worry about floor time. We do.”

The USTR then noted that “that Communist government in Vietnam sat on this agreement for about a year when they were urged time and time and time again to move it forward.” Zoellick added that basically the Vietnamese were free to have any kind of economy they wished, regardless of the U.S. slowness to submit the bilateral to Congress.

“There’s lots of countries in the world that figure out how to reform their economy without necessarily having us be looking over their shoulder,” Zoellick added. “So, frankly, that excuse doesn’t cut much with me.”

Zoellick even complained that the Vietnamese weren’t doing enough to satisfy some U.S. protectionists. “We had some issues raised by some of your colleagues about textiles and about catfish,” he told Rep. Dunn. “And so I don’t want these to get in the way, but I think if we’re going to move quickly, then we’re also going to need to be able to get some response from the Vietnamese government on things that some of your colleagues would like to see.”

Translation: Zoellick wants support for fast-track from Democrats like Arkansas Sen. Blanche Lincoln, who gets disturbed at the thought of Vietnamese catfish competing with Arkansas catfish farmers.

And we all said that Charlene Barshefsky wasn’t a diplomat.

An influential business grouping dumps on “dumping” politics as usual

Usually when I report on antidumping politics and corporate America, the story line is that supporters of these laws — the steel guys, mainly — are pretty much having their way and business lobbies like the Business Roundtable, the National Association of Manufacturers, and the U.S. Chamber of Commerce are conflicted and looking the other way. In 1999, the small band of antidumping stalwarts — steel and textiles, again — helped kill the launch of a round of WTO trade negotiations in Seattle. Now the same domestic protectionists want the United States again to refuse to even discuss antidumping reforms when WTO ministers meet in Qatar in November. Talk about another diplomatic kiss of death. As usual, the BRT, NAM, and the Chamber are taking dives.

But last month an influential business grouping wrote to President Bush “to express our serious concern about recent demands that the United States not participate in any international negotiations encompassing trade remedy laws (including antidumping, countervailing duties and safeguards laws).”

With the upcoming WTO ministerial in mind, the May 14 letter argued that “removing a key negotiating item would take away significant leverage from the United States as it begins discussions to eliminate subsidies and reduce tariffs with Europe and Japan.

“Any decision to prevent the United States from even sitting at the negotiating table if trade remedy issues are raised also seriously undermines U.S. credibility in promoting trade liberalization,” the letter continued.

There were 24 signatories to the letter, including the American Meat Institute, the Biotechnology Industry Organization, Archer Daniels Midland, the Corn Refiners Association, Inc; Cargill, Inc; The Pet Food Institute; the Grocery Manufacturers of America, the US Grains Council, and the National Pork Producers Association.

You can be sure that this strong letter was noticed — and welcomed — by Senate Finance Committee Chairman Charles Grassley (R-Iowa) and other key farm-state lawmakers who usually only hear about antidumping from the steel lobby.

P.S. Another positive sign coming from the business community recently was a recommendation by the National Foreign Trade Council calling for “the eventual elimination of industrial tariffs as a centerpiece of a new WTO Round.”
Now there’s an idea that the American business community can take pride in standing behind.

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