September, 2001: Players

By Greg Rushford
Published in The Rushford Report

For the U.S. steel lobby,
it's Groundhog Day in Pennsylvania

Students of continuity in presidential politics, take note of Republican President George W. Bush’s trip to Pennsylvania steel country late last month. The similarities with a visit that Democrat Bill Clinton made to the Keystone State nearly two years ago call to mind comedian Bill Murray’s famous movie, Groundhog Day — where every day was the same, but nobody remembered.

Saying that he wanted to educate the American public on the benefits of trade, Clinton went to York, Pennsylvania in November 1999, where he spoke to Harley-Davidson employees. “Several years ago you were subject to unfair competition in the American market, and it took some action to get that straightened out,” the president declared. The reference to “unfair” foreigners was aimed at Japanese motorcycle manufacturers.

As Clinton must have known, his Japan-bashing was factually wrong. When she had been in private law practice in the 1980s, Clinton’s trade representative, Charlene Barshefsky, had filed a dumping case against the Japanese on Harley’s behalf, only to lose it. Harley’s trade remedy that Clinton spoke of was Section 201 of the Trade Act of 1974, which has nothing to do with allegations of “unfair” foreign trading.

If Clinton had really wanted to explain the benefits of trade, he simply could have pointed out that nobody could ride out on a Hog without that Japanese carburetor and front suspension. Harley-Davidson jobs in York depend upon the imported parts.

The traveling press corps completely missed the story. David Sanger of the New York Times portrayed Clinton in heroic terms: “He has made the case that few politicians dare to utter: That rising imports are a sign of the health of the American economy, and help keep inflation low and competition keen.” In fact, Clinton had referred to imports as little as possible, and then only to say that they were part of “the price” that Americans must pay if we expected other countries to accept our exports.

Now comes the Groundhog Day part.

When George W. Bush visited United States Steel’s Irvin Plant in West Mifflin, Pennsylvania on August 26, he wasn’t talking about imports much either. He talked about his “trade policy that’s going to have a level playing field as its component.”

“If you’re the commander in chief, it makes sense — common sense — not to be heavily reliant on materials such as steel,” Bush said at a company picnic out on the parking lot. “If you’re worried about the security of the country and you become over-reliant upon foreign sources of steel it could easily affect the capacity of our military to be well-supplied.”

Like Clinton, Bush was not challenged. Nobody pointed out that the U.S. steel industry relies on imports. Perhaps as much as one third of all the foreign steel that comes through American ports is headed for U.S. mills. The imports support many jobs in the domestic steel industry.

Mike Allen reported in the Washington Post on Bush’s proposal to give the steel industry Section 201 protection. Bush has asked the International Trade Commission to launch an “investigation into the underpricing of steel exports by foreign countries, a practice known as dumping,” Allen wrote.

Not only does Section 201 not have anything to do with “unfair” dumping, but the ITC’s statutory responsibilities do not even allow the independent agency to investigate “dumping.” The Commerce Department does that. The ITC examines the impact of imports on domestic industries.

Allen is hardly the first Washington Post reporter to make this mistake. To international trade practitioners, the error is akin to a sports reporter writing that the New York Yankees are in the National League.

At least Bush — like Clinton — chose the company he visited wisely.

While U.S. Steel is a frequent user — you could say abuser — of U.S. antidumping laws, like Harley-Davidson, this steelmaker is also a player in global markets. And U.S. Steel is at least willing to talk about imports (a rarity in domestic steel circles).

The Irvin Plant gets all but a few of its slabs from an affiliate, the Edgar Thomson Plant. The slabs are then rolled on a hot strip mill. “If we have a blast furnace down, we will buy slabs, and sometimes they are foreign slabs,” says spokesman D. John Armstrong.

U.S. Steel also makes its own coke to fuel its blast furnaces, and gets its iron ore mainly from domestic sources. “We have tested some Chinese coke, and for some special instances we use some Canadian mines for iron ore,” Armstrong told me.

While President Bush visited a steel plant that seems about as independent of foreign sourcing as one would expect to find in the United States, that isn’t the main point. The point: U.S. Steel is involved in global markets. It has a joint venture in California, for instance, with South Korea’s POSCO — which uses both foreign and domestic steel. Last year, U.S. Steel bought a steel operation in the Slovak Republic that is now called U.S. Steel Kosice. The Slovak mill reported income of $41 million in the second quarter of this year. “We will probably be testing some Slovakian steel here in our country,” says spokesman Armstrong. “But our goal with the Slovakia business is really to follow our customers overseas.”

This is the sort of involvement in world markets that the domestic industry’s critics have been urging.

In his West Mifflin appearance, Bush didn’t tip his hand on how a 201 plan to give domestic mills temporary protection so they — hopefully like Harley-Davidson in the late 1980s — would get themselves back on their feet (and away from the antidumping cancer). This is, however, dicey business. Will 201 quotas and tariffs roll back imports drastically, while propping up inefficient U.S. mills that really can’t compete on their own? Or will it be basically a market-driven restructuring operation, which would mean weeding out inefficient, uncompetitive domestic mills? If 201 does the latter, it could succeed both in an economic and a political sense.

“We don’t support inefficient operations,” U.S. Steel spokesman Armstrong declares. “The whole point of artificially supporting inefficient steel operations we are opposed to.”

So, was Bush’s choice of a visit to the Irvin Plant — despite the president’s misleading protectionist rhetoric — a sign that his administration is thinking of coming up with a 201 plan that will be driven by market forces?

Stay tuned.

In the meantime, one wonders if a president will ever go to Pennsylvania and just tell people there the truth about the benefits of imports and exports. But as long as memories in the Ohio Valley are as short as Groundhog Day, politicians will keep on telling the same lies, over and over.

Indonesia to Zoellick:
We want access to U.S. clothing markets

Last month President Bush dispatched U.S. Trade Representative Robert Zoellick to Indonesia. In Jakarta, Zoellick met with newly elected President Megawati “to express the United States’ strong support for a stable, united, democratic, and prosperous Indonesia,” according to a White House press release.

Maybe the release should have left out the part about helping the economically depressed Indonesia to become “prosperous.”

When he met with his counterparts in Indonesia’s trade ministry in Jakarta, the first question Zoellick was asked was: Will the United States give us better access to your protected clothing markets? Basically, the USTR ducked the question, and said something about how this is a subject that needs some “technical” discussions. (Translation: Zoellick might find U.S. quotas and high tariffs on imported clothing distasteful but — like predecessor Charlene Barshefsky and all of her predecessors — cares more about not getting in the crosshairs of Sen. Jesse Helms and other luminaries of the congressional Textile Caucus.)

Zoelick’s press secretary, Rich Mills, said that he would get back to me with the USTR’s position on opening U.S. markets to more Indonesian clothes before this article went to press. Alas, he didn’t. (If he had, this would have been the first question of mine that Zoellick’s press office has answered in his seven months in office. Don’t blame the flacks, as this is how Zoellick operates.)

Megawati is coming to Washington this month, when she will have an opportunity to see what Zoellick meant by “technical” discussions to allow Indonesians to sell Americans more clothes.

Australia:
We want access to U.S. sugar markets

Speaking of important visitors to Washington this month who might go away disappointed if they expect President Bush to give them more access to U.S. markets, Australia’s prime minister, John Howard, might be another.

Howard will be talking to Bush about the recent proposal to negotiate a U.S.-Aussie free-trade deal, similar to those we are negotiating with countries like Singapore and Chile.

Australia is a world-class sugar producer. The Aussies would naturally like more access to U.S. sugar markets, which are heavily protected with quotas and tariffs. As a free trader, this would seem to the uninitiated like something that Bush would also favor. After all, our domestic sugar program hits U.S. consumers hard with higher prices. Furthermore, the sugar program protects massive sugarcane fields in Florida that have caused severe environmental degradation in the Everglades.

Dream on.

Bush needs Sen. John Breaux (D-LA), an ardent sugar protectionist and a power on the Finance Committee, to help him get fast-track trade negotiating authority. And can anyone imagine Bush tinkering with Florida, considering that state’s importance in presidential politics (and the humongous political cash that flows to the Republican (and Democratic) Party from the Fanjul sugar family?

I asked Zoellick’s Chief Strategist, Matt Rees, if he would care to dissuade me from believing there is not the proverbial snowball’s chance that Bush will give Australia anything on sugar. Rees is a pleasant young man and a former journalist who was known as a strong advocate of free trade. But he seems to have learned the wisdom in the old Washington saying, “Where you stand depends upon where you sit.”

The Chief Strategist declined to comment.

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