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Who’s Up To What

Commerce’s Joe Spetrini: turning failure into success

For Deputy Assistant Secretary of Commerce Joe Spetrini — the de facto top dog in the U.S. antidumping regime — 2003 has been a notable year. First, Spetrini created diplomatic tensions between Washington and Hanoi , where officials are still seething over what they consider Spetrini’s abuse of his discretionary powers to slap unreasonably high antidumping tariffs on Vietnamese catfish.

And then Paul Blustein reported in the Washington Post that former Commerce official Mesbah Motamed charged that in “almost every case I was involved in” while working in Spetrini’s shop, “there was definitely the pressure, beginning with the deputy-assistant-secretary level and transmitted through lower management, to aggressively interpret the data for the purpose of obtaining the highest margin possible.”

Meanwhile, federal judges continued to send cases that Spetrini has botched back to Commerce, with orders to crunch the numbers right— and in a more transparent manner — the next time. For example, U.S. Judge Richard Eaton of the Court of International Trade basically said in a 52-page ruling that was issued on February 13, 2003 that he had no idea what evidence Spetrini had relied upon to inflict high tariffs on one Chinese respondent in the crawfish tailmeat dumping case. At least, the judge found “no evidence” that Spetrini had been outright dishonest in his calculations, or that the bureaucrat’s mind had been totally closed to reason.

Naturally, Spetrini is up for a promotion. Washington being Washington , sometimes nothing quite succeeds like failure.

The grapevine in the trade bar has it that Secretary of Commerce Don Evans is about to enhance Spetrini’s bureaucratic power. Presently, Spetrini is only one of three deputy assistant secretaries in the Import Administration who are equals (at least on paper). But he is reported to be lobbying to become the head of operations in a pending re-organization. As such, the nine offices that actually crunch the numbers in antidumping cases would report to Spetrini.

As this went to press late last month, Spetrini’s office said that he was on vacation and unreachable for comment.

In Vietnam ’s emerging capitalist economy, the Commerce Department’s machinations in the catfish dumping case have rankled greatly. So have the protectionist caps that the Bush administration has slapped on the amount of clothing that Vietnam can export to the United States . While the emerging commercial ties between the two former enemies are on the whole encouraging, still, the evidence of Uncle Sam’s unwillingness to practice what he preaches when it comes to free trade has provided ammunition to some officials in the Vietnamese government who remain skeptical of opening their economy to the Americans.

At least, the Vietnamese have been big enough to turn the other cheek by not retaliating tit for tat — so far. Last month, Vietnam Airlines inked an agreement with the U.S. Export-Import Bank and Boeing to finance the purchase of four Boeing 777 jets — a deal worth almost $700 million. Moreover, Vietnam is thought to be looking to buy perhaps ten more Boeing commercial jets in the next five years.

Significantly, at the August 15 signing ceremony in Washington , Vietnam Airlines President Nguyen Xuan Hien brought up the issue of Washington ’s double standard. Hien told Reuters that “as a big customer of U.S. products, Vietnam Airlines deems to have the right to request that the U.S. government and that U.S. business should create a favorable condition for the exports of Vietnamese products and services.” And that evening at a lavish dinner thrown by the Vietnamese Embassy in the Mayflower hotel, Ambassador Nguyen Tam Chien expressed his government’s feelings in clear language: “ Vietnam needs more high-tech products from the U.S. , and wants to be able to export its agriculture and garments to the U.S. ”

The problem is, Uncle Sam is preparing to do even worse. U.S. shrimpers — with the behind-the-scenes encouragement of the Bush Commerce Department — are planning to hit Vietnam ’s shrimp exports with an antidumping petition. Washington’s next big move on the bilateral trade front could be to send Commerce official Joe Spetrini — the same Spetrini who so antagonized Hanoi in the catfish case — back to Vietnam to figure out how to stick Vietnamese shrimp exports with high tariffs.

The message to Vietnam is, well, awkward. When it comes to Vietnam ’s buying American airplanes, we are all for free (and subsidized) trade. But when it comes to Vietnam ’s selling us their clothing, catfish, and shrimp, Americans will play protectionist games.

As President George W. Bush has famously put it in another context, with certain kinds of conduct, there are always going to be “consequences.” So far, Hanoi has been admirably restrained. Hmm…wonder if Airbus has noticed what’s going on?

While few Americans are aware of it, every time they go into their supermarket, the U.S. antidumping police are there to pick their pockets with hidden tariffs, a.k.a. taxes. Take the long list of antidumping actions against China , which have taxed such products as honey, garlic, preserved mushrooms, crawfish, apple-juice concentrate, paint brushes, and sebacic acid. Never heard of the latter? Sebacic acid is the stuff that puts the bristle in your toothbrush. It’s in your life.

Now comes a dumping case that targets something called Polyethylene Retail Carrier Bags From China, Malaysia , and Thailand . These are the plastic checkout bags that you get at your grocery counter. Consumers get taxed for the honey, apple-juice, mushrooms, etc. that they put into those bags — and soon, if the plastic bag lobby has its way, for the bags, too. Your neighbors don’t know this.

Commerce’s Import Administration wants to tax Chinese grocery bags as much as 130 percent. For Malaysia and Thailand , the antidumping tariffs would be as high as 102 percent to 123 percent, respectively. Last month, the U.S. International Trade Commission released the data that have caused commissioners to make a preliminary determination that the petitioning U.S. industry is “threatened” with material injury by reason of the allegedly dumped imports. This means that the commissioners have determined that there is no convincing evidence that the petitioners are really suffering material injury.

No wonder. The U.S. industry is, in fact, profitable — although the petitioners contend that their profits are not high enough, and are declining. The president and CEO of one of the petitioners, Sonoco Products Co., Harris DeLoach, Jr. probably could afford to pay his Washington lawyers out of his own pocket. Mr. DeLoach’s reported salary is $1.8 million. Other petitioners actually import plastic bags from Asia themselves, when that is also profitable. This has the look of a weak case.

The domestic Polyethylene Retail Carrier Bag coalition of companies from eleven states including Texas , Virginia , and New Jersey is represented by Joseph Dorn and Stephen Jones, of King & Spalding. Jeffrey Grimson, a partner in Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, represents two Chinese plastic bag factories. Dennis James and Valerie Ellis, of Cameron & Hornbostel, have been representing the Thai Plastic Bag Industries Co., Ltd, and other members of the Thai industry. William Perry and Ronald Wisla, partners in Garvey Schubert Barer, have signed up a number of Chinese manufacturers and exporters. The Malaysia Plastic Manufacturers Association has turned to White & Case’s Walter Spak, Ed Sim, Lyle VanderSchaaf, and Jonathan Seiger.

This month — halfway through President Bush’s three-year steel plan that he announced in March 2002 — the president has a decision to make. He could decide to reduce or modify the tariffs (now up to 24 percent). He could terminate the plan. Or he could simply do nothing and let the plan run its course.

The latter option is a bit risky, considering that a World Trade Organization dispute panel has already determined that the Bush steel plan violates America ’s WTO obligations. In November, the U.S. surely will lose its pending appeal. (That’s as safe a prediction as their ever could be in legal matters, considering that most legal authorities predicted from day one that the Bush plan was clearly WTO-illegal.) The European Union is anticipating slapping on more than $2 billion in retaliatory tariffs against other U.S. products.

While Bush must worry about that, the only real issue for the president is: what’s in it for me in votes in key electoral states like Pennsylvania ? That means that it would be foolish to bet that the White House won’t continue the tariffs. For the White House, this is a purely political issue.

One irony is that the Bush steel plan has hurt some members of the domestic steel industry — even in Pennsylvania , where folks are expected to be grateful.

Consider Duferco Farrell, which produces carbon steel flat products in Farrell , Pa. This company was hit hard by Bush’s tariff-rate-quota on imports of semi-finished foreign slabs that U.S. mills then turn into finished products.

Duferco Farrell “would not exist were it not for slab imports,“ Chief Financial Officer Bob Miller explained to the ITC in July testimony. “We require over one million tons of slab imports every year to produce hot-rolled and cold-rolled steel products.”

(When you think about the strange fact that imports of raw materials that some domestic mills need for their own operations were considered evidence of injurious imports, you get an idea why the Bush steel plan has been ridiculed from the get-go.)

Miller said that the Bush plan has “restricted our access to imported slabs and caused substantial harm to our business.”

The Pennsylvania mill was suddenly was unable to get slabs from its Belgian affiliate, then found that Russian slab was extortionate, and finally bought more slabs from Mexico . “Foreign suppliers in Russia , Brazil and Mexico used the slab TRQ to orchestrate an artificial spike in demand and an artificial spike in slab import prices,” Miller testified. “Ironically, the biggest winners in all of this are probably the foreign slab suppliers,” which “have been able to raise their prices and profits at our expense.”

Of course, when the government picks losers, it also picks winners. While the president’s steel program screwed companies like Duferco Farrell, it helped mini-mills like Nucor. Mini-mills don’t buy slabs; they use steel scrap and import pig iron instead. That’s why Nucor lobbied the Bush administration hard for the restrictions on slab imports that its domestic competitors require.