It's a safe bet that protectionists like Ross Perot
and Pat Buchanan, like most people, have never heard of sebacic acid.
It's a chemical derived from castor oil that goes into everything from
plasticizers, inks and lubricants to bristles for toothbrushes and paintbrushes.
You can easily get it from China. At least, you used to be able to. But
thanks to Bill Clinton's minions at the Commerce Department, Americans
now have to pay a whole lot more for the stuff -- just one more example
of the high, mostly hidden costs of trade protection that consumers might
contemplate while brushing their teeth or painting their homes.
Two years ago a company from Dover, Ohio, called Union
Camp -- the only U.S. producer of sebacic acid -- had a choice: It could
spend some $20 million to modernize its aging production facilities and
compete with the higher quality import competition from China. Or it could
hire a lawyer to fight its aggressive Chinese competitors. As expensive
as Washington lawyers are, Union Camp knew it could find a good one to
bash the Chinese competition for a tiny fraction of the cost of building
a new plant.
That is how Roger Golden, an amiable hired gun who is
a partner in the D.C. office of San Francisco's Fenwick & West, came
to file an antidumping petition against the Chinese on Union Camp's behalf
with the Commerce Department. Mr. Golden's filing alleged that the Chinese
were engaging in "unfair" trade practices -- selling their products
in the U.S. at below "fair" market value.
To be sure, one can search the case file in vain for
any evidence the Chinese were doing anything other than providing Union
Camp with open and fair competition in the marketplace. But U.S. antidumping
statutes have been written by Congress to tilt the playing field in favor
of American producers seeking protection from vigorous overseas competitors,
and these laws are administered with a vengeance by the Commerce Department's
Import Administration bureaucrats.
In this case, the bureaucrats duly jiggered the books,
using such devices as employing economic statistics from India, not China,
to calculate costs of production in China (India no longer even produces
sebacic acid). In the end, the officials accepted Union Camp's assertion
that the Chinese were peddling sebacic acid to Americans at about 243%
below what it cost them to produce the stuff. That assertion could have
easily been knocked down by any first-year economics student. But as the
14 accused Chinese companies didn't bother to hire their own lawyer to
refute the charges, the punitive Commerce estimates stuck. (Four other
Chinese exporters retained William Perry, a partner in the D.C. office
of Baltimore's Ober, Kaler, Grimes & Shriver, who managed to get the
tariffs for his clients reduced to a still all-but-prohibitive range of
between 40% and 80%, which is why just a little Chinese sebacic acid still
manages to trickle into the U.S.)
Then the International Trade Commission found that even
though Union Camp had not been materially injured by the foreign competition,
there was always the threat it could be. Under U.S. law, that's all that
was required to convict the Chinese of "unfair" trading. In
July 1994, the U.S. Customs Service was ordered to collect the stiff tariffs
against sebacic acid from China, although Mr. Perry has filed an appeal
on behalf of his Chinese clients that is slowly winding its way through
the New York-based Court of International Trade.
As many as 100 Americans have been fired because of
Commerce's handiwork. These people are now uncounted statistics who have
disappeared into the netherlands of the American economy. "I had
to let go the two guys in the back who were doing the repackaging,"
says John Hoegl, president of Ivanhoe Industries Inc. in Tullytown, Pa.
An additional 50 or so jobs were lost at Shakespeare Monofilament in Columbia,
S.C. And Morflex Inc. of Greensboro, N.C., which must have ready access
to the high-quality Chinese sebacic acid, has closed its production line
and moved it to Belgium, rounding out the 100. Not only are those who
have lost their jobs silent victims, but publicity-shy officials from
most of the affected companies -- who now have to deal with the Union
Camp monopoly -- aren't willing to take a strong public stance.
As trade lawyer William Perry explains, "The issue
to take to the Perot and protectionist people should be that when you
talk about raw materials, like chemicals and metals, antidumping orders
force the end user to close his production plant and move overseas, or
he is out of business -- and American jobs are lost."
In other words, it would be far better for the future
health of the economy if the field of 1996 presidential aspirants could
first pass the sebacic-acid test.
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