Steel Mills

MSCI Calls for New Strategy in Trade Law Enforcement

Written by Sandy Williams

The Metals Service Center Institute (MSCI) called on the Trump administration to create a strategy that will evaluate trade violations impacting the entire industrial metals supply chain. MSCI president and CEO Robert Weidner said trade enforcement measures must protect not only the mills but also distributors, fabricators and processors in the supply chain.

MSCI has taken a proactive stance in advocating for the metals industry. In a memo to the vice president and trade officials in the new administration on January 10, MSCI emphasized the need to focus on six broad issues: trade and currency manipulation; taxes and fiscal responsibility; regulations; energy, environment, and infrastructure; health care; and employment and labor policy. MSCI has also addressed the International Trade Commission and the World Trade Organization on the need to stem global oversupply of aluminum and steel.

MSCI’s strategy for trade law enforcement is discussed in the following op-ed by Mr. Weidner, published in The Hill on February 15, 2017.

A disruptive strategy for trade law enforcement

For far too long, for far too many administrations, U.S. trade law enforcement largely has been an exercise in futility. The World Trade Organization (WTO) is infuriatingly slow and narrowly focused. When it does get around to imposing penalties, they are easily circumvented.

But far more important, trade law enforcement has become so tightly focused on single issues, and single products in the supply chain, that it has become all but irrelevant in a globally dynamic business environment. Clever international trade violators—with China leading the pack—hardly lose a step in their drive to push their own goods, from raw metals to fabricated products, into the United States, the richest market in the world. In doing so, they increasingly rob the U.S. of its ability to produce steel and aluminum, and manufacture a full range of products from those metals at globally competitive prices.

The industrial metals supply chain, from mills to distribution service centers, fabricators and processors, supports nearly 2.5 million jobs with salaries averaging more than $60,000 a year each. This chain is responsible for more than $500 billion in economic activity each year, or about 3.5 percent of GDP.

But while the rest of the U.S. economy has been recovering, albeit slowly, from the recession, the industrial metals supply chain has not. Through service centers at the end of 2016, steel shipments were still down some 34 percent from their pre-recession levels. Aluminum shipments were off 23 percent and stainless steel shipments were down 15 percent.

Ineffective, fragmented Washington trade policy and enforcement are significant factors in this decline. The fact is that the United States does not have a comprehensive, cohesive, well-managed and broadly targeted monitoring, negotiating and enforcement effort. Enforcement to protect one link in the chain, say a tariff on steel or aluminum that levels the price for mills, is undeniably important. But the impact of this action ripples throughout the supply chain. Trade enforcers must at the same time be willing to protect fabricators or other processors from the resulting cost increases that will erode their competitive edge.

The existing structure of trade negotiation and enforcement has failed to stop the Chinese from illegally subsidizing their metals industries, creating a crippling supply glut and the dumping of cheap steel and aluminum that erodes America’s industrial metals supply chain. When China is hit with a tariff, say on a metal product, it has been known to ship that product to Vietnam first, label it as Vietnamese, and dump that product into the U.S. market. Or it might fabricate an entire metal part and dump those parts in the U.S. Meanwhile, China also carefully controls the value of its currency to keep its exports below competitive prices in the rest of the world.

We are now at a critical turning point in our nation’s history of trade enforcement. We have an opportunity to support the entire chain—metals production, distribution and manufacturing. But this will require an innovative, integrated and comprehensive enforcement program.

President Trump and his trade triumvirate—Wilbur Ross, Peter Navarro and Robert Lighthizer—along with Treasury nominee Steve Mnuchin who will head the administration’s effort to address currency manipulation, must embrace a disruptive strategy for trade enforcement.

Such a program should be guided by three main principles.

First, that we must target countries that violate trade laws.

Second, recognition of the impact that a single enforcement action could have up and down the entire industrial metals supply chain. Trade remedies addressing one link in the chain must also be applied throughout the entire chain.

And, finally, the consistent and formal integration of the entire enforcement effort so that key agencies work collaboratively to ensure the integrity of the entire supply chain.

This sophisticated and dynamic enforcement effort would allow the new administration to collaboratively develop the best policies to curtail dumping, negotiate for a halt in building excess metals production capacity, impose downstream duties, and monitor trade law enforcement from raw materials to finished products across the entire metals supply chain.

An integrated and balanced approach to trade agreement enforcement is the only way to truly level the playing field. This approach will bolster the economy, improve business productivity and profitability while creating good jobs all along the global industrial metals supply chain.

When it comes to trade enforcement, now is the time for such innovative thinking.

NOTE: More information on MSCI’s position on trade at their advocacy website.

Latest in Steel Mills