Leibowitz: Tin Mill Firestorm

The petitioners in trade cases alleging low-priced imports and foreign government subsidies are Cleveland-Cliffs and the United Steelworkers Union. Cliffs produces tin mill products at its plant in Weirton, West Virginia. Predictably, the congressional delegations from Ohio (right across the Ohio River from Weirton) and West Virginia are all in favor of the cases.

The opposite side represents the packaging industry in the United States, which at least potentially involves the congressional delegations of the other 48 states. Quite a few members of Congress have taken sides.

At first glance, the political alignment would suggest that the consumer side has more clout. But an examination of the statutes involved strips government decision-makers (the Department of Commerce Office of Enforcement and Compliance and the US International Trade Commission) of much of their authority to balance the interests of producers and consumers of subject products.

The United States, virtually alone in the world, imposes antidumping and countervailing duties without regard to the adverse impact of these duties on US companies. It also does not allow the International Trade Commission to consider adverse impacts on downstream consuming industries and whether injury to them is greater than any injury to the petitioning industry.

This issue has plagued downstream industries for decades. Domestic steel producers and their backers consistently block reforms that would balance domestic interests.

This case presents some interesting issues. Cliffs does not make enough to satisfy domestic demand. The food packaging industry, therefore, needs to import tin mill products to fill their production lines.

According to the Consumer Brands Association, the domestic packaging industry produces more than 25 billion cans per year, and the demand is growing. Yet domestic steel producers only make enough to satisfy 50% of demand. And much of the steel used in modern “easy open” cans is not made at all in the United States. The US steel industry has fallen behind other countries in making a considerable number of specific products that are demanded by downstream industries, and certain tin mill products are among them.

Petitioners argue that prices are depressed because of excessive imports, which could cause Cliffs’ production facility in Weirton to close.

Clearly, there is widespread support for isolating China and leaving our allies alone. China is almost certain to receive high dumping margins, due to its status as a “non-market economy” under the antidumping law. In addition, significant countervailing duties may be assessed eventually.

But current law does not permit this result. Imports from all countries must be “cumulated” to determine whether there is material injury to the domestic industry. Once injury has been determined, the antidumping duties will be calculated on each foreign producer in each of the eight countries. If the margins are high enough, shipments of tin mill products will fall substantially, leading to inflationary price increases or even shifting of sourcing of food and other products overseas. In other words, the same tin mill steel will be imported with food or other products in it. That will hurt farmers.

This issue with trade remedy cases has surfaced several times in the past. In the 1980s, the government imposed quotas on steel imports through “voluntary restraint agreements.” This was a pleasant euphemism for a not-so-pleasant program the Reagan administration created to take pressure off steel trade as a contentious issue. In exchange for quotas, our trading partners could count on not having to face antidumping and countervailing duty actions on steel products.

The VRAs ended in 1992; following their termination, trade cases were filed. Some succeeded and some did not, but since then steel antidumping and countervailing duties have been placed on steel products.

Now, there is no diplomatic effort from other countries to limit or control antidumping and countervailing duty actions. Perhaps they have perceived that American importers pay the tariffs that are levied, so foreign governments are less concerned than they were forty years ago.

In 1999, an ad hoc group called “Save Domestic Oil” filed antidumping and countervailing duty petitions against crude oil imports from Iraq, Mexico, Saudi Arabia, and Venezuela. The Department of Commerce found that the petitions lacked the requisite domestic industry support. The petitioners appealed and the case was sent back to Commerce for further analysis on the question of domestic industry support, such as which companies formed a part of the domestic industry. Ultimately, the cases died, as the price of crude oil recovered. But the nation recognized that a product that was (1) an absolute necessity and (2) had inadequate domestic production was not a good candidate for a trade remedy case. The law provided only one escape hatch, and that was “domestic industry support.”

Since Cliffs brought the petition, there is no doubt that the industry support requirements have been met. If Commerce, as expected, finds dumping by at least some of the friendly countries named, then imports of tin mill products will likely dry up.

A rational system of trade laws would provide a mechanism to accommodate both positions and fairly permit continued production of cans in the United States. Perhaps there will be an ad hoc solution for this product, or perhaps the government will see if the loss of can production actually happens.

This situation is likely to happen again. I think we need to find a better way forward than playing dice with food production and distribution.

CORRECTION: A version of this article published on July 30 said that U.S. Steel appeared to be getting out of the tinplate business. That was incorrect. U.S. Steel remains in the tinplate business. It continues to process orders from existing customers and to accept orders from new customers.

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