China's sheer capacity to out-produce all other markets is a looming nightmare for many in the domestic steel industry, said David Spooner, former Commerce assistant secretary for import administration.
"In my last two years at Commerce, 80 percent of the cases had to do with China," Spooner said at AMM's inaugural State of Steel Conference in New York, and the United States must balance trade issues with China using "legislation, negotiation and litigation."
Under Section 421 of the Trade Act, petitioners can receive relief in the form of duties if they can show injury from Chinese imports, but during his eight years in the White House, President George W. Bush refused relief when cases went before him for final approval (AMM, Dec. 7, 2005).
Perhaps a sign of things to come was Treasury Secretary Timothy Geithner's much publicized comment that China is a "currency manipulator," which caused an uproar. Later reports suggested that Geithner's comments were taken out of context and President Obama had to apologize to China, but that doesn't mean the new administration is backing down on its promise to examine trade issues.
A White House spokesman said the administration would wait until the Treasury Department submits its report in the spring before making a decision on currency manipulation. Until that time, current trade laws will have to be enough. Whether Section 421 will provide enough relief from unfair subsidies and dumping depends greatly on how "aggressive" domestic groups are, Spooner said.
While Obama attempts to repair the economy, some trade issues will have to wait—leaving the industry guessing to his trade stance. But it seems that Obama is "fair trade," Spooner said. "My best guess is that he understands the importance of open markets, but I don't think it will be high on the agenda."
At the AMM conference luncheon, Spooner warned that stronger "Buy America" provisions could cause problems if they aren't in compliance with WTO regulations.
Supporters said the new provisions were in compliance with U.S. trade laws and WTO agreements; opponents argued that protectionist measures could cause retaliation by foreign countries. Spooner said that what side you are on and whether or not it could help depends greatly on the perspective of consumer or producer.
A better way to help the domestic industry would be to make China subject to market forces, he said. "In my experience, they still don't have a grasp of how markets work. They are not subject to the same market forces."