WASHINGTON Strict enforcement of trade laws will be crucial to keeping steelmakers margins healthy and maintaining the U.S. manufacturing sectors strength, according to several top trade attorneys.
"The trade laws have been critical to the survival of ... the steel industry," David "Skip" Hartquist, a partner at Washington-based law firm Kelley Drye & Warren LLP, said at the Steel Manufacturers Associations annual members conference May 1. "The U.S. market remains so attractive that foreign producers are willing to violate trade laws and WTO (World Trade Organization) rules. If you let your guard down, theyll swallow you up."
Domestic interests have long advocated the strict enforcement of U.S. trade laws, but the outlook doesnt look rosy barring swift congressional action.
"The real problem (with current low-margin business) is because of structural headwinds that need to be addressed if this industry wants to get away from a zombie decade of extremely low profits," said Roger Schagrin of Washington-based law firm Schagrin Associates. "If the governments of the world dont stop the Chinese government from continuing to subsidize the massive Chinese industry, then steel in the Western World is in real trouble."
However, many cases already litigated at the U.S. International Trade Commission and the Commerce Department are steel-related. Some say that duties on commodity steel have had the unintended consequence of encouraging downstream imports.
"We have a fair amount of trade case coverage against China right now. Whats still missing is wire rod, corrosion-resistant and cold-rolled steels" Alan Price, partner at Washington-based Wiley Rein LLP, said. "Were pretty well-covered at the moment in terms of direct imports, but theres a substantial amount in terms of downstream products, including steel grating, wind towers, high-pressure cylinders. That coverage is pretty spotty."
Looking forward, a number of potential wild cards may affect the trade arena, including new appointments at the U.S. International Trade Commission, new trade agreements currently being negotiated, and further federal budget cuts due to sequestration. All of these issues could hurt the steel industry.
"There are some big trade policy issues out there. The (Obama) administration has been more focused on trade agreements and free-trade agreements as a solution to our problems. Its a great idea in theory, but weve yet to see an FTA (free-trade agreement) yield large pluses for large corporations and for the manufacturing sector," Price said.