U.S. Steel pushes Obama to choose workers over trade

U.S. Steel pushes Obama to choose workers over trade. by Mark Drajem Candidate Barack Obama pledged to stand up for workers by cracking down on imports from China. President Obama has promised to fight protectionism and trade barriers. His administration must decide which path to take starting from today, in two of the biggest U.S. trade cases against China. U.S. Steel Corp. and the United Steelworkers union are behind a complaint on imported pipe. The union, an Obama political ally, is also pushing for curbs on Chinese auto tires. “These are decisions that can’t be avoided, so they’ll be perceived as setting the tone for what the Obama administration trade policy is,” said Timothy Keeler, the former chief of staff for the U.S. Trade Representative’s office. Keeler, a lawyer at Mayer Brown LLP in Washington, represents GITI Tire Pte Ltd., the largest Chinese maker of tires, in the trade case. The decisions may help shape the future of U.S.-China commercial relations. The two countries traded more than $400 billion last year, making China the second-largest U.S. trading partner after Canada. China is also the largest foreign holder of U.S. debt, with $776.4 billion. The U.S. International Trade Commission, an independent body, has ruled against Chinese importers in both cases. Because the complaints were brought under different provisions of trade law, the Commerce Department has the final say over tariffs on the pipe, used in oil and gas drilling, and Obama will make the call on tires. Commerce Ruling In a ruling scheduled to be released today, the Commerce Department must decide whether to place duties on $2.8 billion in steel-pipe imports from China to compensate for subsidies that Chinese companies collect. The case was brought by the steelworkers; U.S. Steel, the largest U.S.-based steelmaker; U.S. operations of Evraz Group SA, Russia’s second-largest steelmaker; and Pennsylvania-based Wheatland Tube Co. The case is the largest so-called countervailing duty and dumping case filed against China, according to Daniel Porter, a lawyer for Winston & Strawn LLP in Washington, which represents Chinese producers in the case. Obama must decide by Sept. 17 on a petition by the steelworkers to cap or put tariffs on imports of $1.7 billion of tires from China. It is a test of whether Obama will make good on a campaign pledge to reverse course from President George W. Bush and apply the so-called safeguard measures. Bush turned down all four requests he got to impose duties or quotas on Chinese imports, saying the benefits of protection would be dwarfed by the costs. During the presidential campaign, Obama told the textile industry in a letter on Oct. 24, 2008, that he would “decide those cases on their merits.” ‘President’s Credibility’ “The one thing that is on the line here is the president’s credibility,” said Scott Paul, executive director of the Alliance for American Manufacturing, a coalition of steel companies such as Pittsburgh, Pennsylvania-based U.S. Steel and the steelworkers union. “If they want to pursue an activist trade agenda, they need to pursue an active enforcement agenda, and this is the first thing on their plate.” On April 14, 2008, candidate Obama spoke to the United Steelworkers in Pittsburgh, a week before the contested Democratic primary in Pennsylvania. “I have consistently supported in the Senate going after China,” Obama said then, after embracing union President Leo Gerard. “Here’s the thing that people don’t understand: China needs our market. Their economy is dependent on exports to the United States. We have bargaining power.” ‘Problem With China’ Obama, referring to China’s purchase of U.S. Treasuries, added this caveat: “It’s pretty hard to argue with your banker,” he said. “That’s part of our problem with China.” Since taking office, Obama joined other leaders at a meeting of the Group of Eight in Italy in July as they pledged to refrain from “taking decisions to increase tariffs above today’s levels.” In June he warned, in an interview with the New York Times, about “sending any protectionist signals out there.” China has made the same argument about the economic dangers of protectionism in the pending cases. Liu Dan Yang, the deputy director general of China’s Ministry of Commerce, and nine other officials pressed the U.S. International Trade Commission at an April 22 meeting in Washington to turn down the tire and steel petitions. ‘Financial Stress’ “The Chinese delegation first stressed the importance during this time of global financial crisis for all governments to cooperate in sustaining free trade,” according to a memo that commissioners wrote on the meeting. They said the visiting officials were worried “other industries would identify Chinese imports as the source of their financial stress.” Chen Rongkai, a Beijing-based spokesman for the Ministry of Commerce, said today that a ruling against Chinese parties in either case may hurt the two nations’ trade ties. “We hope the U.S. government will adhere to the promise it made at the G-20 summit on anti-protectionism and make a sound decision accordingly,” Chen said by phone. “Any ruling against the Chinese party, for instance in the tire case, would definitely hurt Sino-U.S. trade relations.” Leaders from the Group of 20 nations vowed after a summit in London in April “to do whatever is necessary to promote global trade and investment and reject protectionism,” restating a pledge made at a Nov. 15 gathering. Shape the Results The pipe and tire cases present the Obama administration with complications that could shape the results. In the steel-pipe case, U.S. manufacturers saw their gross profits almost triple to $2.42 billion in 2008 from the previous year, according to the International Trade Commission. Record oil prices drove demand for the product. While imports from China surged, U.S. production and employment increased too. U.S. companies “were completely tapped out,” Porter, the lawyer for the Chinese producers, said in an interview yesterday. “They were producing all they could.” Since then, as oil prices fell, demand in the U.S. has dropped off and Chinese imports have collapsed, according to Michelle Applebaum, who runs a research firm in Highland Park, Illinois, that advises investors on the steel industry. Chinese producers are curbing exports partly because any tariffs imposed by the Commerce Department would be retroactive, she said. In the tire case, union workers don’t have support from U.S. manufacturers. Opposes Tariffs Cooper Tire & Rubber Co. of Findlay, Ohio, the second- largest U.S. tiremaker, makes some of its tires in China and opposes tariffs. Goodyear Tire & Rubber Co. of Akron, Ohio, the largest U.S.-based producer, hasn’t taken a position. GITI and importers of tires say the lack of support from the companies means American producers have abandoned the low- cost market to imports, so Obama should rule against the petition. The U.S. and China may negotiate a “politically sensitive settlement” to avert the International Trade Commission’s recommendation for duties of 55 percent on Chinese tire imports, said Elliot Feldman, a partner with Baker Hostetler LLP in Washington, who doesn’t have a client in either trade case. “The president understands the fundamentals of free trade,” Feldman, who writes a blog on China trade, said in an interview yesterday. The tire companies are shifting production abroad, “and saying that is like waving a red flag in front of a Democratic president.”