Thursday, February 2, 2012

Documenting the Real - and Personal - Harms Imposed by the Obama Administration's Trade Remedies Policies

Over the last few days, I've tried to document the myriad problems surrounding current Obama administration policies related to trade remedies (i.e., anti-dumping, countervailing duty and safeguards) actions against Chinese imports.  I first explained (in admittedly excruciating detail) how the administration's steadfast support, in the face of numerous adverse legal rulings, for imposing CVDs on imports from "non-market economies" (NMEs) like China and Vietnam was undermining US-China trade relations, injecting uncertainty into the US economy, and creating tons of needless litigation in US courts and at the WTO.  I then criticized President Obama's rather, ahem, audacious claims in the 2012 State of the Union Address that his administration's "Section 421" safeguards tariffs on Chinese passenger vehicle and light-truck tires created lots of American jobs and will therefore serve as the poster child for the President's new trade "enforcement" team.

These blog posts follow years of documenting the problems with US trade laws and the immense-yet-mostly-unseen costs that US trade remedies actions - including the Section 421 tariffs and unrelated countervailing duties on Chinese off-road tires - impose on American businesses (e.g., importers, retailers and downstream manufacturers) that consume, import, market or sell Chinese and other imported goods subject to all of those US duties.  Most of these discussions, however, were been based on public statistics and published news reports, rather than firsthand accounts (mainly because most US business owners are unwilling or unable to comment on the record about such things).

Then last night I received an unsolicited email from Mr. Robert Sherkin, currently President and CEO of Dynamic Tire Corp. and a founder of the now-bankrupt GPX International Tire Corp (the named Plaintiff in the big US court case on the CVD/NME issue).  [Note: I don't represent Mr. Sherkin in any capacity.]  He kindly praised my analysis of the troublesome US trade remedies cases against Chinese tires, and then in a subsequent email explained just how these particular trade actions - which have been repeatedly ruled illegal by US courts and the WTO, yet continue to be championed by the Obama administration - destroyed his company (via the aforementioned bankruptcy), eliminated hundreds of US jobs, and personally cost him millions of dollars.  I asked Mr. Sherkin if I could post his email here, and he agreed.  It is copied below, verbatim (with my clarifications in brackets):
From: Robert Sherkin
Date: Thu, 2 Feb 2012
To: Scott Lincicome
Subject: RE: your post 
[Regarding the AD/CVD investigation of off-the-road (OTR) tires and subsequent CVD/NME litigation in US courts...]
We spent millions fighting this battle for 4 years only to lose the company. The process was Orwellian. You go in thinking that truth would prevail and vindication would be the end result. Boy were we wrong... even now with a US Court telling the government 3 times that they are wrong … they still refuse to accept it.

You can’t possibly calculate both AD and CVD in a non-market economy.  The “surrogate cost” inclusion deals with the CVD aspect!  It is DOUBLE COUNTING.

Has the USA really become that weak that they need to have 6 outs per inning where the other side has 3?  Doesn’t anyone want to do the math or are even the “smart guys” on the Hill only capable of focusing on 20 second sound bites from the talking heads.

We spent over $30 Million on a facility in China, employed over 200 people in North America.

Titan Tire launched an AD claim which was subsequently commandeered by Bridgestone, who by the way was brilliant!  Using their aging 40 year old factory in Bloomington Illinois that they haven’t invested much in over the years, they have effectively blocked China from access to their OTR market in USA ($300+ Million per year) which they fill mostly from their factories in Japan... how smart is that!

Titan on the other hand claimed they couldn’t compete in USA but purchased more USA assets with the goal of attaining 50% of their revenue on an export basis... how can they compete with China outside of USA if they need AD/CVD protection inside USA?  Ridiculous argument but the DOC and ITC lap it up.
[Regarding the Section 421 safeguards duties on fairly-traded Chinese consumer tires...
The latest one we are currently suffering with is the 421 ruling on consumer tires... what I call Obama’s $6 Billion Tax on the US consumer... not one new job was created as a result despite the state of the union lie!  This 421 ruling will have had the effect of increasing the cost of automotive tires to the US consumer by not less than $6 Billion over the 3 years [that it will be imposed]… and imports during the last 2 ½ years have not reduced, they only shifted from China to Taiwan, Malaysia, Thailand, Korea and others.  The USW (not one industry participant) claimed that the 421 “relief” was needed to address market disruption caused by the surge of tires imported from China.

So the US consumer pays the price for the USW to the thump their chest, to the tune of $6 Billion.  Priceless!  Something tells me that there are a lot of better ways to spend this amount of funds!

Sorry for my rant….. I feel a little better now! --- getting kicked in the teeth by the US Government for over $20MM personally gets one a little agitated sometimes!
I don't know about you, but there seem to be plenty of reasons for Mr. Sherkin to get "a little agitated" about (and no reason for him to apologize for) how he, his company and its employees were treated by the Obama administration and its strong commitment to maintaining the problematic status quo on US trade regulations.

The loss of a small business, 200 jobs and $20 million can certainly cause a guy to get a little ranty.

In a great new video, Senator Jim DeMint (R-SC) explains how US regulations are destroying American entrepreneurs' ability to compete and succeed in the global economy.  As I (and others) have frequently noted, US trade remedies laws - and the litigation arising therefrom - are precisely the types regulations that can, if poorly crafted or administered, strangle American businesses - particularly those that consume or otherwise rely on imports.  Unfortunately, many politicians - even supposed champions of the free market - seem to forget that US "unfair trade" regulations can impose very real costs on many American businesses (US tariffs are paid by Americans, afterall) and often on very "unfair" terms.  Maybe Mr. Sherkin's story will help them remember (or discover) that fact.

And if more of this is the future of the Obama administration's China trade policy, then heaven help us.

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