US probe of steel dumping as national security issue could lead to sanctions

2 May 2017 11:22am

20 April 2017. By Ira Teinowitz.

President Donald Trump's announcement today that his administration will seize on a little used national security law to launch a probe of steel exports that could lead to new US sanctions against China and other countries is being seen as the climax of long expected attempt by Trump to more directly take on China over unfair trade.

Trade experts on Thursday suggested that they are more surprised it took Trump so long to act than they are about his rare use of national security to justify trade sanctions.

They noted that during his presidential campaign, Trump repeatedly expressed a desire to take action on steel. Trump's Commerce secretary, his nominee for US Trade Representative and his acting USTR — all with steel industry connections — also have expressed concerns that China's overproduction of steel is unfairly driving down US steel prices and threatening the livelihood of steelworkers.

Commerce Secretary Wilbur Ross, announcing the probe at a White House press briefing, said the administration's intent is to use the law to more successfully pursue trade sanctions against individual products and countries. Too often, he said, countries that dump products either start shipping the same products through other countries or switch to dumping slightly different products.

"The problem with those antidumping and countervailing duty cases is they are very, very limited in nature. So a very, very specific product, from a very, very specific country. What really happens is you bring the action and it will help eliminate the action with that one product from that one country, but that country will start shipping something else in or will modify it slightly," he said.

"It's a fairly porous system, and while it has accomplished some measure of reduction, it doesn't solve the whole problem. We are groping here to see whether the facts warrant a more comprehensive solution that would deal with a very wide range of steel products in a very wide range of countries."

Ross said imports of foreign steel have grown by more than 19 percent so far this year.

The administration is launching the probe under Section 232 of the Trade and Expansion Act of 1962.

Under the law, the Commerce Department will have 270 days to look at the importance of the domestic steel industry, the growth of imports and steps needed to ensure the continuing survival of US steel plants. The report, which Ross said will be completed well before the 270-day time limit, will make a recommendation about sanctions or attempts to negotiate. He said The Commerce Department will hold public hearings in connection with the report.

After Commerce makes its recommendation, Trump can negotiate with China or any other country whose shipments are found to raise national security issues, or instead immediately impose sanctions.

There are few limits on the value, extent or the length of the sanctions Trump could impose, and as a national security action, few avenues for appealing any sanctions.

"The authority is extraordinarily broad. It could be used to get orderly marketing or restraint agreements, or they could opt for a negotiating approach," said Alan Wolff, a former US Deputy Special Representative for Trade Negotiations and trade lawyer who is chairman of the National Foreign Trade Council.

The law allows the president to raise tariffs or otherwise regulate imports as necessary to strengthen national security. US presidents since the 1950s have used it and its predecessor laws to restrict foreign oil exports and combat unfair actions by foreign producers of fasteners and machine tools, but rarely for other trade sanctions.

"It is considered rather extreme to say that national security is threatened," by an unfair trade issue, said Wolff. "There has been a great deal of restraint, that doesn't mean it can't be used."

Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, also pointed to the broad options Trump would have under the law. "My guess is that Trump can do whatever he wants to limit steel imports under this statute and he will not be reversed by the courts," he said.

Trump's planned announcement drew immediate support on Capitol Hill.

"Today's announcement is an important step toward addressing the impact of unfair steel imports on our national security," said Senator Sherrod Brown, an Ohio Democrat. "I'm pleased the Administration is willing to consider trade enforcement tools that haven't been used in more than 15 years. But this investigation won't mean much to Ohio steel companies and steelworkers unless it is followed by tough action that addresses China's overcapacity and stops the flood of unfairly traded steel imports from coming into our market."