Too little, too late

October 2, 2009
By: Eric Lundin

If you've been following the news and reading about U.S. tariffs on Chinese goods, you're well aware that it's a puzzle with many pieces. This bit of news was a real eye-opener: Two pipe producers asked the Commerce Department to impose duties up to 90 percent on some categories of steel pipe imported from China. Ninety percent! I am sure we're accustomed to reading about tariffs up to 30 percent, so this is a bit of a shock.

Even the mildly curious must wonder what sort of a trade situation would justify a 90 percent tariff.
This issue started making headlines back in spring. On April 8, seven companies and one labor union filed a petition with the Department of Commerce to investigate suspicions of subsidies and dumping. On April 29, the Commerce Dept. announced its decision to investigate some specific oil country tubular goods (OCTG) products from China. In early September, the Commerce Dept. announced its preliminary decision to put tariffs in place with a final ruling to be issued in November. It determined that the subsidies vary from 11 to 31 percent.

So much for the play-by-play. Now let's look further.

Although these actions concern OCTG, it's really part of a bigger trend that started to develop some time ago. The Pulse, a column that tracks the tube and pipe trade balance in every issue of TPJ-The Tube & Pipe Journal®, hints at what was happening. Imports from China fell gradually from $203 million in October 2006 to $67 million in December 2007. That's a 67 percent drop over 14 months. Granted, that is significant, but it's not really out of line with trends in imports from other countries. The shocker was the rapid increase in tube and pipe imports from China over the next 11 months: 645 percent.

Could it be any clearer that something was going drastically wrong?

Now take a second look and you'll see the stupidity built into the system. The trouble was easy to spot last summer, yet the Commerce Department is just now getting around to doing something about it.

Because imposing tariffs is the result of a legal process, the reaction is anything but swift. Of course, we all know that "legal" means "a long, drawn-out process that relies on massive amounts of research reported in excruciating detail by lawyers, and boy, do they charge a lot per hour." How many U.S. jobs were lost, how many pipe facilities shuttered, how much havoc did this cause before the rulings were announced?

How about a system of monitoring import levels and prices? A preemptive system would impose duties gradually on specific products when import levels grow faster than some predetermined amount or when prices for imports get out of line with prices for similar domestic goods. This would put the trade situation in slow motion and give the trade commission time to do a review before the exporters have a chance to inflict such carnage on the target market. Such a system would have revealed the problem, and responded to it, in May 2008, when imports grew 81 percent in a single month. It would have put attention on this a year earlier.

Wouldn't this make more sense than waiting around until the damage is done?
Eric Lundin

Eric Lundin

FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-227-8262