No. 36 — September 22, 2000


Weekly Review

--- by Susan MacKnight

No transpacific trade issue has had the staying power of steel and the terms of Japan's access to the big American market. U.S. steel mills prepared, regardless of cost, to pursue their conviction of chronic unfair pricing and other misdeeds by Japanese rivals have ensured the 30-years-and-counting longevity of this conflict. An increasingly combative Japanese government and steel industry, equally certain that the United States is engaged in rampant protectionism, have given the problem new endurance.

The hallmarks of the long-running campaign that the nation's integrated steel mills and, more recently, minimill operators have waged against competitors in Japan span a voluntary restraint agreement (1969 to 1974), the so-called trigger price mechanism (1978 to 1982), another VRA (1982 to 1992) and a blanket June 1992 antidumping suit against carbon flat-rolled steel products. The latest chapter in this history of actual or threatened import restrictions — marked by a barrage of complaints charging cutthroat, injurious pricing of surging 1998 imports of both carbon and stainless steel mill products — is two years old (see JEI Report No. 38B, October 8, 1998).

To date, 12 unfair pricing petitions have been filed against Japanese producers, usually the Big Five integrated mills: Nippon Steel Corp., NKK Corp., Kawasaki Steel Corp., Sumitomo Metal Industries, Ltd. and Kobe Steel, Ltd. Industry experts estimate that these complaints cover 90 percent-plus of Japan's U.S.-bound steel volume. The Department of Commerce and the International Trade Commission, which has the job of deciding whether any connection exists between cut-rate import pricing as determined by Commerce and problems experienced by domestic manufacturers, have completed work on all but one of the cases, the exception being an August suit involving stainless steel angles. In general, American steelmakers have prevailed — and in a big, market-excluding way. Commerce typically has assessed dumping penalties in the high double digits and sometimes at rates over 100 percent. More often than not, its starting point was pricing information supplied by the petitioners since Japanese exporters, convinced that this part of the legal process was stacked against them, opted out as participants in the pricing phase of the dumping investigations.

The list of products for which antidumping-duty orders have been issued starts with carbon hot-rolled steel (see JEI Report No. 29B, July 30, 1999), the initial target of a group organized by USX Corp./U.S. Steel and Bethlehem Steel Corp. It extends to carbon cut-to-length steel plate, large-diameter seamless carbon and alloy steel standard, line and pressure pipe as well as its smaller counterpart, carbon structural steel beams and tin mill products. Rounding out the list is a pair of stainless steel products: rod and sheet and strip in coils.

The ITC, however, has dealt the American steel industry a number of unexpected setbacks in its fight to end the predatory pricing asserted to be the cause of the "crisis" state in which U.S. mills still find themselves today. Most notably, in a decision earlier this year that astounded both sides, the commission found no evidence, direct or indirect, that underpriced sales of carbon cold-rolled steel, the largest category of products in volume terms shipped to the United States from Japan, impacted the operations of competing American producers (see JEI Report No. 10B, March 10, 2000). The ITC arrived at the same no-injury conclusion in the final phase of the proceedings involving stainless steel round wire and circular seamless stainless steel hollow products and in the initial stage of the carbon steel reinforcing bar case.

With few other types of steel mill products left for American manufacturers to target, the legal wrangling in Washington is winding down. That, however, does not signal the coming end of the latest round in the recurrent transpacific controversy over the business practices of the Japanese steel industry and the response to them by the American industry and government. In fact, what could be the decisive phase of the fight will not take place until late this year or early in 2001. This is the approximate timing for a decision by a World Trade Organization dispute-settlement panel on the complaint that Tokyo filed last November over Washington's handling of the dumping investigation involving hot-rolled steel (see JEI Report No. 7B, February 18, 2000).

At issue is whether the United States violated its international trade obligations in general and the dictates of the WTO Antidumping Agreement in particular, although the panel's actual ruling will hinge on the technical questions of Commerce's pricing methodology and the ITC's injury analysis. Whatever the conclusion, it will have ramifications beyond not only the hot-rolled steel case but also the other dumping complaints that have gone against Japanese steel exporters in the last 18 months or so.

A finding supportive of Tokyo's firm belief that Washington has abused the primary U.S. antidumping law would give Japan and other U.S. trading partners equally convinced that this trade statute has been applied in a protectionist manner leverage in their campaign to place America's antidumping regime on the agenda for a new round of multilateral trade negotiations under the WTO. Conversely, a ruling favorable to the United States, even on the narrowest of grounds, effectively would stop that movement in its tracks.

The Clinton administration has fought any and all attempts to weaken the U.S. antidumping law. Should Al Gore be elected president in November, he would pursue the same strategy since his victory would be due in part to strong labor support. That prediction holds regardless of which way the three WTO panelists rule. The United States might have a moral obligation to implement negative decisions by the Geneva-based dispute-resolution group, but international trade rules allow it and other WTO members some leeway in follow-through. A George W. Bush administration also would have trouble rallying support on Capitol Hill for changes in this country's antidumping system in the event of a U.S.-adverse WTO determination.

The upcoming presidential and congressional elections are, in fact, another reason why the steel dumping dispute has not disappeared from public view. With an eye on those campaigns, the White House made regular consultations with Japan on steel issues — namely, unfair trade practices — part of its August 1999 action plan for the domestic industry. Two of those sessions have been held, the latest in mid-March. Ironically, the expert-level meetings, billed as occasions for an exchange of views, have provided another forum for Japanese trade officials to lecture their counterparts about the shortcomings of the U.S. antidumping law and to deny claims that Japan's steel market essentially is closed to imports.

With the U.S. elections even closer at hand, the allegedly anticompetitive practices of Japan's steel industry figured more prominently in the 235-page Global Steel Trade: Structural Problems and Future Solutions report that Commerce released in late July. As its title suggests, the study, a follow-on to the administration's earlier steel action plan, was an attempt by the White House to identify the causes of the 1998 surge in imports that created, in the report's words, crisis conditions for domestic steelmakers in order to stop a replay down the road. Launching a long-term dialogue with Japan as well as with other major steel exporters designed to win elimination of factors that distort world trade in steel was first on the six-point list of preventative steps that the document endorsed.

What form the proposed consultations will take and how actively a new administration might pursue them are uncertain. What is clear is that the transpacific dispute over the trade practices of Japan's steel industry will outlive the Japan Economic Institute.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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