The Wall Street Journal
Copyright (c) 1993, Dow Jones & Co., Inc.
Thursday, January 28, 1993
Commerce's Latest Fair Trade Fraud
By James Bovard

The Commerce Department announced yesterday that companies from
19 foreign nations have been found guilty of dumping steel on the
U.S. market and imposed provisional tariffs as high as 109.22%. The
decision, which amounts to an instant embargo on imports from many
companies, will be hailed on Capitol Hill as further proof of
foreign perfidy. Instead, it simply reveals the hypocrisy and
absurdity of U.S. dumping law.

Dumping supposedly means that a foreign company is selling a
product in the U.S. for less than in its home market, or less than
its cost of production. But in the past 19 years Congress and
federal bureaucrats have repeatedly stretched the definition.
Commerce now routinely finds 97% of all foreign companies it
investigates guilty of dumping.

Though yesterday's announcement was a preliminary finding, the
Customs Service will demand from each company a deposit equal to the
preliminary dumping margin on steel imports. If the Commerce
Department in its final rulings in April and June finds a lower
dumping margin, or if the U.S. International Trade Commission
concludes that the imports are not injuring U.S. steelmakers, the
deposits can be refunded. But Commerce has already indicated to many
companies that it will impose punitive tariffs in the final ruling.

In recent years, Commerce has made it increasingly difficult for
foreign companies to prove that they are not unfair traders. Each
new bureaucratic demand effectively narrows the definition of fair
trade. Foreign steel companies are likely to spend more than $100
million on U.S. attorneys and other costs to try to fulfill
Commerce's demands.

The U.S. can demand practically an infinite amount of information
-- and any refusal to comply immediately is taken as a confession of
guilt. If a foreign company does not speedily answer all requests,
Commerce will use the "best information available" (BIA) to
calculate a dumping margin. But the BIA is usually the allegations
that a U.S. company gave Commerce to launch the initial
investigation, which is usually the most negative information
available about the foreign company.

If a respondent makes a few errors in the cartons -- sometimes
carloads -- of information it is ordered to provide, Commerce can
disregard the entire response and invoke BIA. Commerce even
sometimes uses the allegations by a U.S. company against its foreign
competition when it knows the information is incorrect. Commerce may
have imposed more BIA penalties yesterday than in any previous

In the current dumping investigation, foreign companies were
given only 45 days to make an initial response to a massive Commerce
Department questionnaire. In the case of Metalexportimport (MEI), a
Romanian company, Commerce sent the questionnaire to the Romanian
Embassy in Washington, which dallied before forwarding the
information to Bucharest, and then apparently forgot to send all of
the parts of the questionnaire. MEI tried to fill the data request,
but its response (mailed from Bucharest) arrived a week late. MEI
also tried to respond to the questionnaire without hiring an
American lawyer -- apparently a cardinal sin in the eyes of the
Commerce Department.

MEI subsequently hired counsel and submitted other information to
Commerce on time. Yet, Commerce refused to accept any additional
information and yesterday announced a 75.04% BIA dumping tariff on
its exports. Romanian steel exports have been effectively barred
from the U.S. based solely on unverified allegations by American

Commerce investigated exports of steel coils from Germany's
Preussag Stahl AG (PSAG). PSAG provided Commerce with massive data
on its U.S. and German sales of steel coils -- but then Commerce
demanded further data on sales in Germany of types of steel not
exported to the U.S.

On Dec. 15, Commerce decided to impose BIA penalties on the
German company if it did not furnish information on all sales by
Dec. 21 -- but did not inform the company of that ultimatum until
Jan. 7. At the same time that Commerce heavily penalized PSAG steel
exports for not providing this information, however, it exempted
three other steel companies from the requirement to report home
market sales of products not exported to the U.S.

Polish steel exports have been banished from the U.S. market by a
75.44% dumping margin. Commerce employed its bizarre methodology for
nonmarket economies, announcing yesterday that if Polish steel had
been produced with energy, labor and other costs plucked from South
Africa, Mexico, Argentina and Turkey, it would have cost far more
than it actually did. The use of this method ignores Poland's
massive and courageous economic reforms.

Sumitomo Metal Industries, a Japanese steel producer, became so
exasperated with Commerce's endless demands that it withdrew from
the dumping investigation on Jan. 14 -- effectively surrendering all
its U.S. exports to avoid continued harassment by U.S. bureaucrats.
Though Sumitomo had provided thousands of pages of documents,
Commerce also demanded detailed sales information from other
Japanese companies that bought and resold Sumitomo products,
information Sumitomo said was impossible to provide. Commerce
blocked Sumitomo steel from the U.S. market with a 24.98% BIA
dumping margin.

Commerce has worked overtime to stack the deck against foreign
producers. For instance, attorneys for the U.S. steelmakers were
allowed to examine the lengthy questionnaire that Commerce sent
foreign producers and suggest modifications -- while attorneys for
many foreign companies were effectively prohibited from suggesting
any modifications. The Commerce Department refused to consider any
information foreign companies submitted for yesterday's ruling after
a Dec. 21 deadline; yet, Commerce has reportedly considered dozens
of submissions it received from the domestic steel industry
criticizing foreign steel producers.

Though Commerce calculates its "less than fair value" dumping
margins down to the second decimal point, the final numbers are
often the result of blue smoke and mirrors. Steel is sold in
hundreds of different forms; but Commerce often compares U.S. and
foreign prices of different shapes, qualities, and quantities of
steel. The result of the price comparisons -- if it is a high
dumping margin -- is "close enough for government work."

The higher the dumping margins are set, the more power the U.S.
government has over foreign companies. This is important because the
U.S. government may offer to suspend the dumping investigations if
foreign companies agree to restrict their steel exports to the U.S.
or agree to price controls on their U.S. sales. Since the
preliminary dumping margins are very high, foreign companies will be
tempted to accept whatever scraps of market share Commerce offers in
return for an end to the dumping prosecution.

Commerce's extreme rulings in the dumping cases are in the same
protectionist spirit as its November decisions regarding alleged
subsidies on steel imports from 14 countries. In several of those
cases, Commerce reversed its previous decisions and announced that
privatized companies will be considered guilty for subsidies they
received while government-owned up to 15 years ago. Commerce's
decision effectively erects a huge "DO NOT ENTER" sign at the U.S.
border for East European and Russian manufacturers. U.S. government
officials have long been brow-beating foreign governments to
privatize their state-owned manufacturers; Commerce's action thus
makes a mockery of U.S. foreign policy.

Commerce cannot clobber foreign sellers without also harming
American buyers. Many types of steel hit by the dumping duties are
not produced in the U.S. in sufficient quantity or quality to
satisfy the needs of American manufacturers. Commerce is sacrificing
the majority of American heavy industry to gratify a few greedy
steel producers. (Nucor Inc., the nation's premier steel mini-mill,
refused to support the dumping case.)

Unfortunately, the Clinton administration seems as ignorant of or
disingenuous about the antidumping law as was its predecessor.
Secretary of Commerce Ron Brown declared yesterday that the dumping
"investigations proceed in an open manner to ensure that a fair and
accurate result is achieved." Mr. Brown should tell that to the
Poles, Romanians, Germans, Japanese, British, Italians, Swedes,
Mexicans and Austrians -- all of whom were hit with BIA penalty
tariffs yesterday.

The Commerce Department apparently feels entitled to inflict
unlimited amounts of unfairness in the name of fair trade.
Yesterday's ruling should be a warning shot to the Clinton
administration to fundamentally re-examine U.S. trade law before the
Commerce Department further undermines American competitiveness.