- The Washington Times - Monday, December 11, 2006

The International Trade Commission (ITC) will decide Thursday whether to maintain countervailing duties for imported corrosion-resistant steel. Those anti-dumping tariffs were first imposed in 1993, when nobody doubted that the U.S. steel industry was flat on its back. In its 2000 “sunset review,” the ITC maintained the duties because the industry was still recovering. Now, the ITC should end those duties.

Domestic producers of corrosion-resistant steel argue today that the tariffs should remain because their operating income averaged only 2.7 percent from 2000 through 2005. Worth noting is that this six-year period included a recession and nearly two years of very sluggish economic growth, during which time the highly cyclical steel industry no doubt earned low returns. The domestic CRS industry’s operating income peaked at 10 percent in 2004 and declined to 5 percent in 2005; it averaged 5.2 percent for the first half of this year. Well, by this standard of profitability, Wal-Mart would deserve protection. After all, Wal-Mart’s operating income for 2004 and 2005 was a mere 3.6 percent in each year. Moreover, we don’t recall any crocodile tears being shed in 2004 for Exxon Mobil’s operating income, which, measured as a percentage of sales (9.4 percent), was below the average operating income of domestic corrosion-resistant steel producers (10 percent).

The domestic auto industry, including three highly profitable Japanese companies (Toyota, Nissan and Honda), has been leading the charge at the ITC to terminate the countervailing duties. We would be more sympathetic to the “free-trade” argument of the domestic auto industry if it weren’t so hypocritically insistent upon maintaining the high 25 percent tariff on imported light trucks. That tariff has been in place for more than four decades, during good times and bad. Moreover, representatives for Ford and General Motors decline to offer a cost per vehicle imposed by the countervailing duty, leading us to believe that the steel industry’s estimate of $19 is close to the mark. Even if it were five times that amount, it would still be minuscule compared to the multi-thousand-dollar rebates that GM, Ford and Chrysler must use to bribe customers to buy many of their products. Domestic automakers also complain that the CRS countervailing duties effectively preclude them from long-term planning. That claim is weak, given the failure of Ford, GM and Chrysler to plan for the recent oil-price spikes 1973-74, 1979-80 and 1990-91.

The ITC should cancel the countervailing duties on corrosion-resistant steel not because such action would even remotely begin to solve the problems at Ford and GM. It should do so because the domestic CRS industry is well beyond its prostrate position 13 years ago. And the ITC should do so because it would truly benefit the thousands of small businesses (and their workers) whose use of CRS products represents a high level of value added to their final products. If foreign producers were to resume their dumping, the duties could be re-imposed.



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