When most people see a flatbed truck loaded with drill pipe rolling west on Interstate 10, it’s a reminder of the thousands of oil and gas wells that are driving the booming Texas economy.
When steelworkers in Bellville see those trucks, though, they’re reminded why their plant, which makes similar pipe 60 miles west of Houston, is shutting down next month.
The decision by Pittsburgh-based U.S. Steel to idle the Bellville mill – as well as one in Pennsylvania – reflects the cutthroat international market for steel that has led some Asian producers to use their excess capacity and dump what are called “oil country tubular goods” in the United States.
A complaint against these producers, now before the International Trade Commission, offers yet another lesson in the difference between free trade and fair trade, and why the fine print in international agreements is so important.
“The approach and manner in which foreign companies are dumping thousands of tons of products into the U.S. market leads business leaders such as me to conclude that American steel companies are being targeted for elimination,” United States Steel Corp. Chief Executive Mario Longhi told the U.S. Senate Finance Committee last month.
The fight has been going on since the latest oil and gas boom started nearly a decade ago. As early as 2007, the Chinese government provided subsidies ranging from 10 percent to 15 percent to steel mills so they could export high-value pipe and corner the U.S. market, the Department of Commerce determined in 2009.
For a while, they succeeded and put hundreds of people out of work at the Bellville plant and beyond, said Durwin “Oodie” Royal, president of United Steelworkers Local 4134, which includes Bellville. When the Commerce Department investigation was complete and the International Trade Commission imposed tariffs, the plant reopened and drillers started buying American-made pipe again, he added.
More recently, it’s been South Korea, India, the Philippines, Saudi Arabia, Taiwan, Thailand, Turkey, Ukraine, and Vietnam flooding the U.S. market. The pipe exported by these countries costs markedly less than what U.S. mills produce, depriving U.S. Steel of market share.
The company filed an unfair trade complaint and in February the Commerce department declared that all of the exporters except for South Korea should face tariffs for selling goods in the U.S. market below the cost of production – the definition of dumping. The U.S. International Trade Commission is expected to make a final determination of what tariffs to place on those countries on Aug. 25.
South Korea was a special case because of a free trade agreement signed in 2012. The Commerce Department initially found no evidence of unfair trade practices. But since Korean companies in 2013 exported 894,300 metric tons of steel tubes into the United States at a value of $813 million, the Commerce Department decision mobilized U.S. steel companies and unions to demand action.
If this were a simple case of another nation producing something more efficiently, there would be little room to complain. But in this case, the prices are below the production costs in South Korea, and the companies make the pipe almost exclusively for export, since South Korea has almost no oil or gas wells.
The Korea-U.S. Free Trade Agreement contains provisions that prohibit such actions. Enforcing those rules, however, requires a company to file a complaint and begin a process that can take months, if not years, to resolve.
Royal said he suspects Asian companies export the pipe knowing it will take years for the U.S. to impose tariffs. In the meantime, South Korea keeps its workers employed and its businesses operating while global capacity tightens up.
South Korean officials have not responded to requests for comment from multiple news organizations.
In Washington, U.S. steel companies, the union and members of Congress put increasing pressure on the Commerce Department to act against South Korea, and two weeks ago, it recommended imposing duties of 9.8 percent to 15.7 percent.
“Enforcing our laws should not be a hard-earned reward; it is our right. It’s time for all of our leaders in Washington to stand with us and fight hard for fair – not just free – trade,” said Leo W. Gerard, president of the United Steelworkers International.
The case now goes to the U.S. International Trade Commission to determine whether U.S. industry actually suffered from South Korea’s dumping and what the tariffs should be to remedy the problem. The independent, quasi-judicial federal agency heard testimony last week and should make a decision on the South Korea matter by September.
“I’m hopefully optimistic that they will see the same problem the Department of Commerce is seeing and see things our way,” Royal told me after the hearing. “These are good, middle-class jobs and you take that much money out of the local economy of these small towns, with 2,000 or 3,000 people in them … it sucks the life out of the whole area here.”
Royal said a level playing field might even bring more steel mills to Texas. He said he knows of about half a dozen projects proposed projects for the region before the Asian pipe flooded the market – yet more proof that American manufacturers can compete when trade is not just free, but also fair.
Source – Hearst Newspapers