Protectionists are on the cusp of a “Pyrrhic victory” over China.
No one will like the results when it happens.
A huge global trade war is on the horizon, regardless of whether Hillary or Trump wins the election.
The die is cast: US Steel Given Green Light to Seek China Import Ban.
The US has given the go-ahead for the country’s largest steel producer to seek a ban on imports from Chinese rivals, in the first known case in which trade sanctions could be used in retaliation for alleged China government-backed hacking of commercial secrets.
In a decision last week the US International Trade Commission gave the go-ahead for the case to proceed, setting the stage for a legal battle that experts say will probably take more than a year for an administrative judge to decide.
This timeframe could lead to a decision related to arguably the US’s most important commercial relationship early in the next president’s first term. Under the law, US presidents are given 60 days to block ITC decisions on Section 337 cases, although according to the ITC “such disapprovals are rare”.
“We strongly believe that Chinese steel producers have engaged in illegal unfair methods of competition, which have created a force with which no market economy can compete,” Mario Longhi, the company’s president and CEO, said in a statement welcoming the ITC decision. “We remain confident that the evidence will prove the Chinese steel producers engaged in collusion, theft and fraud and we will aggressively seek to stop those responsible for these illegal trade actions.”
Trade experts say that the case also represents the potential escalation of what has been a creeping protectionism in recent years with steel a growing target of anti-dumping cases.
But a wholesale ban on US imports of Chinese steel would be materially different and could set a protectionist tone for the next US presidency, said Simon Evenett, a professor of international trade at the University of St Gallen in Switzerland, who oversees the Global Trade Alert, a monitoring service for protectionist measures.
“The big thing is really the potential scale of this case versus the pin pricks that we have seen unleashed over the past nine months,” Mr Evenett said.
“This should be setting off alarm bells,” he said. “It is really a nuclear option.”
A total ban would indeed be a nuclear option. Trump would embrace it. Hillary would support it.
The US even greased the wheels in advance. On May 30, the US refused to accept the reappointment of a South Korean judge who the US fears may rule in favor of China in trade disputes.
I wrote about greased wheels in Stacked Deck: US Bullies WTO, TPP Revisited.
European Trade Mess
The EU is still coming to grips with inane sanctions on Russia that did more harm to the EU than Russia. Austria, France, Italy, Hungary, Greece, and Portugal have had enough of sanctions that have backfired due to a collapse in exports.
For details, please see Merkel Ready to Kiss and Make Up with Putin?
Also see Pater Tenebrarum’s exceptional post on the Stunning Idiocy of Steel Tariffs.
The statement by Mario Longhi, US Steel CEO “We strongly believe that Chinese steel producers have engaged in illegal unfair methods of competition, which have created a force with which no market economy can compete,” is nothing but a self-serving lie for the benefit of US Steel and the detriment of everyone else, especially consumers and the US auto industry.
If China is “dumping” steel at cheap prices we should be thankful. Free steel would be even better. Everyone’s standard of living would immediately rise.
Trade protectionists are just like candle makers bitching and moaning about free energy from the sun.
“The Candlemakers’ petition is a well-known satire of protectionism written and published in 1845 by the French economist Frédéric Bastiat as part of his Economic Sophisms. In the Candlemakers’ petition, the candlemakers and industrialists from other parts of the lighting industry petition the Chamber of Deputies of the French July Monarchy (1830–1848) to protect their trade from the unfair competition of a foreign power: the Sun.”
The entire debate over “fair trade” is intellectually dishonest. Fair trade is free trade. Period.
Election Campaign Flashback
In 2011, the US put huge tariffs on Chinese-made tires (to the detriment of consumers and the auto industry). China responded with anti-dumping tariffs on GM.
I wrote about that in Proposal to Stop “Free Sunlight” Gains Support From Mitt Romney.
Here we go again, this time with Donald Trump, Hillary Clinton, and President Obama all waving protectionist flags.
Should the US carry through with the plan, expect a “Pyrrhic victory” over China.
Mike “Mish” Shedlock