Thousands of American manufacturers were taken hostage by the
U.S. government yesterday. The Commerce Department announced it is
imposing dumping duties of up to 109% on steel imports from 19
nations, as well as subsidy penalties (countervailing duties) of up
to 73% on steel from 12 nations. As usual, the Commerce Department
in these cases found all foreign companies that it investigated
guilty of unfair trade. Yesterday's decision was the most damaging
example yet of the Clinton administration's
protectionism-by-default.

Once dumping duties greater than 15% are imposed on a foreign
company, experts estimate that its steel is effectively barred from
the U.S. market. Because many of the types and qualities of imported
steel are not produced in the U.S., this is a devastating blow to
American manufacturers. The cases now go to the U.S. International
Trade Commission, which will issue a final ruling on July 27 on
whether allegedly dumped steel imports have injured competing U.S.
steelmakers.

Commerce's dumping margins will effectively exclude almost all
flat-rolled steel imports from Argentina, Australia, Brazil,
Finland, France, Japan, Italy, Mexico, Poland, Romania, Spain,
Sweden and the U.K.

The Commerce Department claims that the dumping duties are
necessary because its analyses showed that the U.S. prices of
foreign steel producers were unfairly low. But most of Commerce's
decisions were based on a disregard of the actual prices of foreign
steel. Instead, for most cases, Commerce relied at least in part on
its own "make-believe" prices. Since foreign steel companies' prices
were not as high as Commerce's make-believe prices, Commerce has
pronounced all the foreign companies guilty and sought to expel most
of them from the U.S. market.

Commerce used two types of make-believe prices. The first was
based on Commerce analysts' recalculating foreign companies' cost of
production (often arbitrarily increasing the cost of components and
other factors), then adding 8% for profit and 10% for administrative
overhead.

The second method consisted of invoking the "Best Information
Available" -- often simply the allegations made by U.S. steel
producers in their complaints to Commerce. Even in cases where
Commerce had verified most of the information submitted by foreign
companies, U.S. bureaucrats found pretexts to reject foreign
submissions and instead simply treated the unsubstantiated
accusations made by American companies as gospel truth.

While Commerce announced the dumping margins for all 19 nations
yesterday, it postponed the release of the official determinations
for seven of them. Among the remaining 12, 10 of the punitive
judgments were based at least in part on BIA.

Secretary of Commerce Ron Brown stated yesterday, "Information
used in making our final determinations was verified and all
interested parties -- domestic and foreign alike -- were accorded an
opportunity to comment." But Mr. Brown's statement is false. For
most of the BIA determinations, Commerce did little or no
verification of the allegations made by U.S. companies.

For instance, Chris Stokes, a counsel for the Brazilian company
Usiminas, said that "90% of the material information submitted by my
company was verified by the Commerce Department." But Commerce
effectively threw out the thousands of pages of information and
concocted dumping duties of up to 42% based largely on the
petitioners' unverified allegations. And while Mr. Brown met with
chief executive officers from U.S. steel companies, he refused to
meet directly with any foreign representatives in this case.

Vice President Al Gore visited Warsaw in April and hailed the
"green shoots of free enterprise springing up in cities and on the
land" in Poland. But the Commerce Department yesterday judged and
penalized Poland as if it were still a communist country. Commerce
officials used a twisted methodology that compared Poland's U.S.
export prices with the alleged costs of production in Thailand,
South Africa and Malaysia. Commerce then revealed that Polish steel
was guilty of a dumping margin of 62%.

Commerce actions have already slashed U.S. steel exports to
Mexico by 25,000 tons this year. Several large U.S. steel mills
shipped unfinished steel sheet to Mexico, where it was galvanized
and shipped back to the U.S. According to the U.S. Customs Service,
much of the U.S. steel shipped to Mexico and re-exported to the U.S.
is "made in America," since galvanizing alone does not
"substantially transform" the steel sheet. But the Commerce
Department disregarded the Customs Service, invented its own
"rule-of-origin" for steel, and imposed a 65% dumping penalty. Once
Commerce imposed a preliminary high dumping margin on the re-imports
of American steel in January, U.S. exports of steel sheet to Mexico
collapsed, since the Mexicans were effectively prohibited from
exporting the finished product back to the U.S.

Commerce has trampled due process throughout this investigation.
For instance, the department recently made retroactive the
preliminary penalties it imposed late last January on several
countries, adding potentially millions of dollars of penalties on
steel imports. Commerce invented dumping margins above 25% for many
companies in its preliminary dumping margins issued Jan. 27 and
alleged that steel imports from those companies had increased at
least 15%. The department then justified retroactive penalties based
on "imputed knowledge" -- that importers "either knew, or should
have known, that the imports . . . were being sold at less than fair
value." Commerce compared steel shipments for the six months before
the antidumping petitions were filed last June 30 and the six months
afterward.

Most foreign companies' steel exports were restricted by U.S.
import quotas that expired March 30, 1992. Commerce is thus
punishing many foreign companies because their steel exports
increased after the expiration of the import quotas.

Commerce even imposed retroactive penalties on nations whose
exports were a tiny fraction of the U.S. market. Even though Polish
steel exports amounted to less than half of 1% of U.S. steel
consumption and were down sharply from the previous year, Commerce
still decreed that the Poles were guilty of a "massive increase" in
their steel exports.

Foreign nations are already beginning to retaliate against the
U.S. Brazil has slashed its purchases of U.S. coal in direct
retaliation for the U.S. action against Brazilian steel imports.
Japanese steel companies that invested billions of dollars in
modernizing and upgrading steel plants in the U.S. are especially
angry at what they perceive as a betrayal by their American
joint-venture partners, and Japan is reportedly considering some
type of retaliation.

The punitive dumping rates -- and the likelihood of a de facto
embargo on many types and qualities of imported steel -- are the
largest trade policy failure yet for the Clinton administration.
Steel-using industries employ 30 times more Americans than do
domestic steel manufacturers -- yet the Commerce Department seems to
care only about steel producers. This dumping investigation was
controlled by career bureaucrats who are widely perceived to be
"captured" by domestic steel producers. As one highly respected
trade lawyer observed, "The people in the Clinton administration
don't understand that the law says that Commerce must be objective
in how they handle these trade cases."

The Commerce Department apparently believes that fairness should
have nothing to do with how it administers America's "fair trade"
laws. Yesterday's ruling is further proof that the U.S. dumping law
is one of the greatest threats to U.S. manufacturing
competitiveness.

---

Mr. Bovard writes often on trade.

The Wall Street Journal
Copyright (c) 1993, Dow Jones & Co., Inc.
Tuesday, July 13, 1993
Letters to the Editor: It Was Our Duty To Impose Duties

James Bovard's June 23 editorial page article "Steel Rulings Dump
on America," focusing on the Commerce Department's decisions to
impose duties on steel imports from 20 countries, shows a lack of
understanding of the purpose and implementation of U.S. trade law.

The decisions involved imports of steel that were subsidized or
sold in the U.S. at less than fair value ("dumping"). Commerce's
investigations, as are all such probes, are highly technical and
transparent, and follow strict legal procedures. The
administration's trade policy lies in the laws themselves and a
commitment to enforce them. Mr. Bovard's charge that appropriate
actions that follow the facts reflect career employees being
"captured" by domestic interests simply reflects his own bias and
misunderstanding of the issues.

Protection from unfair trade practices is a right granted to all
domestic industries, and Commerce is not allowed any discretion in
implementing these laws. If a domestic industry provides us with
reasonable evidence that a foreign manufacturer has received
subsidies or that dumping is occurring, as it did with steel, we
must conduct an investigation according to law, departmental
regulations and administrative precedent. And all our actions are
subject to judicial review, which grants importers and foreign
producers the right to challenge our actions in court.

Mr. Bovard has challenged Commerce Secretary Ronald H. Brown's
statement that "information used in making our final determinations
was verified." Mr. Bovard is wrong. All information supplied by
foreign firms was painstakingly verified. Only when foreign
producers could not or would not provide us with the necessary input
did we rely on material from other sources ("best information
available"). Data was supported by sworn cifications and affidavits;
it was not "make believe," as Mr. Bovard claimed. Failure to use the
best information available would be contrary to law and deny U.S.
industry the remedy to which it is entitled. Also, in calculating
constructed value, the use of 8% for profit and 10% for
administrative overhead, which Mr. Bovard criticizes, is also
required by law.

Jill A. Schuker

Director, Office of Public Affairs

Department of Commerce

Washington