At an all-day government hearing to discuss the causes of the US trade deficit on Thursday, steel and manufacturing leaders made the case that the trade deficit has put the country's economic security at risk.
"Trade deficits aren't economic indicators of cheap goods. Trade deficits are economic indicators of lost jobs," Leo Gerard, international president of the United Steelworkers said at the Department of Commerce and the United States Trade Representative hearing.
President Donald Trump's executive order signed March 31 instructed Commerce and the USTR to make an omnibus report that will address the major causes of the trade deficit, whether trading partners are imposing uneven burdens on US commerce, the effects on US production capacity, employment and wages in the US and if there are any imports or trade practices that harm US national security.
At the hearing, Commerce Secretary Wilbur Ross said the report was due to the president by June 30, but he expects it will be delivered sooner. Commerce has received more than 160 comments and the Thursday's public hearing included more than 35 speakers.
Ross said the US trade deficit for goods in 2016 was about $735.5 billion and $745.7 billion in 2015. China accounted for nearly half of the trade deficit.
Gerard said the trade deficit analysis is important for enforcement and to make conclusions.
"Trade laws don't work," Gerard said. "We, the union, filed these cases and we won 81% of the time. That's because they cheat all the time."
Roddey Dowd, CEO of Charlotte Pipe and Foundry Company said he was encouraged by the ongoing Section 232 investigation into the impacts of steel imports on national security because it is forward looking, as opposed to regularly used antidumping and countervailing duty investigations.
"The closure of 844 US foundries since 2000 and the commensurate reduction of capacity has led to substantial unemployment, loss of skilled workers and capital investment and the displacement of domestic products by excessive import," Dowd said.
Imported castings represent 25% of the US market, according to Dowd, and 25% of those imports come from China. Metal castings are critical in almost all manufacturing activities and military applications, Dowd said.
Dan DiMicco, chairman of the Coalition for a Prosperous America and former CEO of Nucor, called for a "mechanism to neutralize the value-added tax." In addition to currency manipulation and government subsidies, US manufacturers have to compete with countries that employ the VAT.
"Not only do we have to deal with them exporting into our country and not having to pay that tax, but they get a rebate of the tax in their home country. So basically what you see with border adjustable VAT-type taxes, which basically everyone in the world has and we don't ... exports are subsidized to the tune of the value added tax by the rebates they get," he said.
US Representative Lou Barletta, Republican-Pennsylvania, also raised the issue of how foreign government subsidies for coal industries have devastated the US coal industry, particularly mining for anthracite coal, which is used in steel and charcoal manufacturing, and enforcement.
US production of anthracite coal amounts to about 1.75% of the world's consumption, despite having one of the world's largest reserves in Northeast Pennsylvania, Barletta said. The subsidized Ukrainian coal industry has contributed to suppressed prices and closure of mines in the US, he said.
Multiple speakers, including Barletta, raised the issue of circumvention and transshipment.
"Even with sanctions to prevent cheating, foreign nations find ways around the rules by moving their goods through third party companies located in countries that have trade agreements with the United States," he said, noting that Europe's largest supply of anthracite is in the disputed territory of Crimea. "We know that roughly 37,000 tons of anthracite was shipped to the United States from Switzerland. This is a little suspicious because Switzerland has no known anthracite reserves."
