Antidumping 101: Everything You Need to Know about the Steel Industry’s Favorite Protectionist Bludgeon

Last week, invoking a seldom-used provision of a 1962 law, President Trump launched an investigation to determine whether steel imports present a threat to U.S. national security. An affirmative finding by the Commerce Department would permit the president to impose trade restrictions in response to the threat. But the real threat to U.S. national security is not an abundant supply of cheap imported steel. The real threat is a hyper-litigious steel industry intent on isolating the U.S. economy at enormous cost to downstream U.S. industries, exporters, and consumers. 

With the Trump administration full of steel executives and their lawyers one needn’t ponder too long to get the gist: U.S. trade policy is in the hands of an industry that accounts for 0.3 percent of U.S. GDP, has never had much interest in cultivating foreign demand for its products, has limited stakes in the global trading system, and is monothematic in its demand for aggressive trade law enforcement.

The wall of tariff’s protecting U.S. steel interests is already much higher than the walls erected to insulate virtually any other industry from foreign competition. Currently, there are 151 antidumping and countervailing duty (anti-subsidy) measures in force against most types of steel from most major exporters. And that severely impairs the competitiveness of America’s far more numerous, far more economically significant downstream, steel-using companies.

Under U.S. trade remedy laws, the authorities are prohibited by statute (on account of steel industry lobbying) from even considering the impact of prospective antidumping and countervailing duties on the operations of downstream companies. Absurd self-flagellation, right? The absurdity is magnified when you grasp that the duties paid by U.S. importers (i.e., the steel users), which are big enough deterrents to doing business with foreign suppliers in the first place, aren’t even the biggest concern. Under the seriously corrupted, capriciously-administered U.S. trade remedy laws, the importers don’t even know what their final duty liability is going to be until about one year (on average) after the product is imported.  The amount of duty paid upon entry of the product is an estimate of the duties that ultimately will be owed when Commerce gets around to “calculating” the actual incidence of dumping or subsidization next year.  Imagine getting a supplemental bill today for the groceries you purchased last April.  Would you even buy those groceries in the first place, without knowing the final price tag? Of course not. And that’s the intention of the retrospective nature of the U.S. trade remedy laws.

Although portrayed as U.S. companies against Chinese or other foreign predators, the laws are more aptly described as weapons used by U.S. upstream industries to cut off their U.S. customers from alternative suppliers.  I’m not making this stuff up.  

Over the past 20 years, the Cato trade center has produced a very large body of accessible analyses on the subject of antidumping. Since it’s looking likely that the subject will be a prominent feature of trade policy over the next 3 years, 9 months, below are links to our extensive work on the subject. 

Antidumping administration at the Commerce Department: 

Antidumping policy toward China:  

The adverse, but intentionally ignored impacts of AD measures on downstream industries and exporters:

How to drain the antidumping swamp:

The absence of any legitimate economic rationale for antidumping:

Sundry commentary about the AD regime: