Trump would be right to protect American workers from unfair competition abroad

Donald Trump’s presidential campaign promised an “America First” trade policy that would allow American workers to get jobs and put American companies on an equal footing with their foreign competitors.

 

Foreign companies often receive generous state subsidies, allowing them to use anti-competitive and predatory practices, and flood the U.S. market with cheap goods. The South Korean central government, for instance, gave Samsung Group a generous direct subsidy worth over $155 million in 2012. These subsidies allow Samsung and LG to sell products overseas for less than what it cost to produce them, all while making a profit. American companies can’t compete with state-sponsored foreign companies like these on price.

 

{mosads}Usually, the U.S. doesn’t intervene to protect American businesses and workers — even though U.S. businesses cannot directly compete when foreign states tip the scales in this way.

 

 

But for the second time in under a month, the International Trade Commission (ITC) intervened on behalf of U.S. businesses suffering “unfair” competition from foreign suppliers and invoked a rarely used provision of the 1974 International Trade Act, this time on behalf of Whirlpool. 

 

A recent report by the International Trade Commission is raising alarms that South Korean sponsored Samsung and LG will flood the U.S. market with inexpensive washers, hurting American appliance company Whirlpool. To prevent this outcome, the commission recommends a graduated tariff rate on imports of large residential washing machines above a 1.2 million-unit threshold over the next three years, starting at 50 percent the first year and sliding to 40 percent by the third. “The panel was split on whether tariffs should be imposed if fewer than 1.2 million units were imported in any given year,” reports CNBC. 

 

Both Samsung and LG had promised to open new operations and manufacturing facilities here in the U.S. Samsung had announced plans to shift some assembly jobs from Mexico and invest $300 million in the U.S., creating nearly 500 jobs. But the ITC report suggests Samsung and LG are unlikely to follow through on their promises because without a U.S. imposed tariff, there is less incentive for these companies to “follow through on their planned investment.”

 

In 2013 and 2014 both Samsung and LG “dumping” were accused of dumping low-priced large residential washers under-priced on the U.S. market, causing damage to Whirlpool. While U.S. trade authorities imposed import duties on these companies, instead of complying, they simply moved to China and Vietnam, evading the import restrictions. This is why last May Whirlpool requested the ITC to invoke Section 201 of the 1974 Trade Act, which allows the ITC to impose duties on products no matter where they are produced. 

Section 201 is controversial and there is no consensus among economists as to whether the provision helps or harms that market. When President George W. Bush invoked Section 201 in 2002 to limit steel imports, it became clear that the U.S. steel industry failed to capture a larger share of the market, which resulted in 200,000 workers losing their jobs. By 2003, Bush rescinded Section 201 for the purpose of protecting domestic steel production. 

South Korea has more than doubled to $27.6 billion in 2016, reports CNBC, although through July 2017, the bilateral trade deficit fell to $13.1 billion from $18.8 billion during the same period of 2016, according to U.S. Census Bureau data.

Trump is expected to make a decision on the ITC’s recommendation, possibly as early as next week.

Unless protections are enforced, more and more companies will choose to move their manufacturing operations abroad. American companies Mondelez, Rexnord, and Brake Parts Inc. all recently moved manufacturing operations to Mexico in order to avoid U.S. regulations and take advantage of Mexico’s lower labor costs. By following the ITC’s policy recommendation, Trump would show that he plans to protect American companies and jobs and keep his pledge to the forgotten men and women of the country and his promise to put “America First.”

If he does so, Trump will send a strong message to foreign firms engaging in anti-competitive and predatory behavior. This decision would also renew Samsung and LG’s interest investing in American manufacturing, which would lead to jobs for American workers.

Barbara Boland is a former communications director for Rep. Dave Brat (R-Va.) and former editor for the Washington Examiner. She is also the author of “Patton Uncovered,” a book about how General Patton became the most respected and feared American general in World War II.