|Tomorrow is the big day. The hearing on the U.S. Trade Deficit jointly announced last month by the U.S. Commerce Department and the Office of the U.S. Trade Representative is scheduled to begin at 9:30 tomorrow morning (May 18) in the Commerce Department Auditorium in Washington. Approximately 35 witnesses are expected to testify, and, in advance of the hearing, 156 associations, companies, law firms, and governments have submitted comments.
Kevin Dempsey is the Senior Vice President for Public Policy and General Counsel at the American Iron and Steel Institute, and he is one of those who have asked to testify. (We hope he does.) Today's quote is from his letter of May 10 requesting to be heard. An attachment to that letter provided a short summary of what Mr. Dempsey plans to say. In it, he talked about seven countries. Five of the the seven are problems for the American steel industry. Canada and Mexico are the two that are not. We'll come back to Mr. Dempsey's letter in a minute. First, we need to put it into a larger context.
Unhappiness with American trade was a prominent theme in the last Presidential campaign. With respect to the trade deficit specifically, the most tangible expression of that concern so far has been the Executive Order issued by President Trump on March 31, 2017, setting out a series of concerns and calling for a report. In the language of the order:
Within 90 days of the date of this order [so, by the end of June], the Secretary of Commerce and the United States Trade Representative, in consultation with [other agencies]... shall prepare and submit to the President an Omnibus Report on Significant Trade Deficits.
The order goes on to say that in preparing the report, Commerce and USTR "may hold public meetings and seek comments from relevant ...[parties], including "manufacturers, workers, consumers, service providers, farmers, and ranchers."
But let's go back to the specific concerns of the American Iron and Steel Institute. The first country Mr Dempsey talked about in the attachment to his May 10 letter was Canada and the last country was China. Here are the full paragraphs for each of those two countries.
China: Significant trade distortions caused by Chinese government policies contribute to a massive trade imbalance that has impacted the American steel industry not only in terms of direct trade in steel, but also in terms of substantial levels of imports into the United States of steel-containing manufactured goods, which have disrupted the entire steel supply chain, reducing domestic demand for steel products.
The large volume of Chinese steel exports in recent years is the direct outgrowth of a dramatic increase in the size of the Chinese steel industry since 2000, which has been made possible by massive government subsidies and other trade distorting policies, at the expense of market-oriented steel producers around the globe.
Canada, Mr. Dempsey wrote:
The U.S.-Canada trade relationship is a strong and balanced one. It is the United States top export market for manufactured goods generally, and also the top export market for U.S. steel products. American steel mill exports to Canada have averaged over $5.5 billion per year over the last three years. While the United States runs a slight trade deficit with Canada in volume (tonnage) terms, the United States has a steel trade surplus in value (dollars) terms. This reflects the overall strength and balance in the U.S.-Canada trade relationship.