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Inward Investment Guides

Manufacturers Dispute China's Product Dumping, Currency Devaluation

Manufacturers are gaining government support in their requests to halt unfair Chinese trade practices.

Jennifer LeClaire  (June/July 10)
The Area Development Front Line series offers insight into the innovative strategy being taken by businesses that are succeeding, intelligence on locations that are deploying winning policy to attract investment and talent, and reports on the industry trends that are affecting and shaping the global business climate now and into the future.
U.S. manufacturers are taking their concerns about China's unfair trade practices to the government - and they're gaining allies. Recent victories from American manufacturing groups could mean changing tides in international trade.

Dumping Product
In late April, the U.S. Department of Commerce imposed preliminary tariffs on imported coated paper that China and Indonesia dumped into the American market. According to the Alliance for American Manufacturing (AAM), the ruling will save about 1,200 jobs at Sappi Fine Paper mills in Skowhegan and Westbrook, Maine, and 700 to 800 positions at NewPage's mill in Rumford, Maine.

The paper industry is not alone in its actions against Chinese dumping. Clyde Prestowitz, author of The Betrayal of American Prosperity, has studied China's effect on steel, textiles, plastics, electronics, and other U.S. industries.

"The steel industry has been continuously filing anti-dumping cases. The tire industry has done the same. Usually they win the cases, but the cases are narrow and apply only to specific products. So the relief of winning the case is relatively small," Prestowitz says. "Other industries, like semiconductors, have responded by moving to China."

Still, U.S. manufacturers are gaining support that could lead to permanent relief. For the steel industry, the U.S. International Trade Commission (USITC) ruled in May that Chinese companies sold $2.8 billion worth of oil well drill pipe at prices that were too low for fair competition in the United States. The yearlong investigation came after a petition by the United Steelworkers union and companies such as U.S. Steel.

"A U.S. industry is materially injured or threatened with material injury by reason of imports of certain oil country tubular goods from China that Commerce has determined are sold in the United States at less than fair value," the USITC said in a statement. "As a result of the USITC's affirmative determinations, Commerce will issue an anti-dumping duty order on imports of these products from China."

Currency Devaluation
But dumping is only one problem. There are also accusations concerning Chinese currency manipulation. American manufacturers are calling on President Barack Obama to address China's undervalued yuan.

"It is imperative for Congress to pass legislation that will ensure a level playing field for America's workers and businesses. We need to end China's currency manipulation sooner rather than later," says AAM Executive Director Scott Paul. "Nobel Prize-winning economist Paul Krugman estimates that China's mercantilism will cost the U.S. 1.4 million jobs unless it is reversed. America's workers and businesses can compete on a level playing field, but we do not have one right now."

The flipside of the manufacturing coin is selling into China. According to Laura Narvaiz, a spokesperson for the National Association of Manufacturers, many of the organization's member companies are performing well in the Chinese market and see future growth there as an important part of global expansion.

At the same time, American manufacturers have concerns about doing business with China that must be addressed if they want to sell into the fastest-expanding market in the world and meet Obama's goal of doubling exports.

"These concerns include the need for better enforcement of intellectual property protection in China, the need for moves to address the yuan's significant undervaluation, and an end to subsidization of key sectors that China is targeting for future growth," Narvaiz says. "We are also closely watching how China will implement its new indigenous innovation guidelines for its government procurement market at the federal, local, and provincial levels."

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