Zeroing In on Dumping

A few weeks ago, the antidumping office of the U.S. Treasury Department was one of the most obscure backwaters in the entire federal Establishment. Today its six bureaucrats are rapidly becoming some of the most overworked staffers in Washington. In the past month the steel industry alone has filed 14 complaints of alleged dumping--that is, selling below cost--against foreign competitors in the U.S. In all, $1.4 billion worth of imported steel is involved. Additional cases are likely to cover microwave ovens, Citizens Band radios, motorcycles and perhaps even granola from Switzerland. This counterattack is being launched with the explicit encouragement of President Carter, who seems to see an antidumping crusade as a way to protect U.S. jobs against cheap imports without violating principles of free trade. In mid-October the President promised to act vigorously on any dumping complaints that the steel men might bring.

That pledge cheered executives in many industries, who have long complained that pricing policies of foreign competitors are often unfair. For example, state-owned firms in Britain or Italy can be used as instruments of national policy to keep unemployment down by keeping sales up. If necessary, these companies can sell below production costs and make up the losses with Government subsidies. Dumping is far from the only gripe of U.S. businessmen. They often grouse that Japan pours out its goods to world markets but bars much foreign merchandise through difficult import procedures and other technical barriers to trade. In Europe many countries remit the value-added tax, a form of sales tax, on goods that are exported--which can cut the prices of steel sold outside Europe by as much as 30%--while adding a VAT to imported merchandise.

Any U.S. effort to change these practices would be long and difficult. Dumping is something else: a practice that international trade rules recognize, at least in principle, as unfair and one that a country can normally penalize (by slapping special tariffs on the dumped goods). Generally, dumping is taken to mean selling a product abroad at a price lower than that charged in its home market. U.S. law since January 1975 has been more complicated: a product must be sold for at least the cost of producing it, plus a 10% allowance for overhead, plus another 8% for profit, or it is considered dumped.

That definition makes dumping cases difficult to prove. The Treasury Department must determine production costs --and Japanese steelmakers have refused to supply them. Dumping investigations also can take a year to 15 months to complete. Nonetheless, U.S. manufacturers are making a growing effort to push the Government to crack down on dumping.

By far the most aggressive industry is steel. Imports have gobbled up nearly 20% of its U.S. market, causing American mills to suffer huge losses and forcing them to pay off thousands of workers (see box following page). In one case, U.S. Steel accuses the six biggest Japanese steelmakers of selling metal in the U.S. at an average of 38.20 below cost. The Japanese mills, say U.S. steel men, can sell at a loss for prolonged periods both at home and abroad because they are able to borrow almost limitlessly from banks heavily influenced by the Tokyo government. But when steel shortages occur, says U.S. Steel, the Japanese are quick to soak export customers with high prices; during fiscal 1974-75 one Japanese firm allegedly charged U.S. buyers 47.5% more than its domestic customers for steel. In a separate case, National Steel accuses mills in Belgium, France, West Germany, Italy, Britain and The Netherlands of selling steel sheets in the U.S. at prices up to 47% below cost.

Some other products that are already involved, or are likely to be, in dumping cases:

TV SETS. Treasury found most of the Japanese TV industry guilty of dumping in 1971, and it imposed an average 9% punitive duty on that imported product. The Government is also investigating charges that the Japanese are making under-the-table payments to U.S. companies that buy their sets (TIME, June 13).

CB RADIOS. Richard Horner, president of E.F. Johnson Co. in Waseca, Minn., charges that Japanese CBs meant to sell for $159 each are retailing in the U.S. for only $49. Reason: the Japanese, all of whose CB production is for export, grossly overestimated the U.S. market and are stuck with an oversupply.

MICROWAVE OVENS. "There is no question in our minds that the Japanese are dumping ovens in this country," says George Foerstner, president of Amana Refrigeration, Inc., which is considering a formal complaint. Imports of Japanese microwave ovens leaped 147% in the U.S. last year.

MOTORCYCLES. Harley-Davidson, the motorcycle maker, filed a complaint in June with Treasury accusing the Japanese of selling hundreds of thousands of motor bikes in the U.S. at prices as much as 58% below those charged in Japan and Europe.

Some economists worry that U.S. manufacturers could turn the antidumping law into a new kind of protectionist device by filing unjustified accusations as a kind of harassment of importers. That could be a danger, but the prosecution of antidumping cases seems a far more acceptable way of saving import-threatened U.S. jobs than enacting high tariffs or quotas. Free trade is meant to be fair trade, and the American firms complaining about dumping deserve a chance to try to prove their case. -

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