Trade Negotiations Require a Steel Spine

Leo W. Gerard

Leo W. Gerard USW President Emeriti

President Donald Trump dealt himself a strong hand before negotiating with China.

He held three aces. He’d placed tariffs on imported aluminum and steel in response to unrelenting Chinese overproduction. He’d threatened tariffs on $150 billion in Chinese imports in retaliation for theft and forced transfer of American intellectual property. And for trade violations, he’d forbidden U.S. companies to sell parts to Chinese cell phone giant ZTE, forcing it out of business.

And then, inexplicably, his lead negotiator, Treasury Secretary Steven Mnuchin, quickly folded in talks in Washington, D.C.,  last week. He left two days of negotiations with top Chinese officials with what amounts of an unenforceable letter of intent. The “joint statement” says the Chinese will buy some more American made stuff, improve its protections for American intellectual property and patents, and remove some barriers preventing U.S. companies from operating in China. But there’s no specifics and no enforcement.

In exchange for vague promises, Mnuchin suspended the tariffs. In addition, on Tuesday, the Wall Street Journal reported that the United States and China had reached a tentative deal to save ZTE, despite the fact that ZTE failed to honor an earlier agreement made after it violated trade embargos against Iran and North Korea.  

Now China holds all the aces. It is bragging that it trounced the United States in trade talks. The stock market shot up 350 points Monday on Mnuchin’s assertion that he’d stopped a trade war between China and the United States. And maybe certainty for investors was all Mnuchin, a former Wall Street banker, wanted. But steel stocks slumped Monday. And that’s not what President Trump promised on the campaign trail.  It’s not what tough negotiators would have achieved for the United States when it had the upper hand. No potent negotiator would have surrendered that hand for vague promises, especially considering China’s long history of disregarding its trade pledges. 

Donald Trump won the presidency in part by connecting with working people who’d been hurt by Chinese trade violations. That includes tens of thousands of members of the union I lead, the United Steelworkers (USW). China improperly subsidizes its industries, enabling them to charge prices that often are below production cost. Beijing requires U.S. companies to transfer intellectual property in exchange for operating in China. It has engaged in cyber theft of U.S. trade secrets, including from American steel companies. It commits other violations, including currency manipulation and trans-shipping to circumvent tariffs. As a general case, it flouts international trade rules and regulations so that it can dominate markets.

American manufacturers and their workers wanted Donald Trump to stop all of that. And, for a while, it looked like he might.

After a yearlong investigation to determine whether imports of steel and aluminum had so diminished the U.S. capacity that national security was threatened, the Trump administration on March 1 placed 25 percent tariffs on imported steel and 10 percent on imported aluminum. The intent was to preserve enough of the U.S. industry that filling defense needs domestically would not be at risk.

These sanctions followed a decade of the United States and Western Europe trusting China to keep repeated promises to stop overproducing, only to watch the Asian giant ramp up production even more. In 2001, China produced only slightly more steel than the United States, about 150 million metric tonnes. By 2017, China produced 831.73 metric tonnes, half the steel forged in the world that year. It dumps an average of 90 million metric tonnes on the international market annually, suppressing prices and threatening the viability of mills worldwide.

In announcing the tariffs, President Trump said, “People have no idea how badly our country has been treated by other countries. They’ve destroyed the steel industry; they’ve destroyed the aluminum industry, and other industries, frankly. We’re bringing it all back.”

U.S. industries did begin to gear up, restarting cold furnaces and recalling some 4,000 laid-off workers.

A month after the tariff announcement, the Commerce Department forbid U.S. companies to sell components to ZTE for seven years. This crippled the Chinese telecom equipment maker, which depended on the U.S. for as much as 30 percent of its parts. Commerce punished ZTE for violating a previous agreement concerning sales to Iran and North Korea.

Also in April, the Trump administration imposed 25 percent tariffs on $50 billion worth of Chinese technology imports. This followed an investigation by U.S. Trade Representative Robert Lighthizer’s office that determined improper practices by the Chinese government, including cyber theft and forced technology transfer, were costing the U.S. economy $50 billion a year.

China retaliated within days. Complaining about the aluminum, steel and technology sanctions, it slapped tariffs on U.S. exports including agricultural products such as soybeans, meat and fruit and on high-tech products such as Boeing aircraft.

Hitting back, President Trump ordered the U.S. Trade Representative to consider tariffs on an additional $100 billion in Chinese imports.

That’s where the dispute stood when U.S. officials went to Beijing in May to begin negotiations. There, a feud within the Trump administration over trade policy erupted in public as Treasury Secretary Mnuchin and White House trade adviser Peter Navarro engaged in an expletive-punctuated confrontation.

Mnuchin and National Economic Council Director Larry Kudlow are freewheeling free traders. Navarro and Lighthizer are demanding fair trade – that is international trade respecting trade regulations.

Mnuchin is responsible for the weak-kneed joint statement on trade last week after talks in Washington, D.C. Because Navarro’s name is not on the statement, it appears Mnuchin succeeded in excluding him from the meetings. 

The joint statement does not require China to reduce its $375 billion trade deficit with the United States by $200 billion, a figure U.S. negotiators demanded at the outset. In fact, experts say China’s promise to import additional agricultural and energy products from the U.S. would not even get close to $200 billion and that China was likely to increase these imports because it needs them, not because of any concession to the United States. The statement does not require China to reduce its overproduction and overcapacity in aluminum and steel. And it contains no specifics on China’s forced technology transfer and cyber theft.

Mnuchin gave up the tariffs in exchange for smoke and mirrors. Maybe he was great on Wall Street. He certainly wasn’t on Pennsylvania Avenue.

It’s not clear, though, where President Trump stands. Just before the negotiations last week, the president tweeted that he’d instructed the Commerce Department to ensure that the penalties imposed on ZTE, which employed 75,000, didn’t kill the company. 

President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost.,” he wrote.

The first concern of a U.S. president should be the millions of jobs Americans lost because of China’s predatory trade practices. On the campaign trail, candidate Trump told workers he cared and that he alone could fix it.

Mnuchin did not fix it. He made matters worse by relinquishing America’s leverage in exchange for nothing.

U.S. Commerce Secretary Wilbur Ross, who is aligned with the tough-on-trade faction in the administration, is scheduled to go to Beijing next week. To fix this mess, he’ll need Trump’s unwavering support and a spine of steel.

 

Leo W. Gerard also is a member of the AFL-CIO Executive Committee and chairs the labor federation’s Public Policy Committee. President Barack Obama appointed him to the President’s Advisory Committee on Trade Policy and Negotiation and the President's Advanced Manufacturing Partnership Steering Committee 2.0. He serves as co-chairman of the BlueGreen Alliance and on the boards of Campaign for America’s Future and the Economic Policy Institute.  He is a member of the executive committee for IndustriALL Global Labor federation and was instrumental in creating Workers Uniting, the first global union. Follow @USWBlogger

Posted In: From the USW International President

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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