Stop China’s Stealth Invasion

Leo W. Gerard

Leo W. Gerard USW President Emeriti

Stop China’s Stealth Invasion

A country claiming the greatest military on earth can’t be without some things. Steel is an obvious one.

In the age of drones, aluminum is another. Aluminum is essential for flying machines like the F-35 joint strike fighter and Boeing F/A-18 Super Hornet, for armor plating on army vehicles and naval vessels and for countless infrastructure projects including bridges and roads.

Obviously, then, for the United States to retain top ranking, it must protect its aluminum industry. That industry, though, is under a two-pronged stealth attack from China. For more than a decade, the Chinese have ramped up their own aluminum production and dumped the excess on the world market, depressing prices and bankrupting Western producers. Now, a corrupt Chinese company that is under investigation by three U.S. agencies is trying to buy an American aluminum firm. To ensure national security, that must be stopped. America can’t be beholden to China for aluminum.

In 2000, China produced only 11 percent of the world’s aluminum. Now it’s more than 50 percent. Just between 2010 and 2015, China doubled production, even as demand for aluminum within the country slowed. Chinese companies continued to ramp up because they received massive government subsidies, including cheap power, loans and raw materials. That kept Chinese workers employed but created stockpiles of aluminum. So China exported the excess, overwhelming the world market and driving down prices.

This shattered the U.S. industry. In 2000, 23 aluminum smelters operated in the United States. Now there are only five, with just two at full capacity. Thousands of American aluminum workers lost their good, family-supporting jobs in just the past three years.

Aluminum producers filed formal complaints with the U.S. Department of Commerce about the illegal subsidies and about Chinese companies dumping products in the United States at prices below production costs. And in 2011, the department penalized Chinese extrusion producers, including one called China Zhongwang, with tariffs as high as 374.15 percent.

With that added cost, China Zhongwang’s U.S. sales plunged. Zhongwang, the world’s second-largest producer of aluminum extrusions, then schemed to dodge the sanctions, leading to criminal and civil investigations of possible smuggling, conspiracy and wire fraud. The Justice Department, Department of Homeland Security and Commerce Department are all scrutinizing Zhongwang. 

Zhongwang and associates are accused of shipping nearly 1 million tons of aluminum to Mexico with the intent of then sending it across the border tariff-free under the terms of the North American Free Trade Agreement, as if it had been manufactured in Mexico. Shortly after the aluminum trade association discovered this massive stash, amounting to 6 percent of the world’s aluminum inventory, much of it was whisked away to Vietnam, another country notorious for involvement in what is called transshipment, that is, concealing commodities’ country of origin to evade tariffs.

In addition, the U.S. Aluminum Extruders Council accused Zhongwang and companion companies of another plot to skirt tariffs. Firms associated with Liu Zhongtian, a Chinese billionaire who controls Zhongwang, shipped thousands of tons of pallets made of aluminum extrusions to a factory in a Philadelphia suburb.

These “pallets,” which weighed more than three times American-made aluminum pallets, escaped tariffs specific to extrusions because, supposedly, they were pallets. Pallets, typically though, are designed to be light to reduce shipping costs.

Company officials contended the heavyweight pallets made from extrusions were to be sold as pallets, not dismantled or melted for other uses. Shortly after the Wall Street Journal began asking questions about them, though, they disappeared. Just like the $2 billion worth of aluminum in Mexico.

The Commerce Department wasn’t fooled by this sleight of hand. In November, it announced that the pallets were an attempt to circumvent the 2011 tariffs on extrusions.

Even while Zhongwang remains under investigation, it announced plans to buy American aluminum company Aleris for $2.3 billion from a private equity firm. Aleris, with 14 plants around the world, makes rolled aluminum for a variety of industries, including aerospace and automotive, and significantly, armor plate for the U.S. military.

The U.S. military cannot be dependent on a Chinese-owned company to outfit American armored vehicles or meet other critical needs. In November, a dozen U.S. senators asked Obama’s treasury secretary to block the deal because it would “directly undermine our national security, including by jeopardizing the U.S. manufacturing base for sensitive technologies.” My union, the United Steelworkers (USW), which has 950 members employed at Aleris, also has repeatedly protested the proposed sale, including in a letter sent last week to new Treasury Secretary Steven Mnuchin.

It would be far too easy for Zhongwang to appropriate Aleris’ trade secrets, then run the company into the ground, further cementing China’s illegally-subsidized domination of the world aluminum market. Zhongwang could also exploit Aleris operations to circumvent U.S. tariffs. Based on past performance, that would be no surprise.

The U.S. government has taken important steps toward protecting the crucial American aluminum industry. Before he left office in January, former President Obama launched a formal complaint with the World Trade Organization against the Chinese government over its subsidies to the aluminum industry. 

In March, the Commerce Department began investigating complaints that Beijing illegally subsidized aluminum foil shipped to the United States by 230 Chinese companies.

Last month, the Trump administration initiated an inquiry into the effect of aluminum imports on U.S. national security, which could lead to tariffs or import restrictions. But it’s not Canada or some other allied country causing the problem. It’s China.

And just last week, the Senate confirmed Robert Lighthizer as U.S. trade representative. He has railed against America’s comatose response to abusive Chinese trade practices that have bankrupted American industries and killed American jobs. That includes dirty tricks like creating pallets out of extrusions and transshipping from Mexico and Vietnam. 

Lighthizer assured the Senate he intended to firmly enforce trade law. That’s good because he must stop China’s stealth invasion before it overcomes the entire U.S. aluminum industry.

 ***

Image from Getty Images

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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