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

Failing Bridges Hold Public Hostage

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities.

The Seattle Department of Transportation (SDOT) gave the public just a few hours’ notice before closing a major bridge in March, citing significant safety concerns.

The West Seattle Bridge functioned as an essential component of  the city’s local and regional transportation network, carrying 125,000 travelers a day while serving Seattle’s critical maritime and freight industries. Closing it was a huge blow to the city and its citizens. 

Yet neither Seattle’s struggle with bridge maintenance nor the inconvenience now facing the city’s motorists is unusual. Decades of neglect left bridges across the country crumbling or near collapse, requiring a massive investment to keep traffic flowing safely.

When they opened it in 1984, officials predicted the West Seattle Bridge would last 75 years.

But in 2013, cracks started appearing in the center span’s box girders, the main horizontal support beams below the roadway. These cracks spread 2 feet in a little more than two weeks, prompting the bridge’s closure.

And it’s still at risk of falling.  

The city set up an emergency alert system so those in the “fall zone” could be quickly evacuated if the bridge deteriorates to the point of collapse.

More than one-third of U.S. bridges similarly need repair work or replacement, a reminder of America’s urgent need to invest in long-ignored infrastructure.

Fixing or replacing America’s bridges wouldn’t just keep Americans moving. It would also provide millions of family-supporting jobs for steel and cement workers, while also boosting the building trades and other industries.

With bridges across the country close to failure and millions unemployed, America needs a major infrastructure campaign now more than ever.

 

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