China tires a deal for steelworkers union

The cost of preparing, filing and arguing the complaint the United Steelworkers union filed against China is relatively inexpensive, according to experts in the field.

Legal fees for most cases will run well under $1 million, according to a K Street source with experience on the filings. The safeguard case could cost as little as $750,000.

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To put that in perspective, it’s less than half the estimated cost of filing legal papers and then arguing an antidumping or countervailing duty case. Those cases typically involve more legal work and cost between $1.25 million and $1.75 million. Expenses can run as high as $2 million for complex cases.

Those are good prices to know if a trade war really does break out.

China responded to President Barack Obama’s decision to impose three years of tariffs  on Chinese tires with promises to hit U.S. chicken and car-parts exports with similar treatment. It has also filed a complaint with the World Trade Organization (WTO).

Since countries often mimic one another in imposing trade barriers, it’s possible other nations will hit the Chinese or the U.S., particularly if the global economic recovery is as slow as some expect. Lingering unemployment and further job losses will increase the political pressure on governments around the world to impose additional barriers.

A WTO complaint can cost an industry $750,000 in legal fees, depending on how much work the government does. The government usually gets help from the private sector in formulating its arguments and conducting research.

Because this is the first time a China safeguard, the formal name for the law, has been green-lighted, Obama may see more petitions float across his desk.

Businesses and labor unions had shied away from the petitions, seeing them as a waste of money after former President George W. Bush rejected all four cases that hit his desk. Now it’s clear that such cases at least have a chance with the White House, which should be of interest to attorneys across K Street.

It’s much easier to prove a safeguard case than an antidumping case. The petitioner must show “significant injury” in a dumping case, and a certain percentage of the industry has to agree with you. Those restrictions don’t apply to the safeguard.

“It’s easy. Even a single company can bring a case,” said Cass Johnson, president of the National Council for Textile Organizations.

Still, there are other reasons to think there will not be a gold rush of safeguard petitions.

The law expires in three years, so those who want to test their luck with Obama “should do it right away,” said Elliot Feldman, who leads the international trade practice at Baker Hostetler. A petition that reached the president’s desk early next year could only lead to tariffs or quotas on Chinese products for less than two years.

Also, antidumping orders, which results in high tariffs on an imported product “dumped” in the U.S. at a lower price than it cost to make, have their merits.

An antidumping order can last much longer than a safeguard. Dumping and countervailing orders (the latter is meant to offset subsidies provided by a foreign government) are in place for five years before they are even reviewed. Some have lasted decades.

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They can also be used against any other trading partner, and not just the Chinese. WTO rules allow the use of dumping and countervailing measures, though trade panels have chipped away at the U.S. system.

Steel and apparel companies or unions are seen as the most likely to try the safeguard process. China is already subject to antidumping and countervailing measures on various steel products, and those barriers had a higher burden of proof.

Johnson said a textile case would be tough since the safeguard can only be applied to an import that is competitive or like a U.S.-produced good. China ships clothing, not fabric and yarn, to the U.S.

Apparel companies could bring cases, but Johnson said that could be tough for political reasons. Many of the U.S. apparel companies that make U.S. orders also order from China, he said, and would not look kindly on U.S. companies bringing safeguards.

Finally, there’s one more reason to pick an antidumping order over the China safeguard. The pressure on Obama to reject the next safeguard petition is only going to increase. He doesn’t get to reject antidumping petitions.


Reg reform in 2009


Rep. Joseph Crowley (D-N.Y.) expects the House to approve regulatory reform before the end of the year, either in one big swoop or by breaking legislation into smaller pieces.

“I don’t think there’s any question we’ll get something done by the end of the year,” Crowley said in an interview.

The chairman of the New Democrat Coalition, a centrist group positioning itself as a broker interested in safeguarding innovation in the financial sector, said he thinks legislation covering consumer protection, systemic risk, derivatives and the issue of regulating non-bank financial giants like AIG will be approved.

He said there have been discussions about breaking that up into smaller pieces, though it’s possible it could move as one bill.

Crowley and the New Democrats have yet to come out with a position on the consumer financial protection agency, which has sparked criticism from the financial sector.

Crowley said he thinks there will “some form of a new agency” created, but that New Democrats will work to ensure that it does not stifle the ability of the financial industry to grow.

Crowley said he doesn’t have a problem with setting up a systemic risk regulator in the Federal Reserve. “I’m comfortable with the Fed doing that,” said Crowley, who praised Fed Chairman Ben Bernanke.

New Dems haven’t come out with a position on that issue, either.