Will Biden ‘go to the mattresses’ on trade policy?
It is becoming clearer the Biden administration will maintain many of former President Trump’s trade priorities, including taking a hard stance toward China and pursuing trade policies that protect U.S. workers. Americans should welcome policies that support free and fair trade, but we should not allow these policies to creep toward counterproductive protectionist measures.
One concerning trend is the massive increase in anti-dumping investigations conducted by the Department of Commerce, which grew 283 percent during the previous administration. While these investigations are an important mechanism for ensuring fair trade, they also can be weaponized by U.S. companies to create non-competitive barriers to trade. A clear-cut example of this abuse is playing out now in the mattress industry, where legacy domestic mattress manufacturers appear to be using anti-dumping allegations to stifle competition from newer, more innovative U.S. mattress companies.
American demand for mattresses has increased for decades, yet many legacy U.S. producers have struggled in the face of new competition from American companies offering innovative products. The products often are manufactured in other markets and, as a result, imports of mattresses have risen over the past decade. Last year, a coalition of legacy producers petitioned the International Trade Commission (ITC) to investigate potential mattress-dumping from seven countries: Cambodia, Indonesia, Malaysia, Serbia, Thailand, Turkey and Vietnam.
As advocates of free and fair trade, we should be asking, “Is this a case of unfair trade practices or free-market forces?” A few key points are informative.
In a preliminary determination, Commerce recommended tariffs against all seven countries, ranging from a 2.61 percent tariff against Indonesian-produced mattresses to a whopping 990 percent tariff against Vietnamese-produced mattresses. Tariffs at these rates essentially would eliminate the possibility of selling imported mattresses from anywhere except Indonesia.
These tariffs are meant to counter alleged subsidies to foreign manufacturers. However, the investigators’ math does not add up. Invoices from manufacturers across these countries show that prices for mattresses from any of these countries vary by only a few dollars. In this scenario, these far-flung nations would have had to conspire to subsidize their own mattress industries at levels that would allow each country to sell at the same price. That seems unlikely. Moreover, most legacy domestic manufacturers continue to import mattress components from many of the targeted countries at prices that are consistent with what a finished mattress costs.
The legacy companies also claim that domestic supply can meet the increasing demand for mattresses. In response to Commerce’s investigation, both Walmart and the Department of Justice published warnings that domestic supply could not meet increasing demand and that prices would rise for consumers as a result. Those predictions have been realized; legacy companies have stretched lead times and raised prices.
It is ironic that if Commerce’s preliminary tariff rates are approved by the ITC, Zinus, a Korean-owned mattress importer that produces in Indonesia and imports over $100 million worth of mattresses to the United States each year, will be able to continue to import to the United States with only a 2.61 percent tariff rate, while American-owned mattress importers will be driven from the market by tariff rates ranging from 20 to 990 percent. In an effort to protect the legacy mattress manufacturers, the ITC in effect would shut American importers out of the mattress market in favor of a Korean-based company.
This should come as a warning to Americans who believe in prospering through innovation and free and fair trade. In this case, the country can look to Utah for an example. Utah is home to two thriving mattress companies: Malouf and Purple. One primarily imports products. The other manufacturers in the United States. Both companies have experienced tremendous growth when other mattress manufacturers have struggled. How do both prosper? Innovation.
Both companies sell innovative products and offer direct-to-customer sales, trends that clearly separate the growing mattress suppliers from the rest. Malouf and Purple are proof that in America we can win by innovating and by giving customers choices. Free and fair trade ensures the best outcome, and we protect it through the international trading system. We should guard against protectionist policies that undermine innovation and, ultimately, hurt American consumers.
Derek Miller is president and CEO of the Salt Lake Chamber and Downtown Alliance. He previously was president and CEO of the World Trade Center-Utah, served as chief of staff to former Gov. Gary Richard Herbert and as managing director of the Governor’s Office of Economic Development for former Gov. Jon Huntsman. He began his career in Washington as a management consultant with Arthur Andersen and as legal counsel in the U.S. House.
Miles Hansen is president and CEO of the World Trade Center-Utah. He recently served as director for Gulf affairs at the National Security Council in the White House and, prior to that, was a staff aide to the State Department’s assistant secretary for Near Eastern affairs.