Just another few whirlwind weeks on the international trade front:
▪ The World Trade Organization gave the green light for the U.S. government to impose $7.5 billion in retaliatory tariffs for subsidies in the form of launch aid provided to Boeing competitor Airbus, a finding that prompted much crowing on this side of the Atlantic. The tariffs cover aircraft, as well as tons of other products with no connection to the industry (drinkers of single-malt Scotch whiskey, for example, will be paying more).
“For years, Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies,” said a statement from U.S. Trade Representative Robert Lighthizer said.
U.S. Sen. Maria Cantwell, D-Wash., called the ruling “a victory for U.S. manufacturers and all who support true market competition. … (The WTO) demonstrated that building world support for a rules-based trade regime that calls out anti-market competition through unfair subsidies is critical to having a truly competitive global marketplace. The European Union and Airbus now need to reach a comprehensive agreement with the United States to end trade-distorting subsidies and avoid these tariffs.”
We’ll see how celebratory the rhetoric is when the WTO rules on Europe’s case against the U.S. for its subsidies for Boeing (including incentives offered by the state of Washington to the company).
There are two solutions to this running battle. One is to work out an agreement in which both sides pledge not to subsidize their respective industries. That will never fly. Both sides subsidize their aerospace sectors, and they’ll continue to do so; the form and channels may change, but the behavior is too ingrained not to. Aerospace is too big, too sensitive, too economically critical to each side not to. Neither side wants anything to do with true market competition.
The other option: Tell both sides to do what they want, which they’re going to anyway, so why bother wasting everyone’s time and money with trade cases that go unresolved for decades and result in rules that neither side is interested in complying with?
▪ Tacoma-based Northwest Hardwoods recently idled indefinitely a mill in Mount Vernon and issued layoff warning notices to 66 employees. Hardwood lumber (species like alder and maple) are subject to tariffs that China imposed in retaliation for tariffs the U.S. imposed on Chinese goods, which were imposed in retaliation for … and on it goes.
Northwest Hardwoods said in a statement it is “better positioned than most to withstand an extended U.S.-China trade dispute. This difficult decision was made after exploring all other options and as prospects dimmed for a quick resolution to the U.S. and China trade dispute. The decision is, unfortunately, a necessary step to maintain the long-term financial health of the company.
“If a trade agreement is not reached, and these changes are made permanent (the company also shut down a mill in Virginia), the impact ultimately will be felt in communities that can least afford it. These are good jobs in rural communities where there are not a lot of jobs. This will be felt for decades by families everywhere.
“Across our industry, the trade dispute has drastically decreased demand for U.S. produced hardwood. As China looks to other countries with less regulated and sustainable hardwood supplies to meet market demand, supply chains may be permanently disrupted. We’re hopeful that a fair and equitable resolution to the current dispute can be reached before further systemic issues arise.”
That’s an issue for Washington agriculture as well. Even if they’re not directly targeted or involved in a trade dispute, manufacturers and producers can get caught up in those fights when they wind up on a list of products to be hit in retaliation for something the other side did. The Federal Register entry on what European products qualify for added tariffs is close to a dozen pages long. Washington producers that wind up on similar Chinese or European lists are not the only sources of those items, or reasonable substitutes, and eventually customers tired of the uncertainties and higher costs will go elsewhere, for good.
▪ Here’s another local industry embroiled in a trade fight — cabinetmaking. The U.S. Department of Commerce has issued an affirmative preliminary determination that China has been selling wooden cabinets and vanities in the U.S. at less than fair value — in other words, dumping.
The case was brought by the American Kitchen Cabinet Alliance, whose membership includes two large cabinet manufacturers in the state, Bellmont in Sumner and Canyon Creek in Monroe. The trade association alleges that the dumping of product has enabled Chinese producers to grab a growing share of the market in this country, imperiling domestic manufacturers and the jobs of their employees. (There’s a dueling trade group that says the imports have merely capitalized on a market segment ignored by domestic manufacturers, who themselves have offshored production.)
All this and more (tech companies have their own global trade fights) is playing out against a global debate about the economic costs and benefits of trade, and the political and philosophical costs of doing business with and in some unlovely places around the world.
Those debates are not mere academic exercises. How those debates are fought and resolved (or not) has real-world consequences. The Tip O’Neill aphorism that all politics is local is doubly true for global disputes — every one of them is local somewhere. Increasingly, that somewhere is right here.