On Thursday, the International Trade Commission (ITC) will determine whether domestic washing machine manufacturers have been injured by imports from South Korean competitors.
In May, the Michigan-based Whirlpool Corporation filed a Section 201 petition with the commission, asking it to slap tariffs on washing machines exported to this country by Samsung and LG. If Whirlpool’s wish is granted, you can expect to see fewer of the Korean washing machines in U.S. stores. You can also expect a spike in washer prices, making it harder for many American families to afford this popular appliance.
Particulars of the petition aside, what this case boils down to is whether government should over-ride consumer choices in the marketplace.
Over the last decade, Samsung and LG have become big players in the U.S. market, capturing about 35 percent of domestic washer sales between them. Whirlpool alone holds the same market share and hopes the commission will help it get more.
Awkwardly for Whirlpool, the Korean manufacturers are on their way to becoming domestic competitors. Like many foreign firms that initially break into the U.S. market with imports, Samsung and LG have recently announced plans to open manufacturing facilities in the states.
Samsung’s washer plant in South Carolina will employ roughly 1,000 people by 2020. LG started construction on its first U.S. washing machine facility in Tennessee in August. Slated to open in 2019, it will create 600 new American jobs.
Further complicating the case is the odd nature of the “remedies” requested by Whirlpool in its injury petition. The company recommends a tariff-rate quota with exemptions for countries that they claim do not “injure” the domestic market. This would still allow a significant number of washer imports each year, just not from Samsung and LG. Clearly, then, this case is not about washer imports injuring the domestic market, but about preventing Samsung and LG from competing with Whirlpool.
If washers are being “unfairly” traded into the U.S. market, a Section 201 petition is not the proper way to address the situation. The appropriate procedure would be to request an antidumping investigation. Why didn’t Whirlpool go that route?
Because, thanks to Whirlpool, antidumping tariffs already exist for large residential washers. The United States levies antidumping tariffs on washer imports from South Korea, Mexico, and China. The tariffs on washers from China were just imposed in February, amounting to up to 57 percent.
These existing duties already raise washer prices for American consumers. Additional tariffs under Sections 201 would raise prices even higher, and that cost has to fall on someone.
For example, in 2002, President George W. Bush imposed tariffs of up to 30 percent on a variety of steel imports under Section 201.
The tariffs wreaked havoc among America’s steel-consuming manufacturers. And even though they were removed after only a year and nine months, the damage was done. According to a study by the Consuming Industries Trade Action Coalition, 200,000 Americans lost their jobs in 2002 due to higher, tariff-driven steel prices. When the dust settled, the tariffs had provided minimal relief to steel producers at the cost of driving up unemployment across the U.S.
The Whirlpool case is unlikely to have such a large detrimental effect on employment, but Americans will experience higher costs and decreased choice as a result of the tariffs.
Here’s hoping the ITC exercises some common sense and rejects Whirlpool’s petition this Thursday. The consumer, not the U.S. government, should decide what brands of washers go into our homes. Rather than focusing on ways to restrict trade, the Trump administration and Congress should focus on increasing Americans’ freedom to trade by lowering tariff and non-tariff barriers and negotiating new trade agreements that expand markets both overseas and at home.
This piece originally appeared in The Hill on 10/05/17