OPINION:
For years, American officials have warned that China’s industrial overcapacity would lead to lost jobs in the United States and Europe. Yet these warnings have largely been ignored. Now we face a wave of dumped and subsidized exports from China that could gravely affect the U.S. economy.
In short, China Shock 2.0 is happening now.
The economic picture for China is gloomy. The Washington Post recently reported that China’s economy is slowing faster than expected, and analysts predict it will miss its 5% growth target for 2024. In response, China is becoming even more reliant on exports to the U.S. and elsewhere to keep its factories running.
In August, China’s exports rose 8.7% from the previous year. These surging exports threaten the global economy and put American jobs and security at risk.
As president and CEO of Olin Corp., the largest U.S. producer of epoxy resins, I live with these facts. The U.S. industry has been on the cutting edge of epoxy resins for decades.
This critical and strategic raw material is vital for key economic sectors, including automotive, construction, electronics, aerospace and defense. Fighter jets, missiles, automobiles and cellphones all depend on this material. Furthermore, because epoxy resins are essential to clean energy industries — such as wind turbine blades — they are necessary to build a more sustainable economy.
Americans would have an enormous competitive advantage in epoxy resins on a level playing field — but China doesn’t play fair. Using massive subsidies and other nonmarket distortions, China has created enormous oversupplies of epoxy resins and the main inputs needed to make them. As a result, China has more than doubled its epoxy exports, which allows it to manipulate the U.S. market and harm American producers such as Olin.
For example, Chinese producers ship excess epoxy resins and their inputs at artificially low prices to other Asian countries — and then companies in those countries attack the U.S. market. Meanwhile, Chinese producers ship through Canada and Mexico to reach U.S. customers without paying U.S. tariffs.
These and other market-distorting practices make it impossible for domestic producers to obtain a fair rate of return, thereby putting the whole domestic industry in peril.
We need definitive action to save epoxy resin production in the United States. In April, Olin led a coalition of industry leaders to file petitions with both the Department of Commerce and the U.S. International Trade Commission, arguing that dumped and subsidized imports from countries such as China have caused or threatened material injury to domestic producers of epoxy resins.
The International Trade Commission found we had presented enough evidence to proceed with a full investigation. Last month, the Commerce Department issued its first preliminary determination, imposing provisional anti-subsidy duties of up to 113% on certain producers.
This demonstrates the magnitude of this problem. The Commerce Department will issue its next preliminary determination on provisional dumping duties in early November, with final decisions for all investigations expected in early 2025.
To solve the problem of China’s unfair trading practices, the Commerce Department must fully enforce U.S. trade laws. As part of this effort, it should consider that unfair trading practices in China have distorted markets in other countries, including South Korea, Thailand and Taiwan.
The Commerce Department should also require foreign producers to fully cooperate with its investigations and should use its statutory authority against foreign producers that fail to do so. Commerce has not yet used its full statutory powers, but it must do so for the U.S. epoxy industry to survive.
Congress passed the Inflation Reduction Act to promote clean energy. Still, the United States cannot shift to clean energy without a dependable supply chain for epoxy resins and other critical products. It makes no sense to spend trillions on new clean energy projects and then allow China to destroy our domestic production and undermine our supply chains.
Likewise, the benefits of the CHIPS and Science Act cannot be fully achieved unless there is U.S. epoxy resin production and other key materials to support semiconductor manufacturing.
Senior U.S. officials were in China recently to address the economic harm that Chinese overcapacity and overproduction are causing. I hope that these discussions bear fruit. But if the Commerce Department fails to effectively enforce our trade laws — especially by failing to account for the extent to which China’s actions distort behavior in South Korea and other markets — the consequences for the U.S. economy will be devastating. U.S. manufacturing — indeed, global manufacturing — needs effective action now.
In short, the Commerce Department must ensure that U.S. laws are properly enforced and that American jobs are not lost to predatory and unfair practices. At Olin, we are committed to innovation that drives this country forward. Now, we need our regulators and elected officials to commit to enforcing trade laws so that innovation can continue.
• Kenneth T. Lane is president and CEO and a director of Olin Corp.
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