Last week, a major shirt hanger manufacturer in Texas closed its doors. A sign at the entry gate to the plant informed the workers that the closure was caused by cheap shirt hangers from China. In fact, over the years, Chinese wire hangers have done a job on the US industry. At one time, trade action was filed under a special section applicable to China only.
The case was established and well-documented, and a recommendation of severe punitive duties was given to President Bush. However, the president had the last word. The final ruling was so watered down and weak that the demise of the US wire hanger manufacturers continued unabated. After the closure in Texas, only one US-based plant is left - in Alabama.
But it does not stop here. The wire industry has come increasingly under pressure from cheap Chinese products. Even based on Chinese wire rod prices, these finished products (e.g. nails, threaded rods) come to the US at dumping prices. What to do? The American Wire Drawers Association recently decided to support the paper industry in their lobbying effort, urging the Department of Commerce to consider countervailing duty (subsidies) cases against China. So far, China has not been considered a market economy, and CVD cases cannot be filed against non-market economies.
A preliminary decision was made in favor of the paper industry, and it looks likely that countervailing duty cases against China could be filed soon. These cases are a bit easier to document than antidumping action, and the margins could run very high, depending on the extent of the subsidies.
Alas, this could be a double-edged sword for the wire industry. The domestic US wire rod industry is just as much under pressure from cheap Chinese rods, and they could file their own CVD cases. This would exclude the single-largest source of competitively priced rods for the US wire industry. Unfortunately, there are no easy answers here.