International

September 1999 Vol. 220 No. 9
International

Kurt S. Abraham,
International Editor

U.S. Commerce officials take politically expedient way out

Not surprisingly, the Clinton administration on August 9 dismissed the anti-dumping/countervailing duty petitions on oil imports filed by independent U.S. producers. The petitions were filed on June 29, 1999, by Save Domestic Oil, Inc. (SDO), a group of 12 independents from Kansas, Oklahoma and Texas, that charged Mexico, Venezuela, Saudi Arabia and Iraq sold "subsidized" oil below production costs in the region covering PADD Districts I through IV. These assertions were supported by a long list of groups, including IPAA, TIPRO and other state independent associations.

SDO’s petitions asked Commerce’s International Trade Administration (ITA) to investigate the dumping charges. Assuming dumping occurred, SDO asked that ITA impose duties on the four countries to compensate for damage done to domestic producers. All four nations denied the accusations. However, unlike most "dumping" cases where it usually sides with U.S. firms, Commerce this time rejected SDO’s claims. In fact, ITA’s Import Administration (IA) did not even investigate the claims. Led by Assistant Commerce Secretary Robert S. LaRussa (E-mail, Robert_LaRussa@ita.doc.gov), IA said it dismissed the petitions for lack of U.S. producer support. If IA had at least bothered to hear the case and found that the dumping allegations had no merit, that would have been fine. But they did not do that.

Gauging support. Per the U.S. Tariff Act of 1930, a petition meets the industry support requirement, if domestic producers or workers supporting the petition account for 1) at least 25% of total production in the region; and 2) more than 50% of the output produced in the region "by that portion of the industry expressing support for, or opposition to, the petition." Because IA, as of July 27, received letters from 20 domestic producers (mostly majors) opposing the petitions and they accounted for about 50% of production, the agency exercised "statutory discretion" and extended the deadline for determining support.

In a hurry-up effort that only lasted about 10 days, IA supposedly surveyed "1) each of the 410 largest producers in the region, which accounted for over 86% of regional production; and 2) a 401-company sample of the remaining producers." In other words, the latter group was the mom-and-pop operations. IA said it received responses from 41% of the 410 larger firms but only 18% of the smaller companies. IA said that this survey netted enough additional opposition to conclude that 65% to 68% of all producers opposed the petitions.

To anyone who has surveyed companies for information, IA’s methods look suspicious. Why could IA gather responses from nearly half of the larger firms, but not from even one-fifth of the smaller companies? Why was the timeframe for this exercise so tight? In the midst of summer vacations, did the owners or chief executives of small firms get fair notice of this survey? IA also admits to focusing its analysis on the API Ad Hoc Free Trade Committee, "because it is composed of the largest U.S. producers in opposition to the petition, and because its treatment is dispositive of the industry support issue." In other words, the deck was stacked, and the fix was in.

Reaction. Fighting the petitions every step of the way on behalf of most majors, API naturally was delighted. "(API) welcomes the decision of (Commerce) to deny standing to (SDO) in its anti-dumping and countervailing duty petitions," said an API news release. "These low prices were set by the forces of supply and demand in international markets—not by alleged unfair pricing by a handful of oil-producing countries."

SDO leader and Oklahoma independent oilman Harold Hamm said that Commerce "ignored the facts and their own precedents by bowing to outside political pressure to halt an investigation." IPAA Chairman George Yates also said, "We are disappointed ... the petitioners deserved their day in court.... We believed that support for (the petition) was at least 25% of U.S. oil production in the (PADD I-IV) region." As the only publicly held firm on SDO’s board of directors, Apache Corp. accused Commerce of treating the petitions differently from other industries’ dumping complaints. Hamm also said that IA told SDO, "Exxon simply was too big to ignore."

Based on other Commerce behavior, these allegations may have merit. For instance, Commerce Secretary William Daley brags about working to shore up the U.S. steel industry. Press releases on Commerce’s Internet site ballyhoo a "focus on addressing (steel) industry problems." In an August 5 release, Daley refers to the administration’s "plan to take additional steps to fend off threats to America’s steel industry and workers," and says, "We will not let up on this issue. We are firmly committed to continued tough enforcement of our trade laws."

Motives. Three reasons come to mind for the Clintonites’ uneven behavior. First, most steel industry workers are unionized, whereas oil’s E&P sector is not. Clinton protégé Al Gore and the Democrats will need heavy campaign contributions from unions, as well as votes from their workers, to do well in the 2000 elections. Second, Gore, the self-appointed know-it-all of environmentalism, hates the U.S. oil industry, so you can bet that he put his weight against the petitions.

Last, and most importantly, this administration, just like the Reagan and Bush regimes before it, has learned this nasty little secret: keep oil and gas prices dirt cheap, and you can make the national economy hum, or appear to be humming, without making any tough decisions or choices. It’s a chicken way of governing, one that the last three administrations have practiced well. Clinton officials are not about to favor anything that might upset the horse upon which their economy rides.

Conspicuously absent was discussion about national security and the risks posed to it by ever-increasing crude and product imports, now 55% of total supply. Sooner or later, the U.S. will have to fight another war to safeguard foreign oil (as it did in 1991). And when the next group of mothers screams about sending its sons off to fight a foreign battle, there will be plenty of parties they can point their fingers at to blame.

FROM THE ARCHIVE