Reference no: EM132858536
-Summarize the most important facts in the case. (What is taking place here? What is the organization that is considering the case? Who has initiated this case? What facts have been presented? What are they seeking?)
-List three possible actions the Commission could recommend to the President. Be as specific as possible.
-What are the strengths and weaknesses of each of the alternative actions in (2)? In your answer, consider the various trade theories we have explored. In addition, consider all the stakeholders involved.
-If you were a Commissioner what action would you recommend to the President? Please explain your recommendation.
The Case
Members of the US international Trade Commission are meeting to discuss the request from US manufacturers of bathroom vanity and kitchen cabinets to take some action to protect them from foreign competition.
The US International Trade Commission
The US international Trade Commission (USITC) was established as a result of the Trade Act of 1974 but the Commission was actually an outgrowth of an earlier agency called the US Tariff Commission. It celebrated its 100th anniversary in 2016. The USITC consists of six Commissioners, who serve a nine-year term. They are nominated by the President and confirmed by the U.S. Senate. To maintain the bipartisan balance of the Commission only three of the six Commissioners can be from any one political party. The Commission maintains a professional staff of analysts and investigators focused on international trade. Their main mission is to review claims related to imports which "injure" a domestic industry or violate US intellectual property rights, providing independent analysis and information to the President and the Congress.
Under Section 201 of the 1974 Trade Act, an industry is able to petition the USITC for import relief from foreign competition. The Commission must find that imports have been "a substantial cause of serious injury, or the threat thereof" to a domestic industry in order to recommend relief. Section 201 does not require that the ITC finds that an exporting nation has engaged in any unfair trade practices. The specific definitions of "injury" were provided In the 1974 Trade Act but the Act also instructs the Commission to consider the effect of rulings on general health and welfare, competitive conditions and consumers which may override concerns about a particular industry.
The Commission recommends the specific remedies to be taken but the President has the responsibility to choose and put these measures into effect. The most common relief measures are tariffs or import quotas, but the Commission can also recommend adjustment assistance to the affected industry. Of course they might recommend that no action be taken in a particular case. The Commission holds a public hearing where the technical staff present their report and allow all interested parties to be heard. When a final report is developed Commissioners vote on the recommendation to the President.
Specifics of the kitchen and bathroom vanity cabinet case
On March 6, 2019 The American Kitchen Cabinet Alliance (AKCA), a coalition of more than 50 manufacturers in the US, initiated a case against Chinese imports at the International Trade Commission. At a Commission hearing, an industry spokesman charged that imports of these cabinets from China were injuring and threatening further injury to the domestic industry. Less than a year ago the industry had been granted a 10% tariff on Chinese imports but this did not have the desired results for US manufacturers.
The industry presentation made the following points:
-While overall demand increased 15%, the financial performance of domestic producers has declined -- net profits are down and capacity utilization has fallen.
-Imports increased by 57% to about 18 million cabinets and $1.4 billion in 2018.
-Chinese imported cabinet prices are lower than domestic producers' by 20 to 50%.
-Chinese imports have taken substantial market share from US manufacturers - US market share declined from 83.2% in 2016 to 77.4% in 2018. This has cost the domestic industry over $110 million since 2016.
-The industry employs about 34,000 production workers. There were about 500 more production workers in 2018 than in 2016.
-Hourly wages for production workers in the US are about $17. This has increased more than one dollar per hour from 2016 to 2018.
-Chinese factory workers earn between $2.70 and $4.81 per hour, roughly 1/6th to 1/4 th of their US counterparts.A different point of view was presented by the ACCD (American Coalition of Cabinet Distributors). This organization is a group of distributors, dealers, contractors, installers and importers of ready to assemble (RTA) cabinets. They strongly opposed the imposition of any sort of trade penalty on Chinese manufacturers since their main source of product is China.
At the hearing the ACCD spokesman said that RTA cabinets serve a narrow customer niche, accounting for less than 10% of all US cabinet sales. The ACCD says that the RTA cabinet industry is an innovative development that has gained popularity because of its quick turnaround and lower prices. They claim any penalty on imports would severely hurt their industry and put thousands of American workers at risk.