Question

the page 199

MANAGEMENT FOCUS

Protecting U.S. Magnesium

In February 2004, U.S. Magnesium, the sole surviving U.S. producer of magnesium, a metal that is primarily used in the manufacture of certain automobile parts and aluminium can, filed a petition with U.S. International Trade Commission contending that a surge in imports had caused material damage to the U.S. industry’s employment sales, market share, and profitability. According to U.S. Magnesium, Russian and Chinese producers had been selling the metal at prices significantly below market value. During 2002 and 2003, imports of magnesium into the United States rose 70 percent, while prices fell by 40 percent, and the market share accounted for by imports jumped to 50 percent from 25 percent.

“The United States used to be the largest producer of magnesium in the world” a U.S. Magnesium spokesperson said at the time of the filing. “What’s really sad is that you can be state of the art and have modern technology, and if the Chinse, who pay people less than 90 cents an hour, want to run you out of business, they can do it. And that’s why we are seeking relief”.

During a yearlong investigation, the ITC solicited input from various sides in the dispute. Foreign produces and consumers of magnesium in the United States argued that falling prices for magnesium during 2002 and 2003 simply reflected an imbalance between supply and demand due to additional capacity coming on stream not from Russia or China but from a new Canadian plant that opened in 2001 and from a planned Australian plant. The Canadian plant shut down in 2003, the Australian plant never came on stream, and prices for magnesium rose again 2004.

Magnesium consumers in the United States also argued to the ITC that imposing antidumping duties on foreign imports of magnesium would raise prices in the United States significantly above world levels. A spokesperson for Alcoa, which mixes magnesium with aluminium to make alloys for can, predicted that if antidumping duties were imposed, high magnesium prices in the United Stated would force Alcoa to move some production out of the United States. Alcoa also noted that in 2003, U.S. Magnesium was unable to supply all of Alcoa’s needs, forcing the company to turn to imports. Consumers of magnesium in the automobile industry asserted that high prices in the United States would drive engineers to design magnesium out of automobiles or force manufacturing elsewhere, which would ultimately hurt everyone.

The six members of the ITC were not convinced by these arguments. In March 2005, the ITC ruled that both China and Russia had been dumping magnesium in the United States. The government decided to impose duties ranging from 50 percent to more than 140 percent on imports of magnesium from China. Russian producers faced duties ranging from 19 percent to 22 percent. The duties were to be levied for five years, after which the ITC would revisit the situation. The ITC revoked the antidumping order on Russia in February 2011 but decided to continue placing them on Chinese produces. They were finally removed by the ITC in 2014.

According to U.S. Magnesium, the initial favourable ruling allowed the company to reap the benefits of nearly $50 million in investments made in its manufacturing plant and enabled the company to boost its capacity by 28 percent by the end of 2005. Commenting on the favourable ruling, a U.S. Magnesium spokesperson noted, “Once unfair trade is removed from the marketplace we’ll be able to compete with anyone”.

U.S. Magnesium’s customers and competitors, however, did not view the situation as one of unfair trade. While the imposition of antidumping duties no doubt helped to protect U.S. Magnesium and the 400 people it employed from foreign competition, magnesium consumers in the United States felt they were the ultimate losers, a view that seemed to be confirmed by price data. In early 2010 the price for magnesium alloy in the United States was $2.30 per pound, compared to $1.54 in Mexico, $1.49 in Europe, and $1.36 in China.

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Reread the management Focus “Protecting U.S. Magnesium” (available at the page no. 199 of e-book for this course, in Chapter-7) and answer the following questions:

1. Who gains the most and from antidumping duties levied by the USA on imports of magnesium from China and Russia? How?      (Marks: 1.5)
2. Who are the losers? Please explain the reason for your assertions.     (Marks: 1.5)
3. Are these duties in the best national interest of the USA? Give proper logic in support of your answer. There is no wrong or right answer here, but you must use at least three references to support your arguments (references can be scientific journals, industry reports, industry-related magazines, leading newspaper articles, etc…). (Marks: 2)

Answer 1

Picking up the most from anti-dumping obligations would be the household organizations who can't deliver the things for as low of expense as they could import them. The washouts are the remote organizations who have overabundance to sell and can value them lower than industry standard. They have to recover balance and the anti dumping obligations don't permit this. These obligations are closed to not be in the best national enthusiasm of the US. They advance wastefulness and push out development of outside organizations, they could conceivably trigger exchange wars, and are probably going to be inappropriately executed. There obligations don't advance globalization.

US on magnesium imports from China and Russia are the representatives and speculators of U.S. Magnesium. A few understudies may recommend that the obligations will likewise open the way to magnesium makers in different nations that could likewise sell in the United States. Understudies will presumably take note of that Russian and Chinese magnesium makers will without a doubt be adversely influenced by the obligations, as will organizations like the automakers that had the capacity to profit by the modest magnesium they sold. Understudies might be isolated on the issue of whether the obligations are in the best national interests of the United States. Numerous understudies will likely contend that the obligations will mean more expensive rates for American customers, yet a few understudies may contend that the United States is essentially looking for an increasingly evenhanded exchanging association with China and Russia