It’s Time to Impose Tariffs on Samsung, LG

Part of the American success formula is a reliance on fair play: Everyone must follow the same rules. This extends to the American-led effort for free and fair trade around the world, which has led to lowering of prices and better competition for consumers. But free trade isn’t a free-for-all, and never has been. And the benefits of free trade are greatly diminished by those who cheat, like a driver who decides the shoulder of the highway is his own personal lane during a traffic jam.

For years, Samsung and LG have been competing in the U.S. market for washers and dryers. If they’d been competing by the rules, it would have benefited consumers. Unfortunately, both Samsung and LG opted to dump items into the U.S. marketplace below cost in an effort to harm U.S. manufacturers and the U.S. workers they employ. If that sounds like cheating, you are correct.

In fact, U.S. manufacturers brought an action against those companies in 2012, and won. Having lost, the companies simply moved to another nation rather than start to play by the rules. When they were caught cheating again, they simply moved again to other nations, much like a con man running for the state line before the cops can find him.

Samsung and LG recently threatened they won’t open plants in Tennessee and South Carolina if they are held accountable for their cheating. Both companies could have opened these plants in 2007, when they had only 1 percent of the U.S. market, or even in 2012, when they lost their first U.S. trade case. Samsung and LG were obviously looking for new manufacturing locations at those times but skipped the U.S., the very market they are trying to dominate.

There is nothing in the rules that says a company that is dumping product into the U.S. market is prohibited from building a plant in the U.S. market. Based on their track record, there is little assurance that these companies are not simply playing for time, assembling foreign-made parts, and then moving operations to yet another country as they have done so many times before.

In the meantime, permanent, long-term investments by American companies in the next generation of washers are already being scaled back in anticipation of foreign cheating. While it is encouraging that ground is being broken for new plants, Americans shouldn’t have to listen to threats from known trade violators. They are supposed to be legitimate manufacturing companies, not mobsters saying, “You’ve got a nice plant under construction, be a shame if something happened to it.” In this context, the duo’s threats to not build assembly plants in the U.S. ring hollow.

The South Korean government says that finding their companies guilty of violating trade laws would hurt those companies. No doubt. Just as a team that gets caught cheating on the field is harmed by being caught, companies caught violating the trade agreements they sign on to lose their illegally obtained competitive edge.

On October 5, the U.S. International Trade Commission ruled 4-0 against Samsung and LG. Again. It is high time for these rule breakers to be held accountable. America has tried to be reasonable, but when these two companies were caught cheating before, they fled the country instead of correcting their behavior.

I expect much will be said about having a dispute with South Korea in the context of the North Korean missile threat, but there is no reason a straightforward matter like a narrow trade dispute over two companies will endanger the deep relationship between our two nations. Simply put, American workers shouldn’t have to bail out foreign companies at their own expense. It is fundamentally unfair, and imposing higher tariffs is a precise, limited remedy to correct the behavior of two companies. The time has come for the ITC to recommend, and for President Trump to impose, higher tariffs in these specific, particular cases.

America should enforce trade laws. If not, then those who have been long opposed to free trade will have been proven right. U.S. workers have sacrificed enough for free trade, and if other nations are not going to even play by the rules, then Americans will have no choice but to change how we do business. U.S. workers can win when competing with foreigners, but only if the U.S. referees the market in a fair and equitable manner. The U.S. government should send a clear message: Competitors are welcome, cheaters are not.

Michael James Barton is the founder of a consulting firm, Hyatt Solutions. He worked on trade issues on Capitol Hill and served at the Department of Defense and the Homeland Security Council during the George W. Bush administration.