by Macy, Beth
Furniture-factory workers were losing their livelihoods because of offshoring to China, just like the textile workers before them had. It was a fact. But was there any legal recourse to make it stop?
The furniture industry didn’t have the corporate heft of, say, the Detroit automakers. But wasn’t there a law on the books somewhere that might protect it from unfair and maybe even illegal trade?
Joe Dorn knew there was. He’d already successfully argued the nuances of the Tariff Act of 1930 on behalf of American producers of magnesium, who were being undercut by Chinese imports. He did it again for the makers of gray Portland cement, who alleged that the Mexican company Cementos Mexicanos (Cemex) was lowballing its cement in an effort to push American companies out of the market.
Dorn is a respected trade lawyer at the top-shelf King and Spalding, a multinational firm with trade headquarters at 1700 Pennsylvania Avenue—a block away from the White House. It’s fair to say there are corners of Mexico and China in which Dorn is reviled. When Cemex CEO Lorenzo Zambrano met him in person for the first time in 2006, he greeted him with “You cannot be Mr. Dorn. You don’t have horns!”
Dorn told me this story during an interview that lasted exactly one hour. (He was sorry I had driven more than four hours to talk, but he had clients, paying ones presumably, who were waiting for him.) We were seated at a long table flanked by high-backed leather chairs in a conference room that had a view of DC’s bustling Lafayette Square. There was just a trace of his native North Carolina in his polite, measured speech. Asked if he’d ever traveled to China, Dorn deadpanned, “I’m afraid to go there.”
Among the details the furniture makers learned from him at the 2002 AFMA meeting was that a coalition of American companies or their workers had every right in the WTO-governed universe to ask the U.S. Department of Commerce to investigate factories in another country for underselling, or dumping, as it was known. The practice of selling exported goods at artificially low prices designed to drive domestic producers out of business, dumping can also occur when exporters sell products cheaper in foreign countries than in their own. Dumping isn’t illegal by WTO standards unless the domestic producers can prove harm—that is, show that the dumping has led to factory closings and higher rates of unemployment.
While American producers tend to prevail in two-thirds of antidumping cases brought before the U.S. International Trade Commission, the process is lengthy, complicated, and expensive. Just to commission an initial legal study would cost seventy-five thousand dollars, the lawyer told the furniture makers in a statement that was classic Joe Dorn: exact, understated, and lacking any whiff of emotion.
But the guys representing the industry in the room didn’t need Dorn to provide the emotion. It was already there in spades.
Most of the furniture makers in the AFMA were now investing mightily in their own importing infrastructures—all those fax machines and interpreters, all those tasseled loafers on the ground in Dongguan and Shenzhen. If duties were imposed on China, it would result in their paying more for goods.
JBIII talked the manufacturers into ponying up money for the study. But six months later, when they reconvened to hear Dorn’s report, most were importing even more.
“The last thing they wanted to hear was any news that China may have been breaking the law,” JBIII said, recalling the way the audience response graduated from a low hum to near shouting as Dorn spoke—until he was no longer audible at all.
If people lost their jobs because of illegal race or gender discrimination, JBIII interjected at the meeting, how was that different from people losing their jobs because of illegal trade? Wasn’t all of it illegal?
But the retailers will hate it, one CEO pointed out. “They’ll put your picture in Furniture/Today, and they’ll boycott you,” he said. “They’ll boycott all of us.”
But what made the furniture makers so sure the retailers wouldn’t skip all the middlemen and buy directly from the Chinese factories? That was already happening at Bassett Furniture. In 1999, Bassett and J.C. Penney had celebrated selling one billion dollars in furniture together with a big party in Dallas, near the company’s Plano headquarters. When Penney complained the following year that Bassett’s prices were too high compared with the imports’, Bassett redesigned—or “value-engineered,” as the marketing people called it—its bestselling Penney suites, slashing prices by as much as 33 percent.
Over the course of the next three years, Penney cut its Bassett orders drastically, replacing them with similar Chinese-made products until the Bassett line was entirely phased out. Later, Penney officials insisted they had dumped Bassett because of quality problems, not price—a claim Bassett CEO Rob Spilman disputes to this day.
“For years it was all about ‘loyalty, loyalty’—and turned out, it was all just bull,” said Joe Meadors, the retired Bassett sales executive who helped manage the J.C. Penney account for many years. “They said, ‘We’re goin’ offshore; we’re not gonna buy from you anymore.’ ”
At the AFMA meeting’s end, as Joe Dorn was stuffing his papers into his briefcase, John Bassett pulled him aside and said he’d visit him in Washington if Dorn would finish his presentation. After they met, over the course of the next several months, John picked Dorn’s brain about the process, calling weekly and learning about other cases brought on behalf of other clients, including the shrimp, magnesium, and polypropylene-bag industries.
To petition for a Commerce Department investigation, Dorn explained, JBIII would need at least 51 percent of his industry committed to pursuing an antidumping case against China. Had John thought of the notion two years earlier, before imports had reached a critical mass, the support would have been a cinch. It wasn’t quite the eleventh hour. But the tipping point, as Dorn explained it, was perilously close.
The dominoes tended to fall the same way in every industry hit by offshoring. “First, companies begin importing defensively from China, then they gradually start relying more and more on imports, and as you take the volume out of your U.S. plants, it makes the remaining U.S. volume less cost-effective,” Dorn told me. “And it’s a downward spiral from there.” The earlier an industry organizes against unfair foreign competition, the likelier an antidumping coalition is to prevail.
Dorn wasn’t sure John “could herd all the cats together,” he said. “There were a lot of players, a lot of different voices that were independent. I had my doubts about whether it was even possible to bring together a coalition.”
But Dorn was learning about John’s propensity for legal pads and weekend telephone calls, not to mention his General Patton–style patter. JBIII wasn’t Dorn’s first client to travel covertly to an offshore factory—or send an entourage—to validate rumors of predatorily low pricing.
A lawyer’s lawyer, Dorn had a career-long habit of working every Saturday morning at the firm, and Saturday mornings suited John Bassett fine. He made sure he had Dorn’s direct office number.
The Chinese were about to feel the attack dog’s bite.
In November 2002, Wyatt and Rose made their second trip to Dalian, with JBIII in tow, under the guise of quality control: they would peruse the Louis Philippe samples Dalian Huafeng had made for them, and, the company hoped, place an order.
This time, John Bassett saw it with his own eyes—the cinder-block buildings, the cold, crouching workers, the sky-high timber stacks. And because John was the top dog at Vaughan-Bassett, not just some presumably spoiled owner’s son, manufacturer He YunFeng offered to meet with him personally to discuss plans for his burgeoning American Furniture Industrial Park. He even sent a driver to ferry them around the site.
John was used to dealing with Taiwanese businessmen who wanted to financially gore him.
He sat fairly speechless as He YunFeng, a Communist Party official on his way to joining Forbes magazine’s list of the richest Chinese people, had the gall—or maybe it was just the new-to-capitalism naïveté—to describe how he intended to shutter every American
bedroom-furniture factory, including John’s.
No drinks were proffered; there was no back-slapping, no five-course meals.
Just these words, spoken by his stone-faced interpreter: Dalian Huafeng intended to become the number one furniture maker in the world.
And this was exactly how: He YunFeng would sell the Louis Philippe for a hundred dollars because he considered that to be the “tuition” price of doing business in America—a loss he would have to take in order to capture the market share, he explained.
“He was not belligerent, but it was just like you were speaking to a judge,” John recalled. “He was absolutely serious and confident in what he was saying.”
Who’s going to carry all this inventory? John wanted to know.
YunFeng’s eyes went blank, John said. “And finally, he smiled, and his eyes lit up, and he told the translator, ‘The American retailer will own the inventory.’
“And I said, ‘Good luck with that.’
“It had never dawned on me until then that you’re dealing with a bunch of Communists who have never had any competition whatsoever, and they’re coming up with how they’re gonna succeed right in front of you, and they actually think that every competing store in every community in America is going to carry the same suite of furniture,” JBIII said.
“This guy even wanted to put the Taiwanese in southern China out of business, and those people were already hurting us. It was clear that this was a bigger threat than anything we’d been exposed to before.”
Then He YunFeng looked at the grandson of Mr. J.D. Bassett, who actually had been the largest wood furniture maker in the world, and made an even bolder statement.
Close all three of your factories, he told him, and put the business of Vaughan-Bassett entirely in my hands.
Close his factories? Because a Chinese businessman wanted him to turn tail and run? Because this guy thought he could woo JBIII with fatter profits and promises to rid him of operational headaches like health insurance and the interference of all those acronymic regulatory agencies—EPA, OSHA, and EEOC—not to mention those pesky factory employees?
The conversation soon ended. That’s when JBIII remembered the Taiwanese businessman saying, back in 1984, that Americans were all the same: If the price is right, you will do anything.
On the way out, the friendly sales manager asked Rose to help her buy a subscription to the trade publication Furniture/Today, saying she hoped it would help the Chinese understand the American industry. The Dalian Huafeng managers in northern China were confident, but they were still fairly naive about Americans and their cowboy capitalism. (Rose obliged—partly out of politeness, partly to keep up the ruse—and was later reimbursed.)
That naïveté would soon disappear, just as that forest of Russian timber near the construction site would disappear, turning into dressers and beds. The company had figured out how to export to Japan, after all. It would figure this out too.
Within a year, Rose heard from friends who were witnessing the metamorphosis of Dalian Huafeng. In reports she typed up for Wyatt in 2002 and 2003, her sources described one American buyer after another visiting its Liaoning factories—folks from Value City, Rooms To Go, Lewis and Sons, even Pat Bassett’s Galax cousins from Vaughan Furniture. At least one American supplier sent two managers to live temporarily in Zhuanghe to teach the Chinese workers about American furniture and finishing systems, according to Rose’s reports.
On the car ride back to Dalian, company lore has it that John Bassett looked over at his son Wyatt and invoked the name of Mr. J.D. Bassett. “My grandfather would roll over in his graaaa-ave,” he announced, the story goes. He’s repeated that line so many times since that neither he nor Wyatt nor Rose can remember if he really said it or not.
But people back in Bassett were saying it, he knew, every time another factory closed. He stared at the ceiling of the car, and he worried.
Back home, he picked up the nearest legal pad and got his top-shelf lawyer on the phone.
PART VI
19
Gathering the Troops
Ideally, you’d have every plant you own on a barge to move with currencies and changes in the economy.
—JACK WELCH, CEO OF GENERAL ELECTRIC
In its zygote state, the antidumping team consisted of the top-shelf lawyer, the brainiac son, the Glue of Everything (that would be the secretary Sheila Key, now a vice president), and the Taiwanese translator. John swears it was just dumb luck that his other son, Doug, now the company’s sales and marketing chief, had joined Vaughan-Bassett in 1998, just as the Asian invasion was heating up. Looking back on the political backlash that was about to come from the big retailers, the Chinese factories, and their American importing arms and extend all the way to the hallowed halls of Washington, DC, one might think Doug Bassett’s father had planned his return to the family business all along: prep school at the exclusive Episcopal High School, followed by his undergraduate degree from the University of Virginia, business school at Georgetown, then eight years of backslapping and stairwell negotiations on Capitol Hill for various Republican politicians and candidates.
If Wyatt came across as aloof, then Doug was the guy who buffed the team’s edges, an iced-tea guzzler who knows it’s as important to feed the media (and buy reporters drinks) as it is to bend an ear. If you’re driving two hours for your first meeting at the factory, as I was in November 2011, Wyatt will have forgotten you’re coming and will probably be too busy to talk. But Doug will call while you’re en route just to make sure the roads are okay, even though there’s not a raindrop or snowflake in sight.
He’s sweeter than his dad and softer around the edges than his brother—at first glance, anyway. “I tell people, if you don’t like Doug, there’s no one in my family you’ll like,” JBIII said. His older son is savvy enough to know that it’s okay to finesse a fact if it means he can get JBIII in front of an important audience. In 2009, President Obama proposed his $825 billion stimulus package, and it included COBRA changes that would have extended downsized workers’ benefits for “up to forty years!” Doug recalled, which could have put Vaughan-Bassett and other manufacturers on the hook for millions.
“Dad read it that morning in the New York Times, and I called each of our senators—three Democrats and one Republican—and I said, ‘[Senator Jim] Webb’s meeting with us at two, we can fit you in at one.’ I fibbed a little.… We went up the next week, and eventually they came out with something we could support.” A similar strategy was unleashed in the face of a power-company rate hike (which Doug got lowered, following a chat with the Virginia governor) and a new EPA emissions-regulation deadline (he helped set the strategy that led to a delay). He also helped restore hefty state funding for the High Point Market Authority. The North Carolina governor had tried to nix $1.65 million from the Market’s 2013 budget, but Doug got forty-two North Carolina furniture-company presidents and CEOs to sign a letter he wrote as chairman of the authority. Published on the front page of several North Carolina newspapers, the letter pointed out that nine thousand North Carolinians still worked in furniture-making, retailing, and importing, representing revenues of eight to nine billion dollars.
To top it off, Doug was polite enough to let the governor announce the restoration of funds, which made it sound as if he were the one who’d saved the day. In the end, the Market wound up with $1.86 million, an increase over the previous year, which Doug called an “eminently fair compromise.”
“Doug is very sales- and political-oriented. He knows how to get the most outta people,” Sheila said. “Wyatt’s very good at manufacturing and getting the most outta people here. If they don’t agree, they work it out before it becomes a fight in front of anybody else.”
Anyone looking back on the minefield JBIII had to navigate after meeting Joe Dorn and going eyeball-to-eyeball with He YunFeng might wonder how John ever managed to cobble together a majority of his industry. That person might also wonder what manufacturer turned imp
orter in his or her right mind would join John’s coalition for legal trade, a group whose actions, if all went according to plan, would culminate in boosting domestic production by placing duties on Chinese imports—robbing importer Peter to pay domestic Paul when the truth was that most economists and business schools and CEOs were cheering for Peter to find the cheapest labor he could, wherever he could find it. For the time being, with supply chains in southern China now fully operational, that place was China.
A businessperson looking back might want to examine how John Bassett had a knack for finding exactly the right person for the right job and then convincing that person to do the job exactly the way he wanted—through equal parts charm, brute coercion, and a mutual brand of loyalty that is perhaps only possible at a closely held, family-operated business run by a patrician CEO who happens to have a soft spot for the workers who made his family rich.
John may claim that he assembled his team by happy accident, but the plainspoken people of Galax viewed it as wily craftsmanship. “How many people do you know would think to send their kid to Washington after college so he could find out who you kiss up to and who you don’t kiss up to?” a maintenance worker marveled.
“All that political spadework that Doug did, it was absolutely necessary,” said lawyer Rick Boucher, a Democrat who was nearing the end of his twenty-eight-year career as a representative for Virginia’s Ninth Congressional District, the western corner of the state, when Dorn was hired. While the U.S. International Trade Commission is supposed to be immune to politics, the commissioners “do take into consideration what other policymakers think,” Boucher added.
“Doug really understands Capitol Hill, so he was up here all the time, getting letters written on their behalf. The thing about the Bassetts, they’re not afraid to ask for something. But they’re effective in the way they ask.
