by Macy, Beth
“What they ask for is always within the realm of the possible.” And if what’s possible isn’t immediately evident, they have a way of making it so.
So Doug managed the politics. Wyatt disappeared into the arcane rules of the Department of Commerce and the International Trade Commission.
And John did what he does best, which is to pick up the phone and get people to do exactly what he wants them to do.
First, though, he called in his sons and his company controller, Doug Brannock. They huddled with plant manager Rodney, and Andy Williamson, the money guy John likes to keep nearby. (“Andy, what’s the money today?” John hollers, and within seconds, Andy shouts the company’s eight-figure savings-account balance for that day across the rickety partition wall.)
To hell with the dance card, John Bassett told his team. From here on out, they should imagine a different metaphor entirely, one that had nothing to do with Asian factories or hustler agents or pissed-off retailers. He took them to an imaginary desert island: There is one woman on it, and she’s surrounded by twelve men. “I got news for you, boys!” he bellowed. “When you’re the only girl left standing on an island with twelve men, you don’t have to be good-looking; somebody’s gonna fall in love with you!”
If Vaughan-Bassett could be the last factory standing in the realm of midpriced wood bedroom furniture, he explained, beaming, it would prevail.
But privately, he was not so confident. He had no idea where the antidumping petition would lead. The company’s stockholders were nervous, and many in the industry—including some of Vaughan-Bassett’s biggest customers and best friends—were now thoroughly pissed.
“It feels like I’m walking through fog,” he told his wife.
By the time Dorn—and the Dalian dresser—convinced John there was a case to be brought against the People’s Republic of China, the blended strategy wasn’t just some hot new business model. Importing was now close to becoming the dominant practice, raising the question: Was it even possible to get 51 percent of the industry on board? Lexington Home Brands and Furniture Brands were already importing one-third of their furniture from China. Ethan Allen Home Interiors had opened stores in Shanghai, Tianjin, and Urumqi and had plans to develop a chain of retail stores on the mainland. AkzoNobel, a Dutch-Swedish finishing supplier, was closing plants in the United States and Europe and opening three new factories in China.
Furniture Brands’ Mickey Holliman had just closed the company’s Thomasville plant, eliminating 425 jobs, a year after getting rid of 1,100 jobs in four factories with the closing of the Lane division in Altavista, Virginia. Holliman had just seen his company’s net income plummet 45 percent. As he explained it to Wall Street investors, he was now investing ten million dollars in Asian logistics and quality control. The next plant closing took four hundred more jobs in Winston-Salem, North Carolina, but Wall Street cheered the closing, and Furniture Brands’ stock price jumped to a record high of thirty-two dollars per share.
JBIII worked the phones constantly in early 2003, trying to drum up support for his fledgling American Furniture Manufacturers Committee for Legal Trade. Several industry friends said they’d join, then immediately backed out after a retail customer or two—companies that were already importing much of their inventory—convinced them of the error of their ways.
“People had already gone to a lot of expense to set up buying teams in Asia. They thought they’d been playing by the rules, and they didn’t see why the rules should change,” said Jerry Epperson, the furniture analyst.
The worst thing that could happen to importers? The cheapest deals would come to a crashing halt. And not only that, but the duties collected from the most egregious of the dumpers would be funneled back to the American factories being hurt by the imports—meaning John Bassett and his ilk. That was thanks to a little-known piece of legislation called the Byrd Amendment, or the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), championed by a West Virginia Democrat, Senator Robert Byrd, who had quietly had it inserted into the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2001—without running it by any congressional committees that had experience with or jurisdiction over international trade.
The Byrd Amendment had been passed to the chagrin of the WTO and more than a dozen countries—several of which retaliated by immediately slapping duties on American exports. Senator John McCain called the Byrd Amendment “an almost-one-half-billion-dollar giveaway to U.S. corporations.” Between 2001 and 2004, CDSOA funds provided over $1 billion to U.S. companies deemed injured by unfair trade. The biggest winners were makers of ball bearings, candles, and electronics, and the U.S. steel industry.
While his father worked on getting the 51 percent, Wyatt predicted the opposition would come in two phases: First, their detractors would make fun of them. Then, when it sank in what they were trying to do—stop the free-for-all to get the cheapest furniture the fastest—they were going to be mad as hell.
Sure enough, the opposition lined up to hire lobbyists and Washington lawyers of their own. The big names in retail—including Rooms To Go, J.C. Penney, Havertys, Crate and Barrel, and City Furniture—formed the Furniture Retailers of America and commenced pressuring their domestic suppliers not to join John Bassett’s side.
“Several sent word that they weren’t gonna buy from us anymore if we continued down that path,” Doug Bassett recalled. “But in a lot of those cases, we’d already seen a three-million-dollar-a-year customer dwindle down to nothing. They’d already gone to a pure import model.” In other words, these companies had no leverage with Vaughan-Bassett, because their orders were already zero.
Dorn had never seen a more complicated or vitriolic case involving such a disparate variety of interests and companies. (In the magnesium case, for instance, he had represented just one company.) Neither had opposing attorney John Greenwald.
Neither, it would turn out, had the ITC.
Lobbyists for the importers, retailers, and Chinese factories denounced the members of JBIII’s coalition as old-school protectionists. As selfish opportunists looking to cash in. They were joined by a growing international chorus of free-trade proponents who claimed the Byrd Amendment violated the spirit of the WTO and wanted it repealed.
Coalition members didn’t really care about keeping Americans off the unemployment rolls, the opposition said. They just wanted to cash their Byrd money checks.
By the time the dust came anywhere close to settling, at least fifty-three law firms were lined up to oppose JBIII’s coalition, according to Dorn, and that included new law firms that spun off on their own as a result of this one case—and of the steady stream of legal bills it produced.
It was a heady time for Team John Bassett, and a pressure cooker too. If the coalition could sign up 51 percent of the industry, Dorn intended to file the largest antidumping case ever brought against the People’s Republic of China, and it would be orchestrated from a mountain hamlet better known for barbecue and bluegrass than for international trade.
John went down his list, calling every furniture CEO he could and reminding them all of the generations of employees who’d worked for their families. Of the half a million American factory workers who’d lost their jobs because of offshoring in the 1980s and 1990s, 38 percent still hadn’t found work, and one in five of those who had had taken a pay cut of 30 percent or more.
If China was refusing to play by the rules it had agreed to when it joined the WTO as a nonmarket economy—if it was really fueling its factories with deep subsidies and an artificially cheap currency—didn’t the American factory owners owe it to their workers to find out if they were being wronged?
Legally, in fact, they did. There was a provision in the International Trade Commission rules stating that, in cases where the industry is divided, unionized employees can override management’s opposition and file petitions of their own. If management remains neutral and the unions uphold the petitions, t
hat counts as support. But that didn’t mean much in the right-to-work South, where few factories were unionized.
So JBIII ran an end run around the free traders’ defensive line. “The way he built the coalition was to go to these companies who were reluctant to join and to say, ‘Boys, you better get in the wagon with me, or I’ll make you wish you had,’ ” explained lawyer Tom Word, a longtime Vaughan-Bassett board member who spent decades representing the region’s textile and furniture magnates. “He loves to play hardball.”
The maneuver wasn’t technically a threat. But John let it be known that newspaper ads could be taken out in furniture-factory towns informing employees of their right to join his petition whether management approved or not. Ohhh ship, indeed.
In Galax, he demonstrated how it could be done, calling together reporters from a hundred-and-fifty-mile radius to witness the signing of a support petition by the Galax workers, each of whom walked away with a T-shirt that said I Voted to Save My Job. It was a classic PR move—not necessary at all, because of course Vaughan-Bassett already supported the coalition JBIII had founded—but it was good for grabbing headlines.
Down the street, Vaughan Furniture had joined the petition-signing wave too, even though its managers were already poking around the factories in Dalian. Vaughan employees were working serious short time—one week on, one week off. “I signed because I’d like to keep my job as long as I can,” thirty-nine-year-old Vince Brown told the Greensboro News and Record. “My bills each month add up to more than what I make.”
By mid-July 2003, John had begged, badgered, and bullied fifteen factory heads into joining the coalition, including the CEOs of cousin companies started by his grandfather—Bassett Furniture, Stanley, Vaughan, and Hooker. Before long, though, the implications of siding with John Bassett, even if he was your uncle, became clear.
“We are trying to stand up for what we believe is proper,” said Paul Toms, distant cousin and CEO of Hooker, the high-end furniture maker based in Martinsville. But six months later, after three of its five largest retail customers “expressed displeasure,” as Toms told Furniture/Today, Hooker abandoned its support. Coalition alignment had also jeopardized relations with Asian sourcing partners, which were now providing 50 percent of Hooker’s furniture. Lexington, then importing 60 percent of its furniture, pulled a similar about-face, as did Indiana-based Keller Manufacturing Company.
Retailer spokesman Mike Veitenheimer cheered the companies’ withdrawal from the petition, joining a chorus of economists and business professors who saw the antidumping petition as bad economics, fraught with unintended consequences. “Instead of saving American jobs, as claimed by the petitioners, the supply disruption would lead to job losses in the U.S. for retail company employees,” Veitenheimer said.
Those nefarious Asians, sniped Greg Rushford, a free-trade advocate and blogger who followed the petition controversy. “Here they go again… conspiring to sell American consumers the cheapest possible” goods. “The domestic petitioners are seeking prohibitive tariffs that would range from 158.7 percent to 440.9 percent. The petitioners have calculated how ‘unfair’ China is, down to the last decimal point.”
But John Bassett realized that losing Hooker and a few others was the price of taking a stand. By that point, he had signed up thirty-one companies from seventeen states, spanning the country from California to Vermont—as well as five labor unions. He’d used the phone to gain the support of companies ranging from high-end hippie furniture makers in Vermont to good-old-boy hotel-furniture makers in Mississippi.
All had tossed and turned in their beds worrying about making payroll. All had had to lay people off.
Thanks to John’s lifelong friendship with Steve Kincaid, who ran the case-goods division for La-Z-Boy, he also got the recliner giant to join his team. A third-generation furniture maker, Kincaid, then the AFMA president, accompanied John on a lobbying trip to the U.S. Department of Commerce.
“An official said to me, ‘Well, Mr. Kincaid, we’re not concerned about manufacturing jobs because you’re really only talking about eight or so percent of the employment in the U.S. We think it’s better for the consumer to have more disposable income by buying the cheaper Chinese goods,’ ” Kincaid said.
“What he was telling me was that, if I was going to Walmart to buy a T-shirt for ten dollars, that would be better than having people in Martinsville and Galax and Hudson making fifteen dollars an hour and supporting the local restaurants, insurance companies, and banks.”
It was the same sophistry preached by Walmart founder Sam Walton, who claimed he could raise the standard of living by lowering the costs of retail goods. It was ironic, given that the only jobs many of the displaced workers in the small towns hollowed out by Walmart-championed offshoring could find were part-time, and sans benefits, in Walmart stores. Prices were lower, sure, but wages were in a race to the bottom too.
Kincaid remembers thinking, I’m glad my father isn’t alive to see this.
In August 2003, John invited his industry colleagues to gather again—this time in a banquet room in a Greensboro hotel—to discuss another full-frontal attack. He needed lawyer money, a million and a half, at least. In North Carolina alone, more than forty furniture factories had closed in three years. Nationwide, more than a quarter of the furniture labor force, or thirty-five thousand workers, had already lost their jobs. Wooden bedroom imports were up 54 percent in the first half of 2003—more than in all of 2002. “You’re in pain just like we’re in pain,” JBIII told the four hundred and fifty businesspeople gathered in the hotel. “If you want to help yourselves, we need your support.”
Half the suppliers ended up donating, many of them anonymously, to avoid retribution from Chinese customers. “He put the pitch on me, and I gave him three thousand dollars, as small as I was,” Garet Bosiger, the drawer supplier, said. “He was rallying everybody like a cheerleader and talking about Dalian.”
Dorn told the group that the coalition had a fifty-fifty chance of winning duties, which could result in Chinese import prices increasing some 30 to 40 percent. Truth be told, though, King and Spalding had a better than .500 batting average. Dorn’s firm had already won six out of seven antidumping cases against the Chinese, involving items as diverse as paintbrushes, cookware, and apple-juice concentrate.
When one supplier at the meeting asked why he should support the coalition at the risk of alienating the Chinese factories—which also bought his parts—John turned swiftly to the giant American flag he’d placed behind the podium.
“I’m going to give you the short answer,” he boomed. “Because you’re an American, that’s why. Ladies and gentlemen, you were given your freedom, and you owe something to your country.”
The International Trade Commission was an august body that was supposed to be bipartisan, with an even number of Republican and Democratic appointees. But it wasn’t exactly like the U.S. Supreme Court, above the fray of political whims and party alliances. It was a group of human beings, most of them well connected and with friends in high places—including at the Department of Commerce, which would determine if and how much a particular Chinese company or importer was dumping.
For the next several years, JBIII would take his flag-waving show on the road dozens of times—to Rotary Clubs, coalition meetings, and Washington hearings. He gathered letters from politicians on both sides of the aisle. He got celebrities with Southern furniture-region roots—race-car driver Richard Petty and artist Bob Timberlake—to give their blessings in front of the media.
In a testimony before the House Ways and Means Subcommittee on Trade, filmed by C-Span, John Bassett drew an analogy between unfairly priced Chinese furniture and one of his hometown’s specialties: moonshine. He took the eminent audience back to his Bassett youth, where bootleggers produced some of the finest and cheapest liquor around.
“It was illegal!” he boomed. “But when the ox getting gored by it was the federal and state government, they did somethi
ng about it!”
The gallery chuckled.
“Very illustrative,” a New Jersey congressman noted.
It was folksy, funny, and memorable, his delivery pitched to convey that he was a foreigner himself of sorts, one who’d just landed in Washington with a dispatch from the Real World.
“Every time he testified, he was completely undeferential,” Boucher recalled. “He was very direct and absolutely unintimidated.
“When he got in front of a subcommittee, it was magic.”
When Dorn filed the petition, in October 2003, 57 percent of the bedroom-furniture industry had signed on to the coalition. (Some companies, including Ethan Allen, remained neutral and were not computed in the tally.)
Furniture/Today reporter Powell Slaughter pored over the Department of Commerce and ITC websites, printing out everything he could find about the Tariff Act of 1930. Because China was a nonmarket economy, the Department of Commerce would have to use prices from a surrogate country—a non-Communist country with a comparable level of development, typically India or the Philippines—to determine the fair-market cost of the materials and labor needed to produce the furniture.
If the cost in the surrogate country was higher than the wholesale prices for Chinese-made goods, the difference between the two equaled how much the product was being dumped, and duties would be assessed accordingly—and retroactively. That meant that orders already placed for Chinese furniture could be hit with fees by the following spring.
Petitioners had to prove not only dumping but also domestic industry harm, but that was a piece of cake when you tallied up the job losses, with 28 percent of the entire domestic-furniture workforce eliminated over the past two and a half years. The factory-closing stories were by now so routine that Slaughter had recently taken an angry call from a source who accused him of forgetting the human cost of globalization by burying the latest factory-closing story on here.
