U.S. Trade Remedy Laws: Consumers are Collateral Damage
May 28, 2004
Would you support a flawed
law simply because a bad law is better than none? Wouldn't it make more sense
to refine and improve that law? When dealing with our country's antidumping
and countervailing duty laws, many officials in our government strangely enough
think not. In a May 11th panel discussion hosted by CWT, it became disturbingly
clear that while trade remedy laws inflict pain on thousands of downstream
consuming industries in the United States, their employees, and their customers,
some in Congress and the Administration trivialize the harm as "collateral
damage," a price consumers should be willing to pay so that our government
can avoid the difficult business of trade reform.
Trade remedies are government measures to reduce the impact of imports on
domestic industries. Antidumping duties are used to counter the effects of
imports sold at low prices on the domestic market. Countervailing duties are
used to counter the price effects of imports that benefit from subsidies in
their home countries. Safeguard remedies, also known as Section 201 remedies,
are used to reduce the injurious impact of surges in fairly traded imports.
Trade remedies are supported by some industries that are sensitive to foreign
competition. Industries which import goods as part of their manufacturing
process and consumers of final products support reform of the trade remedy
laws. Why? Because the current law does not require our trade agencies to
consider the impact of trade remedies on these downstream consuming industries
and their customers before implementing new duties. When new duties are imposed
on competing imports to protect a domestic industry, the duty increases the
price of the imports. The cost increases are passed through to downstream
users in the marketplace as higher prices. These higher prices make imports
less competitive and allow domestic producers to raise their prices. Industries
that need access to world-competitive raw materials and components are harmed
because their foreign competitors don't have to pay artificially high prices
for their production inputs. The finished products come into the U.S. without
the burden of dumping duties. Artificially inflating prices then forces downstream
companies either to absorb the price increases, or to pass the cost along
to their customers, risking the loss of their customers' business to foreign
competitors whose prices are not inflated. Either way, these companies' bottom
line is harmed, threatening the job security of their employees and driving
up the cost of living. Sometimes these companies move their operations overseas
rather than pay the higher price for their inputs. These jobs are likely never
to return to the United States.
The implementation of trade remedies is further complicated by the politicization
of the process. Theoretically, the two trade agencies responsible for implementing
these laws, the International Trade Commission (ITC) and the U.S. Department
of Commerce (DOC), make their determinations under statutes passed by Congress
and rules promulgated by those agencies. In truth, decision-making is heavily
influenced by the industries involved and their representatives in Congress
who go to bat for them. It is not unusual for officials in the ITC and DOC
to receive a letter with two dozen congressional signatures, urging they find
in favor of the domestic industry. Some of these congressional signatories
may serve on the Commerce and ITC appropriations subcommittees. Fearing a
reduction in their funding, ITC and DOC officials are vulnerable to pressure
from these members. In addition, in recent years Congress has passed legislation
that amends criteria for determining injury which make it more likely that
determinations would be made in favor of the petitioning industry. This was
done without any thought to how downstream consumers, both industrial and
retail, would be affected. CATO Institute research indicates that the ITC
finds injury or evidence of dumping in a full 67% of the cases filed by American
industries.
This begs the question: why do members of Congress consider the jobs of Americans
in producing industries to be more important than those in consuming industries?
Is one type of job better than another? Shouldn't all Americans be treated
equally under the law? Our U.S. trade remedy laws beg for reform because they
fail miserably in this area.
To avoid reforming our trade remedy laws because it is not politically expedient
is a dereliction of duty. No member of Congress should be willing to accept
"collateral damage" as the status quo, especially if it can be avoided.
The employees of consuming industries pay taxes like everyone else and deserve
equal consideration under the law. Our trade remedies should be implemented
in such a way that they do not harm Americans without first considering their
situation. A prime example is the current antidumping case against imported
shrimp. Tariffs have been sought to help the 13,000 shrimp fishermen in the
United States (who by the way cannot begin to meet domestic demand). However,
these dumping tariffs will negatively impact the jobs of the 250,000 Americans
who work in the shrimp processing industry. When the supply of imported shrimp
drops because fewer Americans can afford it, many in this downstream industry
will lose their jobs. This case illustrates that when the collateral damage
outweighs the gain, something is clearly not working.
Consumers for World Trade calls on Congress to find the courage to reform
U.S. trade remedy laws NOW!