The Senate Comes Through: Byrd Amendment May Be Repealed in 2007!!

January 4, 2006

Of all the programs that could have been cut to reduce the federal deficit, the Byrd Amendment, more formally known as the Continued Dumping and Subsidy Offset Act (CDSOA), was among the most obvious choices. The CDSOA is a law that permits anti-dumping and countervailing duty revenue to be funneled out of the U.S. treasury into the coffers of those companies that asked that they be imposed in the first place. The Bush Administration had called this "double dipping" because American consumers pay twice for the protection of many products as a result of the Byrd Amendment. They pay the increased price of the product that results from the imposition of extra duties on imports, and as taxpayers they pay a select few companies duty revenues that should be going into the general treasury of the United States to fund our Federal budget. This is a significant cost--over a billion dollars to date, and potentially many billions more in the future if the Byrd Amendment had not repealed.

While the House of Representatives supported a flat out and immediate repeal of the Byrd Amendment, the senate was not as supportive. In a conference session composed of a handful of representatives and senators a compromise deal was worked out. In the end the House and Senate voted to repeal the Amendment at the end of 2007, which means disbursements will be made for two more years. While this is not the ideal scenario we had hoped for, it is nevertheless a huge success. The problems with the Byrd Amendment are many:

• The Byrd Amendment forces American companies that depend on imported products--from direct importers to processors to wholesalers and retailers--to subsidize those companies solely because they participated in or supported anti-dumping and countervailing duty petitions. Companies that choose not to participate in such cases are penalized simply because they chose not to seek protection, and many of these cases were filed long before the Byrd Amendment was enacted. This windfall serves no public policy purpose.
• Byrd Amendment money goes to a very small number of companies. More than half the Byrd Amendment payments in 2004 went to only nine companies, and more than 80 percent of the payments went to only forty-four companies nationwide. This is the worst kind of corporate welfare because it rewards a few companies, and thus distorts the competitive structure in an entire sector, in favor of companies who rely on protection.
• The Byrd Amendment places no restrictions on the use of the government subsidies companies receive. Allocation of Byrd Amendment money is based on "qualifying expenditures," which are not monitored or audited by Customs or any government agency. It is simply additional cash for which the recipients do not have to account once they have been paid.
• The possibility of receiving Byrd payments creates a powerful incentive for filing and perpetuating antidumping and countervailing duty cases. U.S. companies are encouraged to file trade actions knowing full well that they will be eligible for Byrd money. U.S. companies in line to receive these payments have a clear incentive to include more products within the scope of anti-dumping cases, including products not even made in the U.S.
• The Byrd Amendment violates international trading rules. The United States relies on an open global trading system for our export sales and our purchase of inputs. The continued existence of the Byrd Amendment undermines the rules-based trading system, invites our trading partners to close parts of their markets to US exports in retaliation, and increases the cost of imported inputs under antidumping orders.
• The Byrd Amendment is a blatant WTO violation, and US trading partners are now imposing or have announced they will impose hundreds of millions of dollars in retaliatory duties on US exports, including dairy products, wine, oysters, apparel, textiles, steel and other products. The EU, Japan, Mexico and Canada have already imposed sanctions on our exports, and other plaintiff countries are about to do so as a result of the failure of Congress to repeal this WTO-illegal measure. These sanctions will remain in effect until Congress repeals this law, costing industries around the country millions in export earnings. Wine, dairy, oysters and shellfish processors, apparel manufacturers and others are on the firing line as a result of Congress' failure to act.
• Several of these issues are addressed in the GAO report of September 26, 2005, which condemns the CDSOA. This report exposed serious flaws in the Act and described it as a poorly planned and implemented law that has given nearly $400 million in four years to a single company, and nearly half of the $1 billion in funds distributed to only three companies.
  
  Also, this tariff revenue could be spent in much better ways than a no-strings-attached handout to a small group of companies. When the Byrd Amendment was adopted, there was a large budget surplus. Today, there is a larger deficit. We must fund the war in Iraq, rebuild after hurricanes Katrina, Rita and Wilma, and keep our commitments to the elderly and those who are not well off. If we must rein in spending for the neediest among us, we must first deal with spending that is largely wasteful and does not further national priorities.

CWT applauds the Senate for doing the right thing by voting to repeal the Byrd Amendment.

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