Allowing petitioners to choose between the ITC and their local U.S. district court for the injury determination would give injured domestic producers the opportunity to serve as private plaintiffs in seeking enforcement of trade remedy laws. The nonpolitical venue would also alleviate the potential for inconsistencies and partisanship in enforcement remedies.Sen. Specter's floor statement introducing the legislation echoed this reasoning and added some, umm, interesting "context." According to Specter, the current system is just too darn lax on foreign cheaters:
Because current administrative remedies have not been consistently and effectively enforced, I am introducing private right of action legislation to enforce the law. My legislation would allow petitioners to choose between the ITC and their local U.S. district court for the injury determination phase of their investigation. Doing so gives injured domestic producers the opportunity as private plaintiffs to control the litigation in seeking enforcement of our trade laws....I've already debunked a lot of the misleading rhetoric that the Senators (and their staff) have used to justify this legislation, in particular their reliance on classic "protectionist myths" about the US trade deficit, manufacturing jobs, trade enforcement and an alleged "race to the bottom" caused by free trade. But I had to wait until the bill's text was released before I could finish my review because I wasn't quite sure if the UFCA would cover only AD/CVD actions, which address "unfair" trading practices, or would include the safeguards actions (under Section 421 or Section 201 of US law), which deal with fairly-traded imports but, oddly, were also mentioned in Specter's floor speech. Without knowing this essential fact, it would be impossible for me to adequately address the bill's substance and some of the Senators' other claims. Well, the bill has been finally released to the public, so now we can take a closer look. Oh goody.
Congress heeded some of the concerns which I and others expressed and inserted a China-specific safeguard provision under section 421 of the Trade Act. But such a safeguard is only as effective as the President's willingness to enforce it. Seven petitions have been filed under section 421 since its inception. Of these, the ITC has made an affirmative determination of injury in five cases. Yet only one determination, handed down in the most recent Chinese tires case, has been upheld by the President. Despite overwhelming evidence to support the ITC's findings of injury, President Bush rejected all four previous petitions for relief on the ground that providing import relief was not in the economic interest of the United States. Since President Bush's decision, countless jobs in my State and across the country have been lost and the trade deficit has widened. It is difficult to understand how providing import relief was not in our economic interest.
President Obama's decision to uphold the ITC rulings in the Chinese tires case last year is a step in the right direction, but much more needs to be done to ensure that domestic industries enjoy the protection afforded to them by existing trade laws.
While it is my hope that this administration and future administrations will evaluate trade remedies objectively in terms of economic consequences, this act will provide a valuable tool for the domestic industry. I ask my colleagues on both sides of the aisle to join me in supporting this legislation....
Let me remind those who criticize our domestic safeguards that President Ronald Reagan, a staunch advocate of open markets, signed into law agreements limiting the imports of autos and steel and pushed for the Plaza Accord in 1985 which raised the value of the yen and made Japanese imports more expensive. President Reagan understood that free trade did not mean wholly unfettered, unregulated trade. Free trade does not mean turning a blind eye to illegal and unsavory practices committed by our trading partners.
My quick review of the legislation's language revealed two pretty big questions: (i) is such a change in US law, by the Senators' own metric, really necessary, and (ii) would this new bill, if enacted into law, violate established WTO disciplines on nations' use of AD/CVD measures? The answer to these questions appears to respectively be "hell no" and "probably." And the first answer reveals a lot about US "unfair trade laws" and the sneaky politicians who would seek to "strengthen" them.
As I indicated above, the primary substantive justification for the Senators' new bill is that current US AD/CVD laws are enforced in an "inconsistent," "partisan" and "political" manner. (Again note that we've already dispensed with the fake justifications re: the trade deficit, manufacturing, etc.) But a quick review the facts reveals these enforcement claims to be totally and utterly false. First, the ITC is a bi-partisan, independent, quasi-judicial federal agency. By law, it is run by six commissioners, no more than three of which can be from one political party (i.e., it always has three Republicans and three Democrats). So claims of "partisanship" and "politics" are obviously groundless. Indeed, just a few months ago the ITC was being heralded by domestic unions and their congressional champions (like new Ways & Means Chairman Sander Levin (D-MI)) for its "independence" and "bipartisanship." (Of course, that was wayyy back when the ITC was siding for them in the Section 421 tires case, so it's like totally different now. Totally.) Furthermore, in AD/CVD cases, unlike safeguards cases, the ITC's injury determination is final and non-reviewable by the President. This is one reason why it was so important for me to see the actual text of the UFCA: because it only covers AD/CVD actions, the ITC's independence and bipartisanship is simply not at issue.
Second, the claim that the ITC's injury determinations in AD/CVD cases are "inconsistent," or that US AD/CVD investigations are insufficiently supportive of domestic industries defies reality. As Cato's Dan Ikenson noted a few weeks ago, the domestics have chalked up quite a lot of wins over the years:
[O]ver the years the United States has been the single largest user of the antidumping and countervailing duty laws. More than any other country, the United States has restricted imports that were determined (according to a processes that can hardly be described as objective) to be “dumped” by foreign companies or subsidized by foreign governments. As of 2009, there are 325 active antidumping and countervailing duty measures in place in the United States, which trails only India’s 386 active measures.Moreover, it's not like the US industries/unions reached those 325 wins with much difficulty, especially considering that US trade remedies investigations are supposed to be balanced, impartial affairs. Based on my review of the 375 AD/CVD cases initiated between 2000 and 2009, only 38.7% (145) resulted in a "loss" for the domestic industry - a rather nice .613 winning percentage. Moreover, only 126 (33.6%) of those 145 "losses" were based on a negative preliminary or final determination from the ITC (the rest were from the US Department of Commerce, which isn't covered by the Specter/Casey/Brown legislation). In other words, since 2000 the ITC has "inconsistently" ruled in favor of US companies or their unions in about two out of every three AD/CVD investigations!
I don't know about you, but that seems pretty darn "consistent" to me. (Indeed, such pro-domestic consistency has been a longstanding criticism of US trade remedies laws.)
Of course, the good Senators know these statistics as well as I do, and this is precisely why Sen. Specter changes the subject in his floor remarks. Instead of talking about the high frequency or total number of AD/CVD "wins" for the domestics, Specter brings up the much different history of US safeguards investigations, particularly the infrequent countermeasures established under Section 421 (aka "China-specific safeguards"). The Senator utterly fails, however, to mention that the President has total discretion under US law to impose safeguards remedies based on whether their imposition would be in the "national economic interest." He further fails to say that AD/CVD laws have no such presidential review or discretion and, as noted above, instead are final after the "independent, bipartisan" ITC makes its final injury determination. But let's face it: Specter kinda has to change the subject - a .613 winning percentage just doesn't evoke much sympathy (except maybe from Yankee fans).
But the Senators and other UFCA supporters don't care about silly things like sympathy or reality, now do they? No, they only care about more protection (and less foreign competition), and this bill could definitely help them improve that paltry .613 by allowing domestic companies and unions (i) to "shop" for sympathetic US court districts (Detroit, anyone?) and (ii) to replace the independent ITC commissioners (and their economic expertise) with a jury of laypeople who have been routinely mislead about the evils of free trade by people like Senators Specter, Casey and Brown.
(Quite the vicious cycle, eh?)
The UFCA also raises concerns about whether it would, after being signed into law, comply with WTO rules. Sen. Specter claims that the bill would be, like, totally WTO-consistent, and the legislation contains a short concluding section (Sec. 4) about WTO notifications after enactment. However, a quick review of a WTO Panel decision against the Antidumping Act of 1916 - an old US law that allowed for a similar "private right of action" in US courts for antidumping cases - shows that the UFCA could have some WTO problems. (Full disclosure: I'm obviously not doing a full legal analysis here, and this should in no way be considered legal advice; this is just a quick-and-dirty glance at some potential problems.)
In particular, the 1916 Act Panel decision indicates that the UFCA could violate Article VI:1 of the GATT 1994 and Articles 1, 3 and 4 of the WTO's Anti-dumping Agreement (ADA). (Similar provisions on "material injury" and other issues in the WTO Agreement on Subsidies and Countervailing Measures could also be in play, but the 1916 Act case didn't deal with those issues, and I'm too lazy to get into them now.) Two issues in particular stick out for me. First is one of the EC's primary GATT Art. VI:1 arguments against the 1916 Act that could be equally applicable to the UFCA:
The absence of an administrative procedure means that no investigation conforming to the requirements of the Anti-Dumping Agreement is conducted. Court proceedings are not a substitute for such administrative investigations. In the case of civil damages proceedings, the proceeding is conducted in the framework of the adversarial relationship between the parties. In both civil and criminal proceedings, the ultimate factual finding is made by the judge and/or a jury, who do not have the specialist knowledge of the subject of national authorities – a factor which is important in such a technical area.Cut-and-paste that argument! Second, the UFCA provisions (e.g., Sec. 791(a)) that allow individual US companies or their unions (as opposed to all petitioners together) to seek a separate injury determination in the US courts might raise problems under Art. 4 of the ADA, which requires a determination of material injury for the "industry as a whole," not individual members of that industry or their unions. How this measure could be applied in practice (e.g., where one company goes to the courts and another stays at the ITC) without violating Art. 4 is rather unclear.
But I digress. The much more important point here, I think, isn't the myriad WTO problems that the UFCA could raise if it became law. It's the fact that the fundamental reasons for enacting the UFCA in the first place are completely bogus. And without any real reason to pass this bill, the fact that it might be WTO-inconsistent after passage is just academic.
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