Monday, November 23, 2009

Some Needed Perspective on "Trade War" Reporting

Although I have no scientific data to back this up, I think it's safe to say that I take a backseat to very few people in my criticism of recent US trade policy. That said, I've grown quite concerned with a growing number of media reports that a recent spike in US trade remedies (i.e., antidumping and countervailing duty) cases is a scary signal of burgeoining US protectionism or an impending "trade war" with China.  For example, last week the AFP reported:
Tensions between the world's number-one and number-three economies intensified last week when the US slapped anti-dumping tariffs of up to 99 percent on imports of some Chinese steel products used in the oil industry.
Similar statements have appeared in lots of recent op-eds and wire service reports, each pointing to a 2009 increase in antidumping and CVD cases as hard evidence that a tit-for-tat trade war between the United States and China is brewing. (Insert ominous "dah-dah-duhhhh" here.)

Such "analysis," however, demonstrates a basic misunderstanding of how AD/CVD cases are initiated and decided in the United States, and it might actually do free traders a disservice.  Sure, China is complaining, but that's hardly anything new.  The fact is that US government does not bring AD/CVD cases.  They instead are the result of massive petitions filed under US law by private domestic companies (or coalitions of companies) and/or their unions pursuant to their commercial interests.  Such petitions typically take months to produce, costing hundreds of thousands of dollars in lawyer and economist fees - hardly an efficient retaliatory weapon.  The US government (through the Department of Commerce) can, by law, have a small role in the crafting of an AD/CVD petition but only in a basic advisory capacity (e.g., to assist the petitioner with meeting the basic legal criteria for a proper petition) and little more.  And once filed, cases are essentially on "autopilot," with DOC's initiation of the case, as well as affirmative preliminary determinations by the DOC and the US International Trade Commission, all but certain (a common free trader complaint against the law, actually).  Meanwhile, the President himself has no formal role in the process.

Such automaticity, and the lack of White House involvement, means that it's a real stretch to claim that the filing of an AD/CVD petition - or the subsequent initiation of case against China, the preliminary domestic injury determination by the ITC or the preliminary calculation of antidumping or CVD duties by DOC - is a sure sign of US protectionism.  Indeed, even a final injury determination or the actual imposition of AD/CVD duties isn't a good indicator of surging American isolationism: according to a plethora of studies, the filing of an AD/CVD petition almost always results in the final imposition of remedial tariffs (unless respondents hire my firm, of course).

Yet even if one were to conclude that the simple initation of an AD/CVD case amounts US "protectionism," the number of AD/CVD cases in 2009 is well within recent historical norms. According to DOC statistics, the United States has initiated 22 AD or CVD cases against China on 12 products so far in 2009. That might sound like a lot, but consider that in 2008 there were 15 AD/CVD cases against China, and 19 such cases in 2007. (These elevated numbers actually have persisted ever since the "free trade" Bush Administration changed its decades-old policy in 2006 and started applying the CVD law to imports from China and other "non-market economies.")  Sure, you can blame US trade law for producing such numerous and seemingly pre-ordained outcomes, but it was doing that long before President Obama took office.

By contrast, the President's decision to impose prohibitive tariffs on Chinese tires under Section 421 of US trade law was both completely discretionary and the first of its kind.  As such, it warrants intense criticism and serious concern about increased White House protectionism and the future of US trade policy.

With the 421 decision, the White House's failure to engage at the WTO, its shelving of pending FTAs with Colombia, Panama and South Korea, its refusal to resolve te Buy American and Mexican Trucks disputes, and USTR's increased "enforcement efforts," free traders have plenty of bad moves to criticize, and journalists have plenty of troubling signs to report.   But when these well-meaning souls add AD/CVD initiations to the list, they risk undermining their message for those policymakers and readers who understand the difference between "typical" and "extraordinary" US trade policy.  Such a move, therefore, could actually end up hindering the important causes of trade liberalization and US accountability, rather than promoting them.


Anonymous said...

From the perspective of legal procedures, you are right to say that the Doc and the white house are not able to control the ad/cvd initiation and, to some extent,the result of these initiation because they have to follow domestic procedures and formulas. But, the doc and the itc are not living in an vacuum, and their attitude towards protectionism could realized in a way that looks like technical and legal. just look at what the doc do on double remedy issues against china, anybody (even the international trade court) pointed out there was a problem of double remedy, the doc pretent to be a deaf. so, ,more trade remedy measures in the US, to some extent and in substance, is a sign of rising protectionism in the US.

Scott said...

Actually, DOC's resistance to the Court of International Trade in the CVD-NME case actually fits perfectly into my analysis. Anyone who has practiced trade law in the United States knows all-too-well that DOC has routinely resisted CIT rulings on myriad issues over the years. Thus, this "trend" is much like the historically consistent number of AD/CVD cases and high probability that petitions lead to final orders (and duties). In other words, such "protectionism" is nothing new - it's just more of the same. Hence, it cannot be said to be a good sign of "rising" US protectionism in 2009.