Tuesday, December 29, 2009

Something to Watch before 2010

If you, like me, find yourself completely Yemen'ed out, here's a little something to watch as 2009 draws to a close: will domestic industries in the US again file a slew of new trade remedies (e.g., anti-dumping, countervailing duty or safeguards) petitions right before the end of the quarter?

As loyal readers of this blog (all threefive of them!) will recall, there were a bunch of new AD/CVD petitions filed right before 3Q09 came to a close in September. Some lazy journalists and well-intentioned-yet-misguided free traders misinterpreted this spike in trade investigations as a sign of impending protectionist doom, when it was really nothing more than petitioners' being strategic about the timing of the case: to get import protection, they needed to prove that subject imports are "materially injuring" them, and the International Trade Commission (ITC) determines injury based on the 3 calendar years plus any interim quarters prior to the quarter in which the petition is filed, so the petitioners filed before the end of September because they probably saw that their bottom lines had improved significantly in 3Q09 thus making it hard to appear "materially injured" under the law.  (The 3Q09 spike in US GDP and the stock market rally starting in 2Q09 is evidence that my guess here is right, especially since there have been no new petitions filed since that big September spike.)

Given this background, if we see yet another spike in AD/CVD (or safeguards cases, including those against China under Section 421) before Friday, we can realistically surmise two things:

First and foremost, barring a crazy jump in Section 421 cases (which, although unlikely, would be an ominous development), a gaggle of pre-2010 trade remedies petitions would not be a sign that the White House is full of protectionist jerks (obvious zinger: there are plenty of other signs of that!).  As I said when the 3Q filings occurred, the number of 2009 trade remedies investigations remains well within historical averages, and AD/CVD petitions reflect private, commercial plays, not public policy moves.  This reality is especially true at the end of the year when the holidays would slow respondents' reaction to any newly-filed petition.

Second, and for the same reasons as those outlined above, a rash of new petitions could actually be a sign that the petitioning companies and their sectors have done better in 4Q09 and want to make sure that the ITC doesn't examine their 4Q (or subsequent quarters') good fortunes.  More broadly, this also could signal that the US economy is continuing to rebound, and that the domestic industries are betting on that (remember, again, that weakness - or at least the appearance of weakness - is a good thing for petitioners at the ITC).  Of course, this "good" economic news probably won't be too well-received by the downstream companies that rely on the targeted imports, but that's a story for another time.

On the other hand, if we see no new AD/CVD petitions before the end of 2009, it might be cause for concern, as potential petitioners are anticipating bad 4Q09 numbers and/or think that things might actually get worse in 2010 (another bad quarter next year could help them paper over an abnormally good 3Q09).  Then again, a lack of pre-2010 cases might simply reflect the fact that - depressing as it may be for the DC trade bar - petitioners let it all ride in September.

Like I said, definitely something to watch.

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