Monday, January 2, 2012

Meet the New Year, Same As the Old Year

One of the big trade developments of 2011 was the continuing tit-for-tat protectionist battle (I refuse to say "trade war") between the United States and China via national trade remedies laws and WTO dispute settlement.  Particularly contentious were disputes over allegedly-subsidized "green" technology products, China's apparent retaliation to unilateral US trade actions via its own trade remedies laws, and the United States' simultaneous application of its CVD law to China (and Vietnam), while treating them as as "non-market economies" in anti-dumping investigations - something that both the WTO's Appellate Body and the US Courts have found to be illegal.  These three issues resulted in a year of a lot of litigation and ultimately a lot of duties against US and Chinese imports in (much to consumers' and exporters' dismay, natch).

And if December is any indication, 2012 will likely see more of the same.  Maybe a lot more.

In the middle of last month, China's Ministry of Commerce (MOFCOM) announced that it was imposing anti-dumping and countervailing duties on US imports of large automobiles and SUVs - the result, as you may recall, of an investigation initiated in response to the Obama administration's 2009 decision to impose duties on Chinese tires under "Section 421" of US trade law.  As the FT neatly explains, MOFCOM's announcement is part of a growing trend of Chinese "retaliation" against the US and other countries via national trade remedies laws - something that Chinese law uniquely allows:
In a statement, China’s commerce ministry said on Wednesday that it was taking action in response to damage to its car industry from US “dumping and subsidies”. The move will affect several larger vehicles popular in China, including sport utility vehicles made by Germany’s BMW and Mercedes-Benz brands at their US plants. Shares of BMW and Daimler, which owns Mercedes, fell 5 per cent and 3 per cent respectively on Wednesday.

In addition to the two German premium brands, the ministry is also targeting models manufactured by General Motors, Ford Motor, Chrysler and Honda’s US unit. The individual duties will range from 2 per cent to 21.5 per cent and be imposed for two years on imported cars and SUVs with engines larger than 2.5 litres....

The move is however the latest in a flurry of legal actions between the US and China, in which each country accused the other of supporting domestic industry with illicit state subsidies and challenged each other’s use of emergency blocks on imports.

Last week the US said it was taking a case against China to the World Trade Organisation, arguing that Beijing’s use of anti-dumping measures against US poultry exports was illegal under global trade rules. Washington also has a similar WTO case pending against China for blocking steel imports from the US. “We are very disappointed in this action by China,” said Andrea Mead, a spokesperson for the US trade representative’s office.

China started the process of imposing anti-dumping duties on American poultry and cars in 2009, shortly after the US for the first time used a special measure to block imports of tyres from China. Beijing subsequently challenged the US’s action to block tyre imports at the WTO, but lost the case after a judicial panel ruled that Washington had acted correctly within the law.
As I told the FT in that same article, because Chinese law does not require MOFCOM to announce the receipt of a trade remedies petition from its domestic industry or to decide whether to initiate an investigation within a specified timeframe, “China can quickly initiate ‘surprise’ investigations in response to unilateral trade actions by the United States and other trading partners that it doesn’t like.”  Moreover, Chinese law doesn't require MOFCOM to immediately impose duties upon reaching final determinations in AD/CVD investigations that subject imports are dumped/subsidized in the Chinese market and injuring the domestic industry.  Both aspects are different from US law, and the latter provision allows the Chinese government to announce final AD/CVD duties without actually imposing them.  Thus, the un-imposed duties can act as a "threat" of sorts hanging over the head of US and other exporters (and, of course, the US government).  This delay happened in the automobiles case.  The final measures were announced in May 2011 but not imposed until mid-December - the week after MOFCOM blasted a unanimous decision by the US International Trade Commission to continue a highly controversial AD/CVD investigation of Chinese solar panels.  This little coincidence has led some to speculate - with some justification, it seems - that China finally decided to impose the automobile duties as a response to the ITC's decision. (I, however, have no idea if that's really the case.)

Based on USTR Ron Kirk's rather disgruntled response to MOFCOM's announcement, it's quite possible that the US will also challenge the automobile duties at the WTO - the third such dispute (as the FT notes).  So this bilateral fracas should continue to work itself out throughout 2012 - the only question, really, is whether China will initiate any more AD/CVD investigations against US imports in 2012 or impose new duties on those products as a result. (My guess: probably yes, but it could depend on future US antagonism.)

Of course, the United States isn't only on the receiving end of questionable trade remedies actions - something that the aforementioned WTO and court cases make clear.  In fact, last Thursday, the US wind industry filed anti-dumping and countervailing duty petitions against imports of wind towers from China and Vietnam - both still considered "non-market economies" under US anti-dumping law.  Bloomberg reports on the petitions:
Wind-tower producers from China and Vietnam are selling their renewable-energy equipment below cost in the U.S., according to an attorney for American producers that petitioned the U.S. to impose anti-dumping duties...

The wind-tower complaint was filed by Broadwind Energy Inc. (BWEN); Otter Tail Corp. (OTTR)’s DMI Industries; a unit of Trinity Industries Inc.; and Katana Summit, Price, who is based in Washington, said in an interview.

The wind-tower companies also filed a countervailing-duty complaint against China. The U.S. uses more than 300 anti- dumping and countervailing duty orders to shield American-made goods, from honey to bedroom furniture, against global competition it deems unfair and damaging to U.S. companies. About half the orders target iron and steel products. Anti-dumping duties apply to goods sold overseas at or below the price in the home country. Towers from China sell at 64 percent of their normal value and those from Vietnam at 59 percent, according to the petition by the U.S. companies....

China accounts for a third of all U.S. actions on imports, the most of any country, including about 100 anti-dumping and more than two dozen countervailing duty orders, according to the U.S. trade commission....
Bloomberg's article also helpfully notes that the wind tower petitions are part of a growing trend of trade disputes - including the aforementioned solar panels investigations - between the US and China over "green" products. The wind towers case thus adds to rapidly expanding volume of green trade disputes around the world - something I've repeatedly noted (and predicted) over the last couple years.

Bloomberg fails to mention, however, the huge mess that is the current legal status of the US CVD law with respect to the NMEs China and Vietnam.  For both of our sakes, I won't again get into those weeds tonight, but recent events in US courts and the WTO will likely cast a rather conspicuous shadow over DOC's initiation of this investigation (although I have no doubt that DOC will act as if nothing's going on).  And, considering China's rather loud response to the latest court decision ruling CVDs on Chinese imports illegal,  further litigation over all of these investigations is extremely likely in 2012.

So to recap: last year we saw both the US and China engage in questionable trade remedies actions against the other's imports and then challenge those actions at the WTO (and, in China's case, in US courts).  We're only two days into 2012, and it looks like this year will follow a very similar storyline.

Stay tuned.

(And Happy New Year!)

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