Attention NC Businessfolk: Learn About US FTAs in Greensboro

As you many have noticed, things have been pretty quiet around here for the last week or so.  This has mostly been due to the Labor Day holiday and a rather, ahem, spirited work schedule of late, but it's also because I've been working hard on few fun extracurriculars, including my new Cato Institute paper on American subsidy and anti-subsidy policy (more on that later) and several upcoming speaking engagements.  The first one of those events is next week: I'll be speaking at a US Commercial Service event in Greensboro, NC on how to take advantage of the new US Free Trade Agreements.  As I know you're all very curious about it, here's the skinny:

Benefiting from the Colombia and Korea Free Trade Agreements

The Colombia and Korea Free Trade Agreements (FTAs) entered into force on May 15, 2012. On the day of implementation, over 80% of U.S. industrial goods exported to these countries began duty-free entry.

• Colombia is the fifth largest economy in Latin America with the third largest population. Colombia is the 3rd largest market for U.S. exports in Latin America.  

• Korea is the United States' 7th largest trading partner. The U.S.-Korea FTA has the potential to increase U.S. exports to Korea by USD 10-12 billion.

Hear from industry and government experts about market opportunities in these two countries, and how your company can leverage the FTAs to make sales. You will learn how FTAs impact NC businesses, market opportunities, how to take advantage of the FTAs, and the importance and impact of FTAs.

A more detailed brochure on the event, including registration information, is here.  If you're in the area and are looking to get your business more involved in the international trade game, this is a good place to start.

And I'll be returning to a more normalized blogging schedule in the very near future.  (I'm sure you just can't wait!) 

Hope to see you in Greensboro.

Next US-China Trade Dispute Puts US "Green" Subsidies in the Crosshairs... Again

Late last week the Chinese government announced new anti-dumping and countervailing duty (anti-subsidy) investigations of US and Korean imports of polysilicon - a primary input for the production of solar panels.

China is investigating whether exporters from the U.S. and South Korea sold solar-grade polysilicon below cost, a practice known as dumping, as part of a probe following complaints from four domestic companies.

The world’s biggest supplier of solar panels also started a countervailing duty investigation into the commodity from the U.S., China’s Ministry of Commerce said in two separate statements. The investigation, scheduled to last a year from today with the possibility of an extension to Jan. 20, 2014, will cover the 12 months from July 1, 2011.

The actions escalate a trade dispute between the world’s biggest economies after the U.S. said in May it will impose duties on Chinese solar cells, which are devices made from polysilicon and assembled into panels that convert sunlight into electricity.

As the article above notes, the new investigations are simply the latest in a long string of tit-for-tat trade disputes between the United States and China.  The US has conducted a boatload AD/CVD investigations of Chinese products over the last few years, and China recently began to respond in-kind - typically in response to US trade actions (like President Obama's "Section 421" tire tariffs).

In that regard, the polysilicon investigations are a bit different from recent Chinese AD/CVD cases on US chicken, steel and autos for two reasons.  First, China's initiation of these cases doesn't appear to be an immediate and direct response to any US action against Chinese imports: as noted above, the last major US act was the preliminary anti-dumping duties in May 2012 (although President Obama did recently announce WTO dispute challenging those Chinese AD/CVD measures on US autos).  Second, the Chinese polysilicon industry has been complaining about dumped and subsidized US imports for almost a year now and had been ratcheting up the pressure on China's Commerce Department (MOFCOM) over the last few weeks.  Thus, this latest set of Chinese AD/CVD investigations might not be - or at least appear to be - direct retaliation against US measures but instead a more standard trade remedies complaint against allegedly dumped or subsidized imports.

And speaking of those subsidies, the petition from the Chinese industry (available here and here) and the Chinese government announcement provide a laundry list of US state and federal subsidies to "green" industries that will be under investigation, including:

• Advanced Energy Manufacturing Tax Credit (federal)
• Refundable Photovoltaic Manufacturing Tax Credit (state)
• MEGA High-tech Tax Credit (state)
• High-tech Anchor Company Credit (state)
• Renewable Energy Renaissance Zones – Michigan Renaissance Zone Act (state)
• Alternative Energy Personal Property Tax Exemption (state)
• MEGA Standard Job Creation Tax Credit (state)

The petition and announcement are in Chinese, so it's a bit tough to parse everything, but I can see that the US states involved are Michigan, Tennessee, Idaho and Washington.

Of course, this is not the first time that China has complained about US subsidies to green manufacturers.  Back in May, MOFCOM released a preliminary report alleging that numerous state subsidies for renewable energy manufacturers violated WTO rules, but that report has not resulted in actual litigation (yet).  Of course, other countries have imposed anti-subsidy measures on US alternative energy imports - most notably biofuels (biodiesel in the EU, Peru and Australia and ethanol in the EU).  

So this latest Chinese investigation of US polysilicon is pretty much par for the green subsidy course.  The only real question is: given the depth and breadth of US green subsidies at all levels of government, how many more investigations (and eventual duties) are on the way?

(p.s. Yes, of course I'm aware that the Chinese government has more than its fair share of green subsidy shenanigans.  That doesn't really matter for tonight's purposes.)

Zeroing's Zombies, ctd.

When the United States first announced that it had settled WTO disputes with the EU and Japan about the Commerce Department's use of "zeroing" in anti-dumping administrative reviews, I noted that, while the policy might be "dead," its zombies would be roaming the earth for quite a while:

[I]t looks like (i) all of the pending WTO disputes unrelated to the EU/Japan agreements will continue unabated; and (ii) foreign exporters, US importers and/or foreign governments will have to bring additional WTO challenges in order to force USTR to recalculate all the duties that were illegally calculated and collected pursuant to the zeroing methodology. And, even though WTO rules (or at least the Appellate Body's interpretation of them) are abundantly clear on the illegality of zeroing, point (ii) could, of course, cost plenty of time and money before it actually produces results. (Sorry, poor developing countries with tiny trade budgets, but you're gonna have to pay a lot and threaten us before we correct our errors!)

Since that time, DOC issued its Final Rule on zeroing.  It has confirmed my initial concerns... and raised a few more, as noted in a recent Law360[$] article on the subject:

Despite a recent announcement by the U.S. Department of Commerce that it will stop using zeroing in administrative reviews of anti-dumping duties, the years-long battle over the controversial methodology is far from over, attorneys say....

[T]he notice by Commerce leaves several issues unresolved and does not completely foreclose the use of zeroing in all future cases, meaning that litigation and acrimony over the practice will continue for the foreseeable future, attorneys said.

So what are those "unresolved issues"?  Well, first, the new Commerce zeroing rule only applies on a prospective basis:

[T]he announcement by Commerce to exclude zeroing in administrative cases applied only on a prospective basis, meaning it would have no effect on duties that have already been collected based on the zeroing methodology.

“There's no possibility via the Department of Commerce for a recalculation or a refund of those duties, despite the fact that this is an admission by Commerce that what they've been doing for years and years is inconsistent with [WTO] Appellate Body decisions”....

Second, the rule doesn't actually kill off zeroing entirely because it leaves open the possibility Commerce applying the methodology in an investigation where "targeted dumping" is alleged:

Despite what the announcement says, it's also quite possible that Commerce will continue to use zeroing in some cases, attorneys said, because the U.S. has taken the position that the use of zeroing is acceptable in cases of so-called “targeted dumping.”

Targeted dumping is when a company is not dumping its products in the U.S. overall, but is instead dumping its products in a specific region or during specific time periods. For instance, if a company were selling its products at less than fair value in the southwest U.S., but at more than fair value in the northeast, it would be engaged in targeted dumping....

I first discussed Commerce's newfound love of targeted dumping back in 2010, and attorneys surveyed by Law360 earlier this week (including me) noted that, because this little loophole still exists (and because zeroing leads to higher anti-dumping duties), it's extremely likely that domestic petitioners will allege targeted dumping in most future AD cases.  It's also extremely likely that new domestic and WTO litigation will emerge as US importers and foreign exporters/countries challenge the zeroing methodology in targeted dumping cases (neither a WTO panel nor the Appellate Body has ruled on zeroing and targeted dumping... yet).  The outcome of such challenges isn't clear, but if past WTO rulings on zeroing in other contexts are any indication, the US will likely lose here too.  Eventually.

Third, and as I noted a couple weeks ago, Commerce's Final Rule doesn't end several WTO disputes and US court cases on zeroing that are already in progress, and it also doesn't foreclose additional disputes for anti-dumping reviews not covered by the rule (e.g., reviews just recently concluded or still in progress):

The new rule applies to all future dumping cases, but other countries that have challenged the use of zeroing could still impose retaliatory measures on the U.S. if they prevail at the WTO. While the U.S. has said it hopes the new rule will assuage the concerns those countries have about zeroing, it remains to be seen how they will respond, attorneys said....

The new rule also has no effect on the numerous cases pending in U.S. courts over the use of zeroing in past reviews, [attorney Lew] Leibowitz said.

“There are a lot of cases over duties that are tied up in litigation, and the rule doesn't speak to those,” he said. “It's up to the courts to decide if the U.S. violated U.S. laws.”

Last year, the Federal Circuit ruled in two cases that Commerce had failed to adequately explain its rationale for using zeroing in administrative reviews, but not in original investigations.

Those cases, which are still pending, and others at the U.S. Court of International Trade each apply only to the individual investigation at issue, so litigation over the past use of zeroing is likely to go on for some time.

Well, it no longer "remains to be seen" how countries will respond to the new zeroing rule, as well as the US-Japan and US-EU Agreements.  They are going to fight, despite USTR's "hopes" that they'll just pipe down, accept the fact their companies paid millions of dollars in additional (illegal) anti-dumping duties in "old" reviews where zeroing was used, and be happy about Commerce's much-delayed (and coerced!) change of heart.  (Shocking, I know.)  Two very recent examples make this fact very clear.

First, the WTO announced on Tuesday that its Dispute Settlement Body established a panel to address Korea's January 2012 complaint against the United States' use of zeroing in anti-dumping reviews of certain Korean steel products.  The announcement shows that Commerce's Final Rule was insufficient to address Korea's concerns (emphasis mine):

Korea explained that consultations with the US, requested on 31 January 2011, allowed for a better understanding of the parties’ positions but failed to resolve the dispute. Korea noted that the US announced it would no longer use zeroing in annual reviews and welcomed the US efforts (see also disputes DS322, DS350 and DS294 below). Korea regretted that the US plans did not go far enough to fully address its concerns. Korea noted that zeroing in administrative reviews had repeatedly been found inconsistent with the WTO Anti-dumping Agreement and that the US was expected to amend the methodology accordingly.

The US said that its Department of Commerce published on 14 February 2012 a modification to its procedure regarding the use of zeroing in anti-dumping reviews. The US said that this modification would address the matter covered in Korea’s panel request. The US added that the process of modifying its methodologies to respond to DSB rulings on zeroing had been completed and, therefore, moving forward with this dispute served no purpose.

Right, "no purpose"... other than to push the United States into recalculating "zeroed" anti-dumping duties on Korean imports that would not otherwise be recalculated pursuant to Commerce's new rule.  And if you're a Korean exporter or US importer who paid those extra duties, that's a pretty big purpose, I'd say.

(The same WTO announcement also noted that Brazil is still weighing its options with respect to its complaint against the US for zeroing in reviews of Brazilian orange juice imports.  Wanna bet on what they decide to do?)

Second, the WTO separately announced that Vietnam has filed a brand new complaint against the United States related to US anti-dumping reviews of Vietnamese shrimp.  The text of the complaint isn't out yet, but reports indicate that it's a follow-up to Vietnam's successful 2010-2011 complaint against - surprise! - the United States' zeroing methodology.  The timing of Vietnam's new complaint - about a week after the publication of Commerce's Final Rule - makes clear that they, like Korea, are not going to stop litigating past US infractions just because the United States has now promised not to commit new ones.

Well, unless targeted dumping's involved, of course.

New Op-Ed: "One Cheer (At Most) for Our New Free Trade Agreements"

The Daily Caller today published a new (and somewhat depressing) op-ed of mine.  Here's the tease:

The recent congressional passage of U.S. free trade agreements with South Korea, Panama and Colombia has elicited an outbreak of Beltway backslapping. Some congratulations are certainly warranted, but a closer look at just how these FTAs arrived on the president’s desk reveals serious problems with not only the agreements themselves, but also the current state of U.S. trade policy.

Uh oh.  Be sure to read the whole thing here.  Your thoughts, as always, are welcome in the comments.