Robert Byrd. AP photo from Wall Street Journal
In August the Wall Street Journal reported that Senators Robert Byrd (D-WVa) and Sherrod Brown (D- OH) were testing the waters for reinstatement of the Byrd Amendment. The Journal referred to:
...subterranean efforts to revive the "Byrd Amendment," a nasty trade law that offers U.S. companies a double reward for seeking tariff help from Washington.
Senator Robert Byrd (D., W.Va.) and a few bipartisan pals snuck this protectionist gift into law in 2000 by attaching it to a spending bill. Congress repealed it in 2005, but not before the provision did great harm to America's trading reputation and U.S. exporters after being declared illegal by the World Trade Organization. Now with a new Congress, and in an election year, Mr. Byrd and Ohio Democrat Sherrod Brown are once again poised to sneak the provision into law.
A draft "Dear Colleague" letter of anonymous (but probably Byrd-Brown) provenance has been circulating in the Senate referring to "strong support for legislation to reinstate" the 2000 law, whose repeal "was a terrible mistake." Meanwhile, Sen. Byrd has put customs and duties language in a pending appropriations bill -- a red flag to those who know how such "placeholder" language could be expanded at the last minute to revive his 2000 act.
The goal of the Byrd Amendment -- aka the Continued Dumping and Subsidy Offset Act -- was to provide extra incentive for businesses to file trade complaints by giving them a share of proceeds. Instead of siccing the U.S. government on foreign companies to collect punitive duties for the Treasury, it gave the tariff money directly to the companies that file complaints.
This was an editorial rather than a news story. Byrd and Brown stood up for themselves in a letter on August 15: Offsets for dumping help U.S. Business.
The Byrd Amendment was repealed in 2005, "But the disbursements continue to complaining U.S. companies for as many years as it takes to collect duty due for alleged dumping of foreign products before October 1 of 2007; last year alone the payout was more than $264 million." (An Expensive Byrd )
Because we are continuing disbursements, the Japanese decided in late August to continue tariffs imposed in 2005 as countermeasures: Extension of Japan's countermeasures against the U.S. Byrd Amendment.
The Byrd Amendment is a bad idea because:
- It violates our agreements with other countries.
- Those countries are entitled to impose offsetting tariffs on our goods when we do that.
- If foreign companies have actually done something wrong and should be penalized (and - given the way the law works - a lot of times this may not be the case) they are punished twice: (1) imports to the U.S. are subjected to tariff penalties to offset the dumping, and (2) production by U.S. competitors is subsidized.
- It creates incentives for bringing anti-dumping cases. Kara Reynolds of American University found that "Theoretical comparisons of the welfare consequences of tariffs, subsidies and import licenses have relied on the assumption that firms reap no private benefits from the imposition of a tariff. This paper conducts an empirical analysis of whether a recent change in U.S. antidumping law known as the Byrd Amendment bestows private benefits to firms lobbying for tariff protection and, thus, increases the level of rent-seeking in the United States. The results provide strong evidence that industries have chosen to lobby for more tariff protection, or filed more antidumping petitions, since passage of the Byrd Amendment. However, there is less evidence that the number of firms filing these petitions increased under the law. This suggests that the Byrd Amendment only partially alleviates the incentive to free-ride." (Subsidizing Rent Seeking - Antidumping protection and the Byrd Amendment)
Here's a related paper co-authored by Reynolds: The returns from rent-seeking: campaign contributions, firm subsidies and the Byrd Amendment:
This is the first empirical study to examine Congressional support of a new law that distributes antidumping duties to protected firms. Because the law produces a transparent measure of how much each firm was rewarded for its efforts to secure the bill's passage, it provides researchers with a unique opportunity to study the link between the expected financial returns to firms, campaign contributions, and Congressional behaviour. Our results indicate that campaign contributions from beneficiaries increased the likelihood that lawmakers would sponsor the law, while contributions from the law's beneficiaries increased with the rewards they expected to receive.
The GAO looked at the implementation of the Byrd Amendment, and found it wanting: Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act: GAO-05-979:
Congress enacted CDSOA to strengthen relief to injured U.S. producers. The law’s key eligibility requirements limit benefits to producers that filed a petition for relief or that publicly supported the petition during a government investigation to determine whether injury had occurred. This law differs from trade remedy laws, which generally provide relief to all producers in an industry. Another key CDSOA feature requires that Customs and Border Protection (CBP) disburse payments within 60 days after the beginning of a fiscal year, giving CBP limited time to process payments and perform desired quality controls. This time frame, combined with a dramatic growth in the program workload, presents implementation risks for CBP.
CBP faces three key implementation problems. First, processing of company claims and CDSOA payments is problematic because CBP’s procedures are labor intensive and do not include standardized forms or electronic filing. Second, most companies are not accountable for the claims they file because they do not have to support their claims and CBP does not systematically verify the claims. Third, CBP’s problems in collecting duties that fund CDSOA have worsened. About half of the funds that should have been available for disbursement remained uncollected in fiscal year 2004.
Most of the CDSOA payments went to a few companies with mixed effects. About half of these payments went to five companies. Top recipients we surveyed said that CDSOA had beneficial effects, but the degree varied. In four of seven industries we examined, recipients reported benefits, but some non-recipients noted CDSOA payments gave their competitors an unfair advantage. These views are not necessarily representative of the views of all recipients and non-recipients.
Because the United States has not brought CDSOA into compliance with its WTO obligations, it faces additional tariffs on U.S. exports covering a trade value of up to $134 million based on 2004 CDSOA disbursements. Recently, Canada, the European Union, Mexico, and Japan imposed additional duties on various U.S. exports. Four other WTO members may follow suit.
K. Subramanian lays out a little of the Byrd Amendment's history, problems, and political economy, here: Byrd Amendment - the politics of U.S. trade.
Hat tip to Shawn Beilfuss: Flipping Asia the Byrd on Fair Trade.
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