The Custom-House

Could the Byrd Amendment Return?

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 Congress repealed it in 2005, but not before the provision did great harm to America's trading reputation and U.S. exporters after being declared illegal by the World Trade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.

How to get past non-tariff barriers

Tariffs used to be the big problem, but today behind-the-border non-tariff barriers - discriminatory regulations and standards, for example - have become serious obstacles to exporters. 

Three Squire Sanders trade attorneys, including former USTR Rob Portman, explain the options available to a frustrated exporter: Act Globally: How to Navigate today's Hidden Trade Barriers.

A two-track approach is recommended.  Work with officials in the country with the barrier, sure, but also work with the U.S. government:

...“You work really at two levels,” says Singham. “One is the international, external level where you’re trying to get the U.S. government to pressure a particular foreign government. You’re also working domestically to try to get local agencies to help resolve the problem. If you just do one side, it’s usually not enough.”...

There are several approaches to bring pressure:

...ask your government to initiate an action under the provisions of the ever-growing World Trade Organization (WTO). Dispute resolution is a central pillar of the WTO’s mission, but as with any large institution, it is not particularly speedy.

“Unfortunately, the reality is that it can take years,” Portman says. “It often requires significant time and resources, and the remedy may not be directly beneficial.”

Are there domestic U.S. laws that may be applicable?

Another tack is to see if there are any laws, such as the Foreign Corrupt Practices Act, under which a case could be brought. With increasing international collaboration on policing corruption, this can be a swifter and more effective option than it was in the past.

How about conditioning foreign aid:

More sophisticated companies sometimes look to affect the ways the United States offers foreign aid to developing countries as a bargaining chit. Millennium Challenge Accounts in particular provide aid based on a country’s compliance with criteria in areas of entrepreneurship, enterprise and law.

Get your issue addressed in a free trade agreement

An ideal situation is to address your concerns as free trade agreements are being negotiated....

And communicate with the USTR's office and your congressman.  A corporate general counsel who can open up new markets for the firm

... for once is not a cost center. If you can act to increase market share, you become a profit center.”

Applying countervailing duties to non-market economies (especially China)

The Congressional Research Service has released a report by Vivian Jones on Trade Remedy Legislation: Applying Countervailing Action to Nonmarket Economy Countries (December 6, 2007). 

Countervailing duty law allows the U.S. to impose tariffs on imports in certain circumstances to offset subsidies received by a foreign firm.  Countervailing duty actions haven't been taken against non-market economies because of the difficulties of estimating subsidies in the absence of markets.  China is a non-market economy - but not like it once was, and last year the ITA decided that it could tease out relevant subsidies in the case of coated free sheet paper.

Jones reviews the background to this issue, and surveys recent Congressional and Admininstrative actions.  Here's the abstract:

Countervailing duties on Chinese paper

In an important change in U.S. trade policy towards China, the Commerce Department last week decided to impose duties on imports of certain types of paper from China, to offset Chinese subsidies.  The Commerce fact sheet says,

Commerce preliminarily determined that Chinese producers/exporters have received net countervailable subsidies ranging from 10.90 to 20.35 percent. As a result of this preliminary determination, Commerce will instruct U.S. Customs and Border Protection to suspend liquidation of entries of subject merchandise and to collect a cash deposit or bond based on these preliminary rates.

The implications extend beyond the paper industry.  Steven R. Wiseman reported for the New York Times: In Big Shift, U.S. Imposes Tariffs on Chinese Paper (March 31).

Jonathan Dingel has been following this over at Trade Diversion: China hit by US CVDs (March 30), and been asking good questions Where are Commerce's Chinese subsidy calculations? (April 2).

Another way to use anti-dumping laws

Greg Hitt and James Hookway report on the use of U.S. anti-dumping laws for something similar to private extortion in Monday's Wall Street Journal: U.S. Shrimpers Haul CashFrom Lower-Cost Rivals (April 2).  How much would you, as an exporter to the U.S., be willing to pay an association that had the ability to create a lot of market uncertainty for you through manipulation of U.S. anti-dumping laws? 

In 2005, the Southern Shrimp Alliance won an anti-dumping tariff case against foreign shrimp producers.  Under the Byrd Amendment, about $100 million in fines from the tariffs were distributed among shrimpers and processors:

What's the payoff from anti-dumping measures?

Doug Campbell examines anti-dumping for the Richmond Fed's Region Focus: Trade Wars (Spring, 2006).  Campbell's paper is a nice overview, and uses  an anti-dumping petition on wooden bedroom furniture for a case study.  This industry has been hammered by foreign competition, but dumping doesn't appear to have been central to its problems.

Anti-dumping measures have been costly:

Congress and "zeroing"

John Miller reports in Wednesday's Wall Street Journal that efforts to wake up the Doha Round are likely to be a non-starter: Doha Revival Talks Are Set, But Accord Is Unlikely (January 24):

Global trade negotiators hope to restart the Doha round of world trade talks at the World Economic Forum in Davos, Switzerland, this week, but a return to the bargaining table will likely be more symbol than substance.

The key players -- the U.S. and the European Union -- remain unwilling to cut farm subsidies enough to satisfy emerging economies like Brazil and India....

Mr. Mandelson proposes a 54% cut in agriculture import tariffs. France, Europe's largest agriculture producer, wants to cut tariffs by just 39% -- and isn't budging. Without France there is no deal: Mr. Mandelson needs support from all 27 EU members in order to reach a global trade deal.

Dan Ikenson of Cato's Center for Trade Policy Studies won't be too worried if the Doha princess sleeps for years to come.  Trade is Much Bigger Than the Doha Round (CATO at Liberty, January 22)

The WTO Appellate Body decision on Zeroing

Sungjoon Cho, of the Chicago-Kent College of Law, summarizes the recent WTO Appellate Body decision on U.S. "zeroing" in anti-dumping investigations: The WTO Appellate Body Strikes Down the U.S. Zeroing Methodology Used in Antidumping Investigations  (ASIL Insight, May 4, 2006)

A blow to "unfair" "fair trade": the WTO Appellate Body ruling on "zeroing"

"Zeroing" is bad and, on April 18th, the WTO's Appellate Body did something about it.  For the bottom line, go to the end of this post.

By way of background:

Japan's Complaint About U.S. "Zeroing"

Japan's Complaint About U.S. "Zeroing"

Kyodo News reports that Japan has filed a complaint about U.S. anti-dumping rules with the WTO: "Japan asks WTO to set up panel on U.S. antidumping method"

"Dumping" occurs when a firm sells goods in a foreign country at prices below those in its home country. Many countries have rules that allow them to impose anti-dumping penalties on firms believed to be dumping. The WTO trade agreements set standards for anti-dumping rules in signatory countries. (WTO Anti-dumping gateway)

The Japanese think that U.S. use of "zeroing" violates the WTO standards. "Zeroing" is a method the U.S. uses when determining whether dumping has occurred, and how serious it has been.

Suppose a good is imported from a foreign country into the U.S. in several different varieties - large, medium, and small. To see if the good was being dumped, the U.S. and foreign prices for each variety would be compared. The percentage differences between the prices for each variety would be calculated and the results would be summarized with a weighted average of the three percentages (weighted by the import values). This percentage would be the aggregate dumping margin.

Unless one of the varieties was sold in the U.S. for more than it was sold in the home country.

In that case, the percent for that good would be set to zero before the weighted average was calculated. In other words, if some of the varieties were not dumped, the percentages for those that were not dumped would be ignored. The effect would be to increase the size of the dumping margin, and the likelihood that the firm would be found to be dumping.

Zeroing has been under fire for a while. WTO dispute and appeals reviews have ruled against E.U. zeroing, and U.S. zeroing. Dan Ikenson of the CATO Institute discusses the status of the WTO decisions as of last April: "Zeroing In: Antidumping�s Flawed Methodology under Fire".

Jay Kraemer and Mark Fajfar bring things up to late November 2004 in this memorandum from the law firm, Fried, Frank: "WTO Appellate Body Rules Against U.S. �Zeroing� in Anti-Dumping Calculations".

Kraemer and Fajfar point out that the the WTO is finding that zeroing

"...is contrary to Article 2.4.2 of the Anti-Dumping Agreement, which requires that the dumping margin calculation include "all comparable...transactions." In essence, the...[WTO - Ben] found that by excluding non-dumped transactions from the calculation of the weighted average dumping margin...the U.S. method leads to the finding of dumping margings where none exist, or to the finding of higher dumping margins than actually occurred." (pages 1-2)

The Kraemer and Fajfar article is very interesting, summarizing the U.S. arguments. They note that, if the U.S. dropped the zeroing methodology, firms petitioning the Department of Commerce for anti-dumping penalties, would have to think very carefully about how they defined the products they wanted penalized for dumping:

"If the U.S. petitioner frames the scope of the investigation too broadly, it faces the risk of too many transactions with a "negative dumping margin" - i.e., where the export price in the U.S. is higher than the normal value [that is, the "price" in the home country - Ben]." (pages 8-9)