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Friday, March 23, 2012

U.S. Trade Remedy Laws and Nonmarket Economies: A Legal Overview


Jeanne J. Grimmett
Legislative Attorney

Two major U.S. trade remedies are antidumping (AD) law, which combats the sale of imported products at less than their fair market value, and countervailing duty (CVD) law, which aims to offset foreign government subsidization of imported goods. If dumped or subsidized imports are found to cause or threaten material injury to a domestic industry, antidumping or countervailing duties will be imposed. Both remedies are available when goods are imported from competitor countries with free market policies. As of 1984, however, only AD law had been applied to goods from nonmarket or “transitional” economies. With the continued economic growth of some of these economies, such as China and Vietnam, pressure increased on the U.S. government to use both trade remedies more aggressively against unfair imports from these countries.

AD law has been amended several times since its inception in 1921. With Congress’s continued statutory guidance, the Department of Commerce (DOC) has implemented several different methodologies for applying AD law, including using surrogate country data when the fair market value of a product in the originating country is not readily ascertainable. CVD law had not been used against NMEs, however, since DOC concluded in 1984 that it could not determine subsidization in such situations. In 1986, the U.S. Court of Appeals for the Federal Circuit (CAFC), in Georgetown Steel Corp. v. United States, upheld DOC’s interpretation of the CVD statute as reasonable. While DOC had generally refused to review CVD petitions against NME countries following this determination, it accepted a petition seeking a CVD on imports of coated free-sheet paper from China in 2006. DOC distinguished the current Chinese economy from the Soviet-style economies at issue in Georgetown Steel and found that the imported Chinese paper was subsidized. Because the U.S. International Trade Commission did not make the requisite final affirmative material injury determination, CVDs were not imposed. Other CVD petitions were successful, however, resulting in the imposition of 24 CVD orders on NME country merchandise.

World Trade Organization (WTO) agreements, together with the WTO Accession Protocols of China and Vietnam, acknowledge that AD and CV duties may be imposed on these countries’ goods, and that surrogate country data may be used to calculate dumping margins or subsidization. In a WTO case brought by China, however, the WTO Appellate Body found in April 2011 that the simultaneous imposition by the United States of AD and CV duties on the same Chinese merchandise, where surrogate country data was used to establish the fair market value of the goods in the AD case, remedied the same subsidization twice or “double counted” in violation of U.S. WTO obligations. The United States is expected to comply with this decision by April 25, 2012. More broadly, the U.S. Court of Appeals for the Federal Circuit, on December 19, 2011, held that CVDs may not be imposed on NME goods under any circumstance, finding in GPX Intl Tire Corp. v. United States that Congress had legislatively ratified DOC’s 1984 statutory interpretation and thus DOC may no longer interpret the statute to permit such duties and must seek a statutory amendment if it wishes to impose such duties in the future. The CAFC affirmed a lower court decision that also prohibited DOC from imposing CVDs on NME goods, but did so on the ground that DOC had failed to eliminate double counting, the same practice at issue in the WTO case. DOC is preparing a new WTO-compliant determination in the investigations challenged by China in the WTO. The executive branch has also asked Congress to enact legislation to remedy the court’s ruling and, on March 5, 2012, requested that the CAFC rehear the case en banc. H.R. 4105 (Camp), introduced February 29, 2012, would generally authorize the application of CVDs to NME products, make this authority effective as of November 20, 2006, and prospectively amend antidumping law to address double counting issues. S. 2153 Baucus), an identical Senate bill, was passed in the Senate by unanimous consent March 5, 2012.



Date of Report: March 6, 2012
Number of Pages: 3
7
Order Number: RL3
3976
Price: $29.95

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Trade Remedies: A Primer


Vivian C. Jones
Specialist in International Trade and Finance

The United States and many of its trading partners use laws known as trade remedies to mitigate the adverse impact of various trade practices on domestic industries and workers. 
         U.S. antidumping (AD) laws (19 U.S.C. §1673 et seq.) authorize the imposition of duties if (1) the International Trade Administration of the Department of Commerce (ITA) determines that foreign merchandise is being, or likely to be, sold in the United States at less than fair value, and (2) the U.S. International Trade Commission (USITC) determines that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, due to imports of that merchandise. 
         U.S. countervailing duty laws (19 U.S.C. §1671 et seq.) authorize the imposition of countervailing duties (CVD) if the ITA finds that the government of a country or any public entity has provided a subsidy on the manufacture, production, or export of the merchandise, and the USITC determines injury or threat thereof. 
         U.S. safeguard laws (19 U.S.C. §2251 et seq.) authorize the President to provide temporary import relief from injurious surges of imports resulting from fairly competitive trade from all countries. Other safeguard laws authorize relief for import surges from communist countries (19 U.S.C. §2436) and from China (19 U.S.C. §2451). In each case, the USITC conducts an investigation, forwards recommendations to the President, and the President may act on the USITC’s recommendation, modify it, or take no action. 
These laws are deemed consistent with U.S. international obligations provided that they conform to the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (ASCM) and the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, 1994 (ADA, Antidumping Agreement) agreed to as part of the Uruguay Round of multilateral trade negotiations that established the World Trade Organization (WTO), as well as other trade agreements to which the United States is a party.

In the first session of the 112th Congress, legislation was introduced seeking to amend trade remedy statutes, including addressing currency misalignment (S. 1619, S. 328, and H.R. 639) in trade remedy investigations. S. 1130 and related bill S. 1267, the Strengthening America’s Trade Laws Act, seek, in part, to provide more specific methodology for trade remedy actions in nonmarket economy countries. In the second session, H.R. 4105 seeks to specifically apply countervailing action to nonmarket economy countries in light of a December 19, 2011 decision by the U.S. Court of Appeals for the Federal Circuit that CVD action may not be applied to the imports of such countries. S. 2153, an identical measure, passed in the Senate by unanimous consent on March 5, 2012.

This report discusses, first, congressional interest in trade remedy laws, and describes legislation seeking to amend the laws in the first session of the 112th Congress. Second, it describes antidumping and countervailing duty laws, procedures, and investigations. Third, U.S. safeguard statutes and investigative procedures are presented. Finally, an Appendix provides a chart outlining briefly all U.S. trade remedy statutes, major actors, and effects of these laws.



Date of Report: March 6, 2012
Number of Pages: 39
Order Number: RL32371
Price: $29.95

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Tuesday, March 6, 2012

The Eurozone Crisis: Overview and Issues for Congress


Rebecca M. Nelson, Coordinator
Analyst in International Trade and Finance

Paul Belkin
Analyst in European Affairs

Derek E. Mix
Analyst in European Affairs

Martin A. Weiss
Specialist in International Trade and Finance


What started as a debt crisis in Greece in late 2009 has evolved into a broader economic crisis in the Eurozone that threatens economic stability in Europe and beyond. Some analysts view the Eurozone crisis as the biggest potential threat to the U.S. economic recovery. The Eurozone faces at least four major, and related, economic challenges. These challenges include: 1) high debt levels and public deficits in some Eurozone countries; 2) weaknesses in the European banking system; 3) economic recession and high unemployment in some Eurozone countries; and 4) persistent trade imbalances within the Eurozone.

European leaders have undertaken several rounds of unprecedented policy measures to resolve the crisis. Key policy measures focus on: austerity measures and structural and economic reforms in countries facing severe market pressure, including Greece, Ireland, Italy, Portugal, and Spain (often referred to as the Eurozone “periphery”); financial assistance from other Eurozone governments and the IMF to Greece, Ireland, and Portugal; plans for debt restructuring in Greece; European Central Bank (ECB) liquidity support to private banks and purchases of sovereign bonds on secondary markets; and a commitment by most countries in the European Union (EU) to balance national budgets, the so-called “fiscal compact.”

Although the ECB’s infusion of cash into the banking system in December 2011 and February 2012 through long-term refinancing operations appears to have calmed markets, significant risks and policy questions remain. Particular concerns center on how to restore growth in the Eurozone periphery amidst often unpopular austerity reforms; how to put Greece’s debt on a sustainable path; and how to correct trade imbalances in the Eurozone. More broadly, there are questions about the impact of the crisis on the future of the Eurozone. Some economists are optimistic that ultimately the European leaders and institutions will do whatever is necessary to keep the Eurozone from collapsing, and that the Eurozone will emerge from the crisis stronger and more integrated. Others view a broader financial crisis triggered by a disorderly default or exit by one or more countries from the Eurozone as a real possibility.



Date of Report: February 29, 2012
Number of Pages: 23
Order Number: R42377
Price: $29.95

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Issues in International Trade Law: Restricting Exports of Electronic Waste


Emily C. Barbour
Legislative Attorney

Electronic waste (e-waste) is a term that loosely refers to obsolete, broken, or irreparable electronic devices like televisions, computer central processing units (CPUs), computer monitors, laptops, printers, scanners, and associated wiring. Because e-waste is generated in high volumes in the United States and contains hazardous materials like lead, mercury, and chromium, it is a growing area of domestic concern. Currently, e-waste is essentially unregulated at the federal level and can be disposed of with common household garbage in municipal solid waste landfills or incinerators. However, the international trade in e-waste is subject to the international agreements governing the hazardous waste trade. The United States is a party to several of these agreements, but it is not a party to the largest multilateral agreement in this field: the Basel Convention.

Although it is difficult to know exactly how much e-waste is exported from the United States, developing countries in Asia or Africa appear to be active importers of it. Many of these countries lack, or do not enforce, labor or environmental laws that would mitigate or prevent the harms to human and environmental health that are associated with e-waste processing. The result is that some overseas e-waste recycling operations may pose a significant risk to human and environmental well-being.

Recently, momentum has developed for domestic legislation restricting U.S. e-waste exports. These restrictions could take many forms, including a partial or total ban on e-waste exports, an e-waste export licensing system, or a quota on e-waste exports. However, these restrictions may be difficult to reconcile with the General Agreement on Tariffs and Trade (GATT), one of the World Trade Organization (WTO) Agreements, and could be susceptible to challenge before a WTO panel.

In particular, e-waste export restrictions may be deemed inconsistent with Articles XI:1, XIII:1, and I:1 of the GATT. If declared a violation of the GATT, e-waste export restrictions could be justified under Article XX of the GATT if they (1) fit under one of the exceptions listed in paragraphs (a) to (j) of Article XX of the GATT and (2) satisfy the requirements imposed by the Article XX chapeau. It would be difficult, however, for U.S. export restrictions on e-waste to meet this standard for justification if they are imposed without serious U.S. engagement in international negotiations on the hazardous waste trade or without the concurrent operation of comparable restrictions on domestic e-waste production.



Date of Report: February 24, 2012
Number of Pages: 21
Order Number: R42373
Price: $29.95

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Thursday, March 1, 2012

What’s the Difference?—Comparing U.S. and Chinese Trade Data


Michael F. Martin
Specialist in Asian Affairs

There is a large and growing difference between the official trade statistics released by the United States and the People’s Republic of China. According to the United States, the 2011 bilateral trade deficit with China was $295.5 billion. According to China, its trade surplus with the United States was $206.2 billion—$89.3 billion less.

This paper examines the differences in the trade data from the two nations in two ways. First, it compares the trade figures at the two digit level using the Harmonized System to discern any patterns in the discrepancies between the U.S. and Chinese data. This comparison reveals that over three-quarters of the difference in the value of China’s exports to the United States is attributable to five types of goods. Those five types of goods, in order of the size of the discrepancy are electrical machinery; toys and sporting goods; machinery; footwear; and furniture.

The second approach to examining the differing trade data involves a review of the existing literature on the technical and non-technical sources of the trade data discrepancies, including an October 2009 joint China-U.S. report on statistical discrepancies in merchandise trade data. The literature reveals that the main sources of the discrepancies are differences in the list value of shipments when they leave China and when they enter the United States, and differing attributions of origin and destination of Chinese exports that are transshipped through a third location (such as Hong Kong) before arriving in the United States.

The size of the U.S. bilateral trade deficit with China has been and continues to be an important issue in bilateral trade relations. Some Members of Congress view the deficit as a sign of unfair economic policies in China, and have introduced legislation seeking to redress the perceived competitive disadvantage China’s policies have created for U.S. exporters.

This report is updated annually, after the release of official trade data by China and the United States.



Date of Report: February 24, 2012
Number of Pages: 10
Order Number: RS22640
Price: $29.95

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