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Regulating Import Competition and Unfair Trade
Regulating Import Competition and Unfair Trade
Chapter 11Chapter 11
Two Main Points Two Main Points
• Laws regulate imports when local industries need safeguards against injury; breathing room to retool and retrain workers so they can compete more effectively.
• Laws that regulate unfair foreign competition, particularly dumping prices here at low prices and subsidies by foreign governments.
• Laws regulate imports when local industries need safeguards against injury; breathing room to retool and retrain workers so they can compete more effectively.
• Laws that regulate unfair foreign competition, particularly dumping prices here at low prices and subsidies by foreign governments.
Safeguards Against InjurySafeguards Against Injury
• Principally temporary ( 4 year with 4 more possible) tariff increases and quotas.
• Endorsed by Art. XIX of GATT (1947); the escape clause.
• Updated in the 1994 WTO Agreement on Safeguards.
• Principally temporary ( 4 year with 4 more possible) tariff increases and quotas.
• Endorsed by Art. XIX of GATT (1947); the escape clause.
• Updated in the 1994 WTO Agreement on Safeguards.
The Escape Clause (1994)The Escape Clause (1994)
• When imports are increasing so rapidly that a domestic industry is in imminent peril of serious injury.
• Serious injury is a “significant overall impairment in the position of a domestic industry” (not just a particular company in that industry).
• When imports are increasing so rapidly that a domestic industry is in imminent peril of serious injury.
• Serious injury is a “significant overall impairment in the position of a domestic industry” (not just a particular company in that industry).
U.S. Escape Clause ProceduresU.S. Escape Clause Procedures
• The ITC conducts an investigation on its own accord or by a petition by any number of groups.
• Public hearings take place where all interested parties get to express their views.
• If other factors are equally to blame, then no escape.
• U.S. law does not mirror GATT XIX, but it is close.
• The ITC conducts an investigation on its own accord or by a petition by any number of groups.
• Public hearings take place where all interested parties get to express their views.
• If other factors are equally to blame, then no escape.
• U.S. law does not mirror GATT XIX, but it is close.
Escape Clause: Tariff vs. QuotaEscape Clause: Tariff vs. Quota
• Tariffs are preferred over quotas.• If quotas are used GATT says the bottom
limit is the 3 year prior import average.• Voluntary import restrictions (such as we
did to Japan’s autos in the ‘80s) are no longer legal.
• Tariff concessions to injured nations are expected - to make them whole.
• Tariffs are preferred over quotas.• If quotas are used GATT says the bottom
limit is the 3 year prior import average.• Voluntary import restrictions (such as we
did to Japan’s autos in the ‘80s) are no longer legal.
• Tariff concessions to injured nations are expected - to make them whole.
Special Rules for ChinaSpecial Rules for China
Part of the deal for allowing China into
the WTO was the U.S.-China Relations Act of 2000, which makes it
easier to protect domestic
industries from Chinese imports
that are “a significant cause of
material injury.”
Part of the deal for allowing China into
the WTO was the U.S.-China Relations Act of 2000, which makes it
easier to protect domestic
industries from Chinese imports
that are “a significant cause of
material injury.”
Assistance to Workers & CompaniesAssistance to Workers & Companies
Trade adjustment assistance is available to workers put out of work by foreign trade or by having the jobs sent offshore. This is handled by the Dept. of Labor.Assistance is also offered to companies damaged by imports. This is handled by the Commerce Department.
Unfair CompetitionUnfair Competition
Antidumping LawsAntidumping Laws
• Dumping refers to the practice of selling goods in foreign countries for less than they are sold at home.
• The purpose is generally to drive the domestic companies out of business.
• Codified in Art. VI of GATT.• In the U.S. part of Title 19 U.S.C. &
investigated by DOC (& its ITA) and the ITC..
• Dumping refers to the practice of selling goods in foreign countries for less than they are sold at home.
• The purpose is generally to drive the domestic companies out of business.
• Codified in Art. VI of GATT.• In the U.S. part of Title 19 U.S.C. &
investigated by DOC (& its ITA) and the ITC..
Dumping MarginDumping Margin
The ITA looks at the difference between the normal value (home price) versus the export price. The difference is the dumping margin, which can be the basis for (equal to) antidumping duties. If the margin is less than 2%, ignore it. For China normal value is a “surrogate” value as if it were not government controlled in all price and cost areas.
The ITA looks at the difference between the normal value (home price) versus the export price. The difference is the dumping margin, which can be the basis for (equal to) antidumping duties. If the margin is less than 2%, ignore it. For China normal value is a “surrogate” value as if it were not government controlled in all price and cost areas.
Subsidies and Countervailing DutiesSubsidies and Countervailing Duties
Subsidy defined: a government benefit
to a firm or industry to achieve some
goal or objective. They take many
creative forms (see p. 374).
Subsidies tend to distort the inter-
national trade picture.
Regulated by GATT and U.S. law.
Subsidy defined: a government benefit
to a firm or industry to achieve some
goal or objective. They take many
creative forms (see p. 374).
Subsidies tend to distort the inter-
national trade picture.
Regulated by GATT and U.S. law.
Dealing with SubsidiesDealing with Subsidies
Countries may respond to subsidies in
one of 2 ways. 1) Go to the WTO;
2) Unilaterally impose a counter-
vailing duty (a special tariff) equal to the
amount of the subsidy.
Both can be undertaken simultaneously, but
only one relief is available.
Countries may respond to subsidies in
one of 2 ways. 1) Go to the WTO;
2) Unilaterally impose a counter-
vailing duty (a special tariff) equal to the
amount of the subsidy.
Both can be undertaken simultaneously, but
only one relief is available.
Prohibited SubsidiesProhibited Subsidies
• A) Export subsidies – payments to foster exports.
• B) Import substitution subsidies –
payments contingent on using domestic goods.
---both of these violate WTO.
• A) Export subsidies – payments to foster exports.
• B) Import substitution subsidies –
payments contingent on using domestic goods.
---both of these violate WTO.
Domestic SubsidiesDomestic Subsidies
• There are many ways countries can help their domestic industries.
• One argument in favor of U.S. universal health care is that other countries do it, which lowers the cost for foreign companies such as car makers.
• These are generally legal.
• There are many ways countries can help their domestic industries.
• One argument in favor of U.S. universal health care is that other countries do it, which lowers the cost for foreign companies such as car makers.
• These are generally legal.
Adverse Effects SubsidiesAdverse Effects Subsidies
• Domestic subsidies that cause adverse effects are actionable under the WTO or by countervailing duty actions.
• To be illegal, the subsidy must be specific, not general (i.e. a tax break that favors only one industry, versus one that applies across the board).
• Domestic subsidies that cause adverse effects are actionable under the WTO or by countervailing duty actions.
• To be illegal, the subsidy must be specific, not general (i.e. a tax break that favors only one industry, versus one that applies across the board).
Subsidies & Non-Market EconomiesSubsidies & Non-Market Economies
• How can you countervail domestic subsidies in non-market economies like China? It’s tough.
• Before 2007 we didn’t try, but
now we do, principally due to
political pressures.
• How can you countervail domestic subsidies in non-market economies like China? It’s tough.
• Before 2007 we didn’t try, but
now we do, principally due to
political pressures.
The Byrd AmendmentThe Byrd Amendment
The Continued Dumping and Subsidy Offset Act of 2000 – countervailing duties were paid over to the damaged companies,
instead of going to the Treasury.
This was declared illegal by WTO and repealed in 2007
The Continued Dumping and Subsidy Offset Act of 2000 – countervailing duties were paid over to the damaged companies,
instead of going to the Treasury.
This was declared illegal by WTO and repealed in 2007
For Further StudyFor Further Study
• The 2009 Dept. of Commerce Antidumping Manual for the training of Import Administration personnel.
• http://ia.ita.doc.gov/admanual/index.html
• The 2009 Dept. of Commerce Antidumping Manual for the training of Import Administration personnel.
• http://ia.ita.doc.gov/admanual/index.html
