US unlikely to abolish trade protection act
By Wang Li (China Business Weekly)
Updated: 2004-10-17 10:23

The United States is unlikely to abolish a biased trade law, despite opposition from its trade partners and their right to punish the United States authorized by the World Trade Organization (WTO).

For China, this may mean its exports to the United States will face more anti-dumping charges.

The WTO ruled on August 31 that the US' Byrd Amendment, or Continued Dumping and Subsidy Offset Act of 2000, violates international trade rules. The trade bloc authorized the European Union (EU), Canada, Japan, South Korea, Brazil, Mexico and India to impose a combined US$150 million punitive tariffs against the US goods.

However, the EU and authorized countries have yet to announce any concrete punitive measures.

EU Trade Commissioner Pascal Lamy said the authorization was not their purpose. The real intention of their lawsuit against the Byrd Amendment at the WTO in 2001 was to urge the United States to abolish the amendment and abide by international trade rules.

On the other hand, these countries' inaction, together with the looming presidential election in November, makes the United States insist on its current trade protectionism.

Ironically, in a statement on August 31, the US Trade Representative Office said the WTO ruling would not prevent the country from taking further legislative action to punish foreign producers dumping their goods in the United States.

The Byrd Amendment was passed in October 2000. It stipulates the US Government can subsidize US "victim" producers of "unfair imports" with tariff revenues levied from anti-dumping and anti-subsidization cases. These producers include those submitting dumping accusations against foreign exporters.

The WTO and the trade partners of the United States said the Byrd Amendment encourages US firms to arbitrarily accuse foreign exporters of dumping, because once they win, they will receive the government subsidies. If they fail, they have nothing to lose.

US firms have greatly benefited from the Byrd Amendment. Statistics show they were subsidized to the tune of US$230 million in punitive tariffs in 2001 and US$330 million in 2002. Sectors benefiting from this include steel, foodstuffs and producers of daily necessities.

Facing international pressure, US President George W. Bush proposed in February 2004 to abolish the Byrd Amendment within the year, saying the act offers dual benefits to US firms, which is against WTO principles. But the initiative was strongly opposed by Democratic congressmen and thus suspended.

With the escalating competition for the presidency, it is impossible for Bush Administration to propose the abolition of the Byrd Amendment again because the initiative may be blamed by the Democrats as losing more US jobs.

If Bush wins the election and abolishes the act, he would be accused by the Democrats of cheating US voters.

But if Kerry wins, he dares not abolish it because this may be considered a betrayal of the US labour interests which Democrats claim to safeguard.

But will the EU, Japan or other countries take punitive measures to force the US to concede?

In the short term, they are reluctant to do so because that would stir up trade wars, which they do not want to see.

What about China? Because when the lawsuit against Byrd Amendment was launched, China was not a WTO member, so it was not authorized to retaliate against the United States.

But China has also been deeply affected by the act. Last year, among the 10 anti-dumping cases launched by the US side, seven were against China.

Under such circumstances, China had better ally itself with the EU and Japan. The Chinese Government must also encourage and support Chinese enterprises to respond to dumping charges. When they win more cases and hence reduce the benefits of US plaintiffs, US firms will become less eager to launch anti-dumping cases against China.

The author is a researcher with the Chinese Academy of International Trade and Economic Co-operation affiliated with the Ministry of Commerce.