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"Rising Transatlantic Tensions over the Byrd Amendment on Antidumping and Countervailing Duties"

Lewis E. Leibowitz
Hogan & Hartson LLP
Counsel, Consuming Industries Trade Action Coalition
November 13, 2000

I welcome the opportunity to be here to discuss issues of importance to American industry and the trade relationship between the U.S. and the European Union.

The "Byrd Amendment" provision (section 1003 of the agriculture appropriations bill, Public Law No. 106-387 (October 28, 2000) is essentially a provision (S. 61) introduced by Sen. DeWine early in the 106^th Congress. This provision would take antidumping and countervailing duties collected by the U.S. Customs Service and give them to private companies that brought petitions is specific cases under those laws. This money under prior law was placed in the general revenue.

We do not have much time here today. I want to make sure you all understand how bad for the United States, and how illegal under international trade rules, this provision is.

1. This provision grants a substantial subsidy for companies that bring AD/CVD cases or affirmatively support them. This is clearly a subsidy, because it is a government financial contribution that confers a benefit on the recipient. That is the definition under the WTO Subsidies Agreement. Depending on the circumstances of the subsidy, it might be "actionable" under the WTO. If you believe, like most people, that subsidies are not a good thing for governments to do, you have a clear case of a bad law right here.
2. The Byrd Amendment violated the WTO Antidumping and Subsidies Agreements because it provides for action by the United States government that goes well beyond the only remedy authorized under national laws for dumping and subsidization-the imposition of offsetting duties. In the recent WTO case declaring the Antidumping Act of 1916 a violation of the Antidumping Agreement, it was made clear that additional remedies are not permitted. The WTO case is not close, in my view. Defenses such as the "silence" of the language of the relevant agreements are not credible in light of the 1916 Act case.
3. The Byrd Amendment is horrible trade and public policy. Based on an essentially meaningless condition ("qualifying expenditures"), private companies will be given millions of dollars of public money without condition. It will make it much harder for the U.S. to discourage other governments from subsidizing their industries. Domestically, this is simply a giveaway program. The Byrd Amendment imposes no requirement that the recipient companies perform any worthwhile actions with their money. Most likely, the money will be used to pay lawyers for bringing these cases, much like contingency fees in personal injury litigation. This will clearly result in a substantial increase in these cases. Ironically, the steel industry (which thought of this idea for personal gain) prevailed upon Republicans to introduce it.
4. America's industries will pay heavily for this giveaway program. Downstream users of steel (an industry not even mentioned by Sen. Byrd in the conference committee), agricultural products and other products, will have reduced supplies of products due to the proliferation of antidumping and countervailing duty cases. The welfare loss from these cases will multiply, costing billions of dollars and thousands of jobs to America's businesses and consumers. We call for a prompt analysis by the International Trade Commission, the GAO and others to measure the loss to the U.S. economy from proliferating trade remedy cases, which is routinely ignored by Congress and the Administration.
5. This provision will aggravate already raw relations between the United States and our trading partners. Add this to the list of the Foreign Sales Corporation issue, the privatization issue and the wheat gluten issue.
6. The privatization dispute is not well-known, but it has significant potential for retaliation against U.S. exports. When a company is sold at fair market value, any value added by past subsidies is fully paid for by the buyer and the subsidy no longer has any economic effect. Because of this, the WTO has ruled that the United States practice of continuing to impose countervailing duties on privatized companies is contrary to the Subsidies Agreement. The U.S. Court of Appeals for the Federal Circuit has issued a similar ruling under United States law. The Department of Commerce, however, is defying these rulings even today, refusing to re-evaluate its prior orders under its now-discredited methodology (I'll explain the methodology afterwards to anyone with the patience to listen-if you believe it is reasonable, you'll be the first without an axe to grind to accept it). Today, the European Commission requested consultations with the United States in connection with sixteen (16) cases where the United States is violating the Subsidies Agreement by imposing countervailing duties where changes of ownership have eliminated subsidies. Affected trade subject to eventual retaliation could be substantial.
7. These cases are just the ones in which Europe is the complaining party. Japan has complained against U.S. practices in the antidumping area; Korea has also complained and prevailed. Korea, Australia and New Zealand have complained about the imposition of "Safeguard" restrictions on imports of steel pipe, lamb meat and wheat gluten. The EC was also a complainant on wheat gluten. If that Panel decision is affirmed, the U.S. will have to rewrite its Safeguard, antidumping and countervailing duty laws.

What Should Be Done?

CITAC believes that it is past time we had a full discussion, in Congress and the Administration, of the trade remedy laws. This is distasteful, because passions run high and there seems to be more heat than light at hearings on these laws. They are also very complex.

Despite all that, we need to look at these laws. Immediately, we need to repeal the Antidumping Act of 1916 and the Byrd Amendment, and to compel the Department of Commerce to abide by the rule of law in subsidy cases. But we need to do more. We must look at the laws in their entirety. What "ills" are they trying to cure, are they doing a good job, and are the procedures open and fair to all affected parties. Unfortunately, the answer to these questions is not hopeful.

While the coalition I represent (CITAC) has appeared before Congress, the Administration and conducted numerous briefings, we still hear from people that "they don't hear from" our side. While I think this is not true, they plainly don't hear enough from our side, which I think is the side of most Americans. Therefore, we call for open hearings in the jurisdictional committees to air these issues fully.

What do most Americans need? They need trade remedy laws that recognize the new economic reality that companies rely on open trade, not just for export markets (as important as they are) but on imports of components, raw materials and consumer goods. Trade remedy laws (like those currently in effect) impose trade restrictions and limit access to goods without considering whether American businesses and consumers have reasonably available alternatives. If they don't (and increasingly they do not), American businesses just move-to Canada, Mexico, Singapore or elsewhere, so they can get the materials they need. They don't come to Washington to complain; they just leave and take their jobs with them. While our economy is robust and growing, these lost jobs are replaced. But when our economy turns down, these job losses will not be replaced-and the trade laws will be a further drag on our economy.

There is a rightful place for trade remedy laws in our country. We do not advocate their repeal; just their modernization. They must be flexible, to take account of the requirements of American industry for imported raw materials and components. They must comply with all applicable international rules, to prevent retaliation against American exports. And they must be inclusive, allowing our government to take intelligent action, not just action. We have developed legislation that would make common-sense reforms to the trade laws. We hope we can join together with all American industries to push this agenda forward in 2001.