Customs Update: A CASE OF SCHIZOPHRENIA
8/01
Published in the Journal of Commerce on August 17, 2001
by Susan Kohn Ross
Talk about U.S. trade, and you're talking schizophrenia. Do we favor free trade or don't we? We just don't seem to be able to decide, and certainly cannot reach consensus.
The U.S.Jordan Free Trade Agreement (USJFTA) was negotiated and signed. Now, as it goes through the approval process, Congress and the Bush Administration are unable to decide whether or not they really want it.
Notable as the first trade agreement to include labor and environmental provisions (Nafta contained such provisions in side agreements), plus an additional one allowing for the imposition of sanctions in lieu of reliance on domestic laws for trade remedies, the USJFTA faces serious opposition.
Elsewhere, the U.S.Singapore Free Trade Agreement is still in negotiation, while in July the draft text of the Free Trade Area of the Americas was released.
The U.S. reached agreement with China over that country's accession to the World Trade Organization, but lost to the Europeans over Foreign Sales Corporations, a provision in U.S. law which allows tax benefits for certain income derived from foreign sales. The Europeans brought a WTO complaint which was sustained. The U.S. rewrote the law and, in a matter of days, the Europeans sought and later obtained approval from the WTO to impose sanctions on $4 billion worth of U.S. goods, sanctions which will be delayed until September so the U.S. may decide how it will respond.
While these steps suggest that Congress is at least somewhat receptive to free trade, we have an equal amount of backward movement.
For example, the Byrd Amendment snuck into law at the last minute as part of an agriculture funding bill. It allows the redistribution of dumping and countervailing duty monies to the affected companies. Such a provision is thought to be a clear violation of the U.S.'s WTO obligations but was nonetheless approved! Similarly, a seeming violation of WTO obligations comes with the renewal of the merchandise processing fee to fund the Patients Bill of Rights.
Meanwhile, further trade negotiations could be delayed by the Bush Administration's failure to obtain trade promotion authority because there are not enough Democrats who will support it without labor and environmental provisions, and the Administration appears adamant in excluding them.
The Export Administration Act languishes again after what some have counted as a dozen attempts to rewrite it, due to a lack of consensus. Missing in this context is clear agreement as to what is freely available in the market place so as to not be subject to restriction. Although U.S. industry is clear about what its foreign
competitors are selling, the government seems unwilling to act on that information.
We face a possible new round of WTO negotiations starting in Qatar in November on such important topics as competition policy, electronic commerce and dispute settlement but, again, there is no consensus in these areas.
We have also seen the proliferation of U.S. dumping cases from the predictable to the unusual. For example, in the category of the unusual is the case brought by California grape growers against China and Mexico. What makes this claim unique is the speed with which it was decided. The International Trade Commission dismissed it within a matter of weeks, calling it a naked attempt to avoid competition.
The predictable example comes from an investigation that was recently opened regarding the steel industry, predictable in the sense that steel makers have long complained that foreign steel is being sold in the U.S. at prices well below the cost of manufacturing (a classic definition of dumping).
In order for the steel case to succeed, the threshold step the International Trade Commission must take is to define the industry. Is it one industry or are there many? If many, which ones, if any, have been harmed? In terms of defining the industry, for example, should the making of steel be treated as a different market depending on its constituent materials or its intended end use?
Whether the U.S. can find a cure for its trade schizophrenia is another question.
S.K. Ross & Assoc., P.C.
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