SOS trade legislation targets Chinese subsidies
A bipartisan coalition of Capitol Hill lawmakers introduced legislation Thursday which they say will allow the Commerce Department to apply antisubsidy laws to non-market economies, such as China.
“This bill would allow the U.S. to fight back against countries like China who are currently exempt from our countervailing duty laws because they are classified as non-market economies,” said Rep. Phil English, R-Pa., who, along with Rep. Artur Davis, D-Ala., is a lead sponsor of the bill in the House.
“It is intolerable that U.S. producers are currently held hostage by China from launching a CVD case until China chooses when, and indeed if, to make the reforms necessary to graduate to market economy status,” English added.
On the Senate side, the chief sponsors of the proposed Stopping Overseas Subsidies (SOS) Act are Sens. Susan Collins, R-Maine, and Evan Bayh, D-Ind.
“The problem is not China’s economic liberalization and modernization,” Collins said. “The problem is this: now that China has the capacity to be a key international economic player, the country has repeatedly refused to comply with standard international trading rules and practices. And these violations include the use of subsidies and other economic incentives that are designed to give its producers an unfair competitive advantage.”
In a press conference on Capitol Hill Thursday, the lawmakers cited China’s use of currency manipulation. “By keeping the Chinese yaun pegged to the U.S. dollar at artificially low levels, the Chinese undervalue the prices of their exports,” Collins said.
Other types of subsidies include providing below interest-rate loans to uncreditworthy companies and preferential access to raw materials and other inputs.
The lawmakers said the SOS bill will amend the U.S. countervailing duty law to ensure that countervailing duty measures can be applied to imports from non-market economies, such as China.
When the U.S. countervailing duty law was approved by Congress in 1979, the Commerce Department decided it was impracticable to apply these laws to non-market economies due to the difficulty of determining what defines a government subsidy within the context of a state-controlled economy.
Currently, U.S. industries have no direct means to fight subsidies used by non-market economies. They must rely on government-to-government negotiations or on the dispute settlement processes of international organizations such as the World Trade Organization.
“While these channels might eventually lead to relief, it usually takes years to see results — and by that time, that industry could already be decimated,” Collins said.
Numerous industry groups back the proposed legislation, such as the National Association of Manufacturers, American Forest & Paper Association, Cotton Council, Committee on Pipe and Tube Imports, American Textile Machinery Association, and Catfish Farmers of America.
“When our foreign competitors in the EU, Japan, or Canada face illegal subsidization from China, they can turn to their governments for help and take advantage of their WTO rights,” said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers. “Our companies should be able to do the same.”
“The United States needs to stop fighting unfair trade with one hand tied behind its back,” said Andrew G. Sharkey III, president and chief executive officer for the American Iron and Steel Institute, in a statement.
“Foundries have been particularly hard hit by unfair trading practices of several countries and primarily China in the last few years,” said Blake Jeffery, executive director of the Indiana Cast Metals Association, in another statement. “We feel it is imperative to the survival of the foundry industry that China be made to comply with existing trade agreements and all non-market economies be subject to countervailing duty laws.”
The sponsoring lawmakers emphasized that the legislation will help level the playing field American companies competing with Chinese producers. “This is pro-trade legislation, not anti-trade legislation,” Davis said.
English said he’s confident the bill will pass the Congress this year, and that the Bush administration should support the bill. A number of free trade agreements will need the approval of lawmakers to take effect, he said.
