[Congressional Record Volume 140, Number 58 (Thursday, May 12, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: May 12, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
     REMARKS OF JEFFREY E. GARTEN, UNDERSECRETARY OF COMMERCE FOR 
                          INTERNATIONAL TRADE

  Mr. DOLE. Mr. President, I ask unanimous consent to place in the 
Record a recent speech by Jeffrey Garten, Undersecretary of Commerce 
for International Trade.
  Mr. Garten points out the fundamental importance to many U.S. 
industries of an effective antidumping law. United States companies 
must have a remedy against unfair price competition. Also, as Mr. 
Garten's speech makes clear, the Uruguay round agreement creates a 
system for holding other countries to the same standards of 
transparency and due process that apply in our system. The speech is 
good reading for any member as we move forward on drafting implementing 
legislation for the Uruguay round.
  There being no objection, the remarks were ordered to be printed in 
the Record, as follows:

New Challenges in the World Economy: The Antidumping Law and U.S. Trade 
                                 Policy

                         (By Jeffrey E. Garten)


                                summary

       Few areas of American trade policy have become more 
     contentious than the antidumping law. Those firms which have 
     used it have found it essential for their survival, and those 
     who think they may need it are comforted by its existence. 
     Others see the antidumping statute as protectionist and 
     arbitrarily administered; many of them worry, also, that 
     other countries will adopt U.S.-type laws and use them 
     against American exporters abroad. The debate was evident in 
     the recently completed Uruguay Round. It will no doubt be 
     continued in Congress as the legislation implementing the 
     Uruguay Round results is considered.
       The proponents and opponents of the antidumping laws often 
     argue in highly legalistic terms which make the stakes appear 
     to be at the fringes of trade policy. This is especially true 
     in a world in which international commerce has grown so fast, 
     and so complex, and become so central to both domestic and 
     foreign policy. Yet the underlying debate is not marginal; in 
     many ways the fundamental issues are central to the 
     maintenance of a liberal trading system.
       This speech attempts to describe some of the major issues, 
     and to put them in the broader context of the 
     Administration's trade strategy and the competitive 
     environment for U.S. firms. It begins with a brief history of 
     the antidumping laws, explains their current purpose, and 
     describes how dumping occurs. It raises criticisms of the law 
     and provides responses. It recounts what was achieved during 
     the Uruguay Round in Geneva. And finally, it discusses a 
     series of issues such as: the special problems of Japan and 
     China; the needs of U.S. exporters facing antidumping actions 
     abroad; the need to address the unique circumstances of 
     ``economies in transition'' such as Russia; the implications 
     of the new World Trade organization; and the importance of 
     fair administration of the law.
       The most important conclusion is that a strong antidumping 
     law is more important than ever to American interests. It is 
     an essential cornerstone of U.S. support for the kind of 
     liberal and open trading system to which President Clinton is 
     dedicated. The Administration will administer and enforce 
     this law as vigorously and as fairly as possible.
       It is a pleasure to be here today to discuss one of the 
     most crucial issues in international trade policy these 
     days--our international trade laws, particularly the 
     antidumping law. In the short time that I have been in 
     Washington, I know of no other aspect of trade policy that 
     has generated more controversy. To a large number of 
     companies, Congressmen and Senators, the laws and the way 
     they are administered play a critical and essential role in 
     trade. On the other hand, we find many who are opposed to the 
     law, feeling it is protectionist, arbitrarily implemented, 
     and copied by foreign governments who use them against 
     American exporters. Since it is the Department of Commerce 
     that has statutory responsibility for administering the 
     antidumping law, it falls to the Secretary of Commerce, 
     myself, and the Assistant Secretary for Import Administration 
     to deal with competing interests and to execute the law as 
     fairly and efficiently as possible. As someone who is 
     constantly at the intersection of competing claims and 
     interests, I wanted to explain what I believe the antidumping 
     law is all about, and some of the fundamental challenges we 
     face in the future.
       I arrived in Washington last Fall with very little 
     technical background concerning international trade law. 
     During my government tenure in the Nixon, Ford and Carter 
     administrations, I was involved in a broad array of 
     international economic issues, but never trade law per se. In 
     the subsequent twelve years as an investment banker on Wall 
     Street, I was more concerned with pushing money around the 
     world than with the intricacies of trade law. Still, as a 
     result of having spent a good portion of my professional life 
     working abroad, I know that while capital flows and trade 
     have been mushrooming, contributing to quantum leaps in 
     global economic integration, the differences among countries 
     in the way they deal with trade are still enormous. Having 
     lived in Japan and worked throughout East Asia, for example, 
     I know first hand the meaning of industrial policies that 
     rely on subsidies, de facto cartels, and other trade 
     distorting measures. Having worked in several Latin American 
     countries, I know for a fact that none of the countries south 
     of the Rio Grande are as open to trade as the United States, 
     though many are taking encouraging steps in that direction. 
     And so I have always had a visceral appreciation for why the 
     United States, the most open of all major industrial 
     economies, needed to have laws against unfair trade practices 
     of foreign countries.
       It was one thing to harbor these feelings, another to be 
     jettisoned into the fray as Under Secretary of Commerce. It 
     happened about two hours after I was confirmed on November 8, 
     1994. No sooner did I hear the good news than phone messages 
     started to pile up on my desk. One trade lawyer after another 
     HAD to see me immediately on antidumping. The subject was the 
     Uruguay Round, and the alleged disaster that was about to 
     engulf the United States if it did not take a very tough line 
     against the rest of the world, which I was told was out to 
     destroy our laws. I met with many of these lawyers for a 
     solid two weeks. I heard their views. I heard opposing 
     views, too, especially those who were worried that our 
     laws, however they emerged from the Uruguay Round, would 
     be emulated by other countries and used against our 
     exporters. The arguments were clear enough, and I 
     proceeded to Geneva to help Ambassador Mickey Kantor and 
     Ambassador Rufus Yerxa negotiate the new antidumping code. 
     And it was in Geneva that I saw the strong international 
     emotion that our laws elicit.
       In a minute I will review what happened in Geneva. Suffice 
     it to say, we achieved most of our objectives there--we were 
     in fact, quite pleased with the results--and now the 
     spotlight is turning to implementing legislation. This, too, 
     promises raise a host of issues on all sides.
       What I want to do today is to try and put our laws and the 
     controversy surrounding them in some perspective. I'd like to 
     review the history of the antidumping statute and the reasons 
     why it is so important to us today. I will then focus on 
     several crucial issues for the future, including the 
     importance of pursuing the interest of those companies 
     applying for the protection of the law without neglecting 
     those American exporters who are concerned that the spread of 
     antidumping actions in other nations could block their sales; 
     the importance of protecting the interests of American 
     industry at the same time that we recognize the need for 
     Russia and other ``non-market'' economies in transition to 
     have access to western markets; the need to work assiduously 
     to make the new World Trade Organization (``WTO'') a success 
     from our point of view; and the importance of fair and 
     objective administration of the law itself.
       In the end I will conclude that a strong antidumping 
     statute, vigorously enforced, is more important than ever to 
     America's interest. The Clinton administration is intensely 
     committed to opening foreign markets, and to keeping our own 
     economy open to fairly priced foreign products. The existence 
     and implementation of our laws against unfair trade are 
     absolutely essential to creating public confidence that we 
     can counteract unfair practices and create a level playing 
     field. Without this concept of fairness, popular support for 
     an open world economy, let alone American leadership towards 
     that goal, would be badly weakened.
       But I will also conclude that it would be unrealistic and 
     very bad policy to believe that the laws against unfair trade 
     practices can take all the burden of helping U.S. industry to 
     compete in the world economy. The international trade laws, 
     including antidumping, are a critical component, to be sure. 
     The fact is, however, that most of the essential ingredients 
     of U.S. competitiveness are found in other areas of the 
     Administration's programs. These include better fiscal 
     balance, a climate conducive to long term investment, an 
     emphasis on rejuvenating our technological base, a focus on 
     education and training of the workforce, and attention to 
     such human resource issues such as health care--to take 
     the most obvious examples. It most certainly includes our 
     efforts to open foreign markets in Asia, Latin America, 
     and Europe via multilateral regional and bilateral 
     negotiations. In all these areas the Administration is 
     pulling out all the stops to make sure U.S. firms have the 
     best environment to succeed at home and abroad. In my 
     view, the importance of what President Clinton has done to 
     help U.S. firms compete cannot be emphasized enough.

                   History of the antidumping statute

       Let's begin with a little history.
       With the advent of the industrial revolution, the 
     possibility for dumping in earnest began. As the first nation 
     to industrialize, England was the first nation accused of 
     dumping. English manufacturers, it was repeatedly alleged, 
     were dumping goods in the United States with the intent of 
     preventing the development of industry here. Alexander 
     Hamilton, in his Report on Manufacturers, declared that the 
     greatest obstacle encountered by new industries in a young 
     country was the system of export bounties which foreign 
     countries maintained in order to ``enable their own workers 
     to undersell and supplant all competitors in countries to 
     which these commodities are sent.'' While there appears to be 
     little empirical evidence to support these general claims 
     (though there does appear to be some evidence of sporadic 
     dumping from England after the War of 1812), the result of 
     the debate was the Tariff Act of 1816, the first distinctly 
     protectionist tariff enacted by the United States. In the 
     words of Jacob Viner, the famous economist, and the first to 
     write a comprehensive work on the history and theory of 
     dumping:
       ``There is no doubt that the fear of English dumping, 
     actual or pretended, played a part, although probably a very 
     minor one, in the development of American protectionist 
     sentiment.'
       The United States did become progressively more 
     protectionist during the 19th century. Henry Clay, in a 
     speech to Congress in 1824, urged protection of American 
     industries:
       ``* * * the unprotected manufacturers of a country are 
     exposed to the danger of being crushed in their infancy 
     either by design or from the necessities of foreign 
     manufacturer s.''
       But with the establishment of free trade in England and the 
     development of large scale manufacturing industries in other 
     countries, complaints of England dumping diminished and 
     charges of dumping began to be directed against producers of 
     other countries.
       In fact, dumping became a real problem in international 
     trade around 1880, when the manufacturing enterprises of two 
     newly industrializing powers, Germany and the United States, 
     began mounting a challenge to British commercial hegemony 
     using dumping as a systematic export tactic. The German-
     American commercial onslaught shook British confidence and 
     touched off a national debate on the value of free trade.
       At the time, Britain believed in open markets while its 
     trading partners, in particular Germany and the United 
     States, believed in protected home markets. One area where 
     dumping was particularly pronounced at the time was steel. 
     Dumping by American and German industrialists lowered their 
     unit costs compared to competing steel producers in Britain. 
     Because of high tariffs, these German and American 
     manufacturers could maintain high prices at home by 
     restricting supply at home and disposing of surplus in 
     Britain's open market. German and American Companies that 
     were dumping engaged in the practice known then as 
     ``continuous running'' or ``rapid driving''--that is, running 
     their mills at high operating rates, which resulted in 
     progressively lower per-unit production costs for each 
     additional unit of output. British producers generally could 
     not do this; foreign markets were increasingly closed to 
     their exports, and continuous running, on their part, tended 
     to further depress prices in the home market. The British 
     Government, after much debate, took no action. The British 
     steel manufacturers chose not to invest in the latest steel 
     making technologies. The result was the British found 
     themselves, by 1914, hard pressed to fight a protracted war 
     of attrition against a stronger industrial power in World War 
     I.
       Much of the dumping which was occurring in Great Britain 
     during the turn of the century was coming from the United 
     States. At the time, there were significant differences 
     between the United States and Great Britain in attitudes 
     toward the economy in general and in particular toward 
     competition and trade. The United States believed in closed 
     markets and tolerated monopolization. The two factors which 
     allowed American manufacturers to dump were high U.S. tariffs 
     and U.S. monopolies, or what at the time was known as ``The 
     Trust.''
       As we moved into the 20th century a cultural shift in the 
     United States began to occur. Tolerance of monopolization 
     faded, the antitrust laws were enacted and enforced, and 
     tariffs began to come down. As historian Alfred Chandler 
     observes, the U.S. enactment of antitrust legislation and 
     institutionalization of the values it reflected:
       ``* * * probably marked the most important non-economic 
     cultural difference between the United States and Germany, 
     Britain and indeed the rest of the world insofar as it 
     affected the evolution of the modern industrial enterprise.''
       As the rest of the world remained or became more 
     protectionist, the United States developed a culture which 
     highly valued competition--a value this country still holds 
     today both nationally and internationally.

                  Dumping becomes a problem in America

       One result of this cultural shift in the early part of the 
     20th century was that the United States began to experience 
     dumping in its own market. As U.S. industries began to suffer 
     the same adverse effects as British industries had several 
     decades earlier, pressure built to deal with injurious 
     dumping. Unlike Britain, the United States took action by 
     enacting its first antidumping law. Under Title VIII of the 
     Revenue Act of 1916, the concept of dumping in international 
     trade was formally addressed under U.S. law for the first 
     time. The Act's antidumping provisions were rooted more in 
     the concepts of unfair trade under U.S. antitrust law than in 
     tariff law. The intent of the exporter would be a factor, for 
     dumping was illegal if:
       ``* * * such act or acts [importation and sale of articles 
     ``sold at a price substantially less than market value or the 
     wholesale price of such articles''] be done with the intent 
     of destroying or injuring an industry in the United States, 
     or of preventing the establishment of an industry in the 
     United States, or of restraining or monopolizing any part of 
     trade and commerce in such articles in the United States. 
     [Revenue Act of 1916 at Sec. 801].''
       Violation of the 1916 Act was punishable by serious 
     criminal and civil penalties. However, as a criminal statute, 
     the Act was subject to strict interpretation. The level of 
     proof required, and the need to show intent to injure a 
     domestic industry, severely curtailed its effectiveness. The 
     failure to assign the task of enforcement to a specific 
     government agency also contributed to the Act's 
     ineffectiveness.

                The first effective U.S. antidumping law

       As the problem of dumping became more severe, the United 
     States saw a need for an effective antidumping remedy. The 
     concerns of Congress were stated in the House Ways and Means 
     Committee report on antidumping provisions in 1919:
       ``In 1903 there were in the United States five 
     manufacturers of salicylic acid. By 1913 three of these had 
     failed . . . During the latter part of the decade referred 
     to, salicylic acid was selling in Germany at from 26 to 30 
     cents. During this same period, the German houses were 
     selling in this country, after paying a duty of 5 cents at 25 
     cents or a [net] price of 6 to 10 cents below what they were 
     getting at home.
       ``In 1901 where there was no American manufacture [of 
     oxalic acid] it was sold by the Germans at 6 cents. In 1903, 
     when the works of the American Acid and Alkali Co. was 
     started, the price was immediately dropped to 4.7 cents, at 
     about which figure it remained until 1907 when the American 
     factory was shut down for a number of months. During this 
     shut down the price was instantly raised to 9 cents. When the 
     factory reopened the price was again dropped until 1908, when 
     the company failed. . .
       ``The same process was carried on in regard to bicarbonate 
     of potash. In 1900 there was no manufacture and imports ran 
     about 160,000 pounds. In 1901 American manufacture began. 
     This succeeded so well that in 1906 imports had dropped to 
     45,000 pounds. At this time the American manufacture's price 
     was 6.5 cents, while the import value was given at 4.9 cents. 
     In the following year, the Germans made a determined and 
     successful onslaught. Their import value was lowered to 2.2 
     cents with the result that instead of 45,000, 310,000 were 
     imported. Accordingly in 1908 the American manufacture 
     failed. The price was immediately raised to 7.5 cents and 
     remained thereabout until the war.'' Antidumping Legislation, 
     H. Rept. 479, 60 Cong. 2 session.
       In light of the ineffectiveness of the 1916 Act and the 
     perceived need to prevent the stifling of domestic industries 
     due to dumped merchandise, the Antidumping Act of 1921 was 
     passed. This Act, while not completely addressing all of the 
     problems of dumping, provided the first effective means to 
     counteract injurious dumping in the United States.

                Advent of dumping problems in the 1970's

       For many years the U.S. antidumping law was used relatively 
     little, except for a spurt of activity against German exports 
     in the years immediately preceding World War II. Continuing 
     into the later part of the 1960's, few petitions were filed. 
     This was not because dumping did not occur, but because U.S. 
     industries, for a long period after the war, enjoyed a 
     preeminent competitive position in world markets such that 
     dumped imports seldom caused injury. However, the strong 
     growth of the European and Japanese post-war economies 
     radically changed this picture. Beginning in the early 
     1970's, many U.S. industries found themselves facing intense, 
     and sometimes unfair, competition at home and abroad. Their 
     response, when facing unfair price competition in the United 
     States, was to seek relief under the antidumping law.

                       Important changes of 1979

       An important change in U.S. antidumping law occurred in 
     1979 when the law was significantly transformed as a result 
     of the new GATT code negotiated under the Tokyo Round. 
     Shortly afterwards, the administration of the law was 
     moved from the Department of Treasury to the Department of 
     Commerce. There were important, substantive changes in the 
     administration of the law, as well.
       First, many of the statutory deadlines which we have today 
     were added. Prior to 1980, there were few time limits for 
     cases and therefore, a case could and often did drag on for 
     years. Often when a case was politically sensitive it was 
     simply not finished, thereby denying the U.S. producer a 
     remedy under the law.
       Secondly, a system of administrative protective orders 
     (``APO's'') was implemented. An APO enables opposing counsel 
     to gain access to business proprietary information. This 
     allows attorneys to effectively represent their clients and 
     actively participate in the process, which in turn helps 
     ensure that the system is open and transparent. It became a 
     major goal of the Department of Commerce to make certain that 
     all parties, whether they agree with a decision or not, know 
     on what basis the decision was made.
       Finally, a more detailed judicial review was allowed, 
     allowing parties the right to appeal a determination of 
     either the Department or the ITC.
       A combination of increased international competition and a 
     greater probability of receiving relief drastically increased 
     the number of dumping orders issued. From 1970 to 1979, 79 
     orders were issued. From 1980 to 1989, 175 orders were 
     issued. Sixty four orders were issued in just the three years 
     from 1990 to 1993. With this increase in cases has come an 
     obvious increase in the size of the Department of Commerce's 
     Import Administration. In the late 1960's, for example, there 
     were fewer than ten professionals working part time on 
     dumping and countervailing cases; today Import Administration 
     has nearly 300 employees.

                      History in international law

       The antidumping law likewise has a long history in 
     international law. One of the results of the Genoa 
     conference, held in May 1922, was a request that the League 
     of Nations undertake a study of dumping and differential 
     pricing. Reporting on the conference, the League's Secretary 
     General explained that:
       ``* * * questions regarding dumping and differential prices 
     being among those which concern most closely the equitable 
     treatment of commerce, it is desirable that the League of 
     Nations should undertake at an early date an inquiry on the 
     subject.''-- The Genoa Conference and the League of Nations: 
     Memorandum of the Secretary General, League of Nations 
     Off. J. Aug. 1992, at 1003.
       The league undertook the inquiry and the most tangible 
     result was Jacob Viner's second major work on the topic of 
     dumping called ``A Memorandum on Dumping.'' The League 
     failed, however, to produce any sort of general agreement on 
     further international action.
       In the negotiations to write the original General Agreement 
     on Tariffs and Trade (``GATT''), one area that was covered, 
     largely at the insistence of the United States, was unfair 
     trade in the form of dumping and subsidized exports. Since 
     the formation of the GATT in 1947, signatory countries have 
     recognized the pernicious effects of dumping. Indeed, Article 
     VI of the GATT specifically says:
       ``The contracting parties recognize that dumping, by which 
     products of one country are introduced into the commerce of 
     another country at less than normal value of the products, is 
     to be condemned if it causes or threatens material injury * * 
     *.'' [emphasis added]
       The first four rounds of trade negotiations which occurred 
     after the GATT's inception in 1947 were largely limited in 
     focus to tariff reductions among the contracting parties. In 
     1967, however, as a result of the Kennedy Round of 
     negotiations, a GATT Antidumping Code was adopted which 
     expanded upon the limited rules set out in Article VI. The 
     code was amended in 1979 in the Tokyo Round of negotiations. 
     In the recently completed Uruguay Round GATT negotiations, 
     the code was further amended. A major goal of the United 
     States in the Uruguay Round was to maintain the effectiveness 
     of its antidumping law--a goal I am happy to say we achieved.

                   The purpose of the antidumping law

       Let me discuss in more detail what the antidumping law is 
     designed to do. Broadly speaking, dumping refers to price 
     discrimination between national markets, such as the sale in 
     the United States of a product at a price less than is 
     charged for the product in the producer's home market. In 
     these circumstances, U.S. producers may be at a disadvantage 
     because their prices are unfairly undercut. The U.S. law 
     seeks to end such injurious pricing practices that commonly 
     result when the free market is prevented from operating 
     properly because of trade barriers or other reasons. The 
     antidumping law provides for the imposition of duties on 
     imported products that are sold in the United States at 
     ``less than fair value'' (i.e. dumped) and cause ``material 
     injury'' to a U.S. industry. Fair value usually is determined 
     by the foreign producer's home-market price of a comparable 
     product of its price in a third country market. 
     Alternatively, the constructed value (which is the sum of 
     the cost of materials, an amount for general expenses, an 
     amount for profits, and the cost shipping containers) of 
     the foreign producer's merchandise may be used to 
     determine fair value. Constructed value is generally used 
     as the basis for foreign market value when one of two 
     conditions exist. Either there is no home market or third 
     country sales; or, alternatively, the manufacturers home 
     market or third country sales are below this cost of 
     production.
       In its simplest form, if a manufacturer in country ``X'' 
     sells a widget in the United States for a price which is 
     lower than the price charged in the manufacturer's home 
     market, then the manufacturer is dumping. This is rarely a 
     simple determination, for both international agreements and 
     U.S. law mandate a complex series of adjustments to ensure 
     that price comparisons are fair. Thus, if there are physical 
     differences in the products sold in the two markets or 
     differences in selling expenses that logically and directly 
     affect price, adjustments for these differences are mandated 
     to ensure that only actual price discrimination is detected. 
     If imports are dumped and cause or threaten material injury 
     to the competing U.S. industry in the sense that the industry 
     loses sales, suffers profit losses, or is forced to lay off 
     workers, the United States has the right, under international 
     agreements, and the obligation under U.S. law, to impose a 
     duty on those goods equal to the amount of the dumping. That 
     duty is designed to correct the competitive imbalance created 
     by the dumped imports.
       While one form of dumping may arise from price 
     discrimination, dumping may also occur when the U.S. 
     producers are unfairly undercut by foreign producers selling 
     below their costs of production. In this case, where the 
     manufacturer is selling below cost in both markets, the U.S. 
     price is compared to the constructed value. However, this 
     alone is not enough to justify the assessment of antidumping 
     duties. Such below cost sales must be shown to be injuring 
     the competing U.S. industry. In other words, during a 
     recession where producers in other countries are selling 
     below cost, that fact alone would not be sufficient to 
     sustain a dumping finding and impose a duty. It must be shown 
     that such sales are adversely affecting the U.S. industry--
     i.e., that U.S. producers are bearing a disproportionate 
     share of the burden of the recession because of the selling 
     practices of the foreign industry.
       The international economist Jagdish Bhagwatii described, in 
     his essay Protectionism, the basic purpose behind free trade 
     and by extension the laws against unfair trade:
       ``If one applies the logic of efficiency to the allocation 
     of activity among all trading nations, and not merely within 
     one's own nation state, it is easy enough to see that it 
     yields the prescription of free trade everywhere--that 
     alone would ensure that goods and services would be 
     produced where it could be done most cheaply. The notion 
     that prices reflect true social costs is crucial to this 
     conclusion, just as it is to the case for free trade for 
     one nation alone. If any nation uses tariffs or subsidies 
     (protection or promotion) to drive a wedge between market 
     prices and social costs rather than to close a gap arising 
     from market failure, then surely that is not consonant 
     with an efficient world allocation of activity. The rule 
     then emerges that free trade must apply to all.
       ``Therefore, where the nationalist theory of free trade 
     glosses over the use of tariffs, quotas, and subsidies by 
     other countries, urging free trade for a nation regardless of 
     what others do, the cosmopolitan theory requires adherence to 
     free trade everywhere. The trade regime that one constructs 
     must then rule out artificial comparative advantage arising 
     from interventions such as subsidies and protection. It must 
     equally frown upon dumping, insofar as it is a technique used 
     successfully to secure an otherwise untenable foothold in 
     world markets. [emphasis added]
       Dumping sends false signals to the market. While free trade 
     increases world wealth, dumping causes resources to be 
     misallocated, ultimately resulting in reduced wealth for the 
     nation in which it occurs. This raises the most basic issue 
     presented by dumping: ``Where will investment occur--in this 
     country, or somewhere else?'' The ability to dump acts as a 
     disincentive to investment in the country where dumping is 
     occurring and fosters excessive investments in the market of 
     the dumper. This is because certain market distortions such 
     as closed market, anticompetitive practices and government 
     subsidization shield investors in the dumping country from 
     normal market risk in the open market where dumping occurs. 
     Accordingly, capital will flow to those industries and 
     markets where investors believe that they are most likely to 
     make money on their investments; and will flow away from 
     industries where this is less likely. Dumping has a dramatic 
     effect on investors decisions.
       Other mechanisms, such as Section 301 of the Trade Act of 
     1974, do not address the problem of dumping and furthermore, 
     do not work fast enough or surely enough to deal with the 
     underlying causes of dumping. The antidumping law deals 
     relatively promptly with the adverse effects of dumping and 
     that is particularly important today, given how quickly the 
     manufacturing processes are changing and how fast import 
     penetration can surge, and how much damage can be done to 
     domestic industry in so short a time. This is especially true 
     in the high technology area, where product life cycles are so 
     short that failure to achieve economies of scale in one 
     product jeopardizes the next generation of products.
       The antidumping law seeks to foster a strong, fair, and 
     competitive U.S. market. It seeks no special advantage for 
     U.S. producers, but simply seeks to preserve any natural 
     comparative advantage they have. If a foreign producer sells 
     to the United States at a price no lower than his home market 
     price, and also no lower than his full cost of production, 
     then it is not dumping. However, if the foreign producer 
     dumps, and in so doing injures a U.S. industry, the 
     antidumping law steps in to rectify the imbalance.

                           How dumping occurs

       The circumstances which give rise to dumping are varied and 
     widely debated among economists. It has been argued by some 
     analysts that dumping is a result of closed home markets, 
     anticompetitive practices or predatory intentions. Others 
     point to dumping investigations where nothing like this is 
     present but dumping is still found to be occurring. It is 
     important to note that neither U.S. law nor our international 
     obligations require a finding of any particular market 
     condition--like anticompetitive practices--in order to impose 
     a dumping duty. However, I believe that there are certain 
     market distortions which do give rise to dumping. Moreover, I 
     believe that there is an implicit presumption underlying the 
     law that dumping is a result of these distortions.
       The Administration is committed to resolving, through 
     bilateral or multilateral negotiations with our trading 
     partners, any policies or conditions which I believe give 
     rise to dumping. However, dumping is a real problem today, 
     and the only immediate solution to these problems is the 
     antidumping law.
       Here are some of the conditions that give rise to dumping:

                             Closed markets

       Let's start with the phenomenon of closed foreign markets 
     in which the foreign manufacturer has a degree of market 
     power. In this case, the exporter is able to sell in the home 
     market for a high price, run his factory at full capacity and 
     thereby lower his per unit cost of production. The excess 
     capacity is then sold in international markets. As long as 
     the exporter is able to sell overseas at a price above his 
     marginal cost, the export sales will increase the exporter's 
     profitability. Some Japanese producers have successfully used 
     this strategy for a number of years.

        Anti-competitive practices which permit sales below cost

       Another, and often related, phenomenon occurs when 
     companies engage in anti-competitive practices which provide 
     the resources to sustain losses (i.e. sell below costs) in 
     order to gain market share and drive competitors out of 
     the market. In this case, comparing prices in the United 
     States with the producer's home market price may not 
     indicate price discrimination. This might be because the 
     producer has such leverage that it is able to undercut 
     competitors at home as well as in the United States. For 
     this reason, the law prohibits the use, as the basis for 
     fair value, of home market prices which are below the cost 
     of production.
       When anti-competitive practices, such as collusive 
     behavior, or closed markets, or both, provide foreign 
     producers with significant economic leverage, dumping is an 
     expected result. For example, when foreign producers account 
     for a broad range of different but related products, and have 
     significant market power for such products, they can afford 
     to ``cross-subsidize'' one or more products from the profits 
     derived from the sales of other products, permitting below 
     cost sales of targeted products.
       The most insidious results of such dumping is in the high 
     technology area where, in order to remain competitive, a 
     producer must finance the research and development for future 
     products with either the profits from the current 
     generation's production or new investment capital. If that 
     producer is undercut by exports even for a short while, he 
     will have difficulty raising capital and will have to cut 
     back on research and development and may ultimately be forced 
     out of the market.

                        Government subsidization

       Another example of marketplace distortion that gives rise 
     to dumping occurs when foreign industries are supported by 
     government actions including subsidies and price controls. 
     Such actions distort both the home and international markets 
     by funding production that would not make economic sense 
     under free trade principles. Often, the result is excess 
     world production of a product and falling prices because 
     supply exceeds demand. To the extent that the government 
     actions are in the form of subsidies, we can and do use the 
     countervailing duty law to counteract them. However, often 
     the effect of subsidized increases in production capacity is 
     that the goods are also dumped in the United States. The 
     subsidy to the producer at home enables it to sell at low 
     prices in the United States and to undercut U.S. competitors 
     in the U.S. market. In the recent steel cases where there was 
     both an antidumping and a countervailing duty case, in each 
     case, dumping margins were found far in excess of the 
     countervailing duty margins.
       Governments often believe that they have valid reasons for 
     supporting their industries; their subsidies are not 
     necessarily given with the intent of distorting markets or 
     injuring competition, but for social and political reasons, 
     typically to avoid the need to close or downsize important 
     industries. They understandably wish to avoid the problems 
     created by significant decreases in productive activity 
     and increases in unemployment. However, by funding 
     continued or increased production that is uneconomic, 
     foreign governments inescapably create worldwide over 
     production and lower prices that, more often than not, are 
     dumped prices. Furthermore, these governments create 
     inexorable pressures to export greater quantities of goods 
     and, in doing so, export unemployment. U.S. industries and 
     U.S. workers should not be forced to bear this burden.

                         Non-market conditions

       Dumping also occurs where the normal market forces of 
     supply and demand simply do not operate, as in the case of 
     non-market economies (``NMEs''). The most prominent current 
     NME exporter is the People's Republic of China--a special 
     problem which I will discuss later--but Russia and the other 
     former Soviet republics--including Ukraine, Kazakhstan etc. 
     as well as Romania, Hungary, and the Czech and Slovak 
     Republics--are also still considered to be non-market 
     economies. The NMEs pose special problems and challenges in 
     the implementation of the antidumping law. Indeed, the 
     antidumping law mandates special calculation methods to 
     determine fair value of products in NME countries, because of 
     the absence of normal market forces. Internal prices and 
     costs are disregarded since they are essentially meaningless 
     in market economy terms. Instead, fair value is determined by 
     constructing the cost on the basis of the NME's actual 
     factors of production (e.g., quantities of raw materials, 
     labor, energy, etc.) using surrogate prices from a market 
     economy of comparable economic development.

                       Industry specific examples

       Examples from several cases may help explain how these 
     conditions can cause dumping and their effect on U.S. 
     industries.

                                Bearings

       The 1988 antidumping investigations of antifriction 
     bearings from Japan and multiple European countries are 
     excellent examples of closed foreign markets. Because of 
     market barriers in Japan and Europe, manufacturers there were 
     able to sell at high prices in their home markets; in other 
     words they had insulated themselves from foreign competition. 
     As a result, they could afford to dump their excess 
     production at low prices in the United States rather than 
     disrupt the artificially high prices in their own markets. In 
     fact, the U.S. market became a battleground as the Europeans 
     and Japanese engaged in a price war here, crippling the U.S. 
     market and the competitiveness of U.S. companies. Almost 
     without exception, the dumping margins were significant, 
     vividly reflective of the distortion created by closed 
     markets.

                             Semiconductors

       The experience of the U.S. semiconductor industry in the 
     1980's shows the pernicious effects of anti-competitive 
     practices which can allow selling below the manufacturer's 
     cost of production. A combination of a protected home market, 
     a cartelized home market, substantial financial resources, 
     and aggressive dumping, including selling below the cost of 
     production, allowed Japanese companies to nearly decimate the 
     U.S. semiconductor industry. In the case of commodity memory 
     products, the displacement of U.S. producers by Japan 
     occurred in two bursts of intense price undercutting during 
     the 1981-82 and 1984-85 periods. The first episode (1981-82) 
     culminated in Japanese domination of the then current 64K 
     generation DRAM and leadership in the race to commercialize 
     the 256K DRAM; the second episode (1984-85) saw Japan achieve 
     a virtual monopoly over the 256K DRAM as most U.S. producers 
     exited the market altogether. Each episode began with an 
     extraordinarily rapid, massive buildup of DRAM capacity by 
     Japanese producers, establishing far more than the world 
     market could absorb. In each case, a precipitous price 
     collapse followed, led by extreme discounting by Japanese 
     firms. In each episode, tremendous losses were experienced by 
     American firms, and from all accounts, by Japanese firms as 
     well. The net result was a virtually complete withdrawal by 
     U.S. firms from the production of DRAMs by the end of 1985. 
     Whereas 11 U.S. firms had been producing DRAMs at the 16K 
     level in 1980, by 1986, only two U.S. firms remained in the 
     market at the 256K level and these accounted for less than 10 
     percent of world sales.
       Some might say that this was just good old fashioned 
     competition and the United States lost. But was this fair 
     competition? Japanese semiconductor manufacturers had a 
     number of advantages not shared by their U.S. counterparts 
     and these were not ``comparative'' advantages arising from 
     the operation of genuinely free markets.
       First, they were able to enter into arrangements such as 
     joint producer groups which were used to regulate competition 
     in the home market and which represented a degree of market 
     manipulation and control that would be illegal in the United 
     States.
       Secondly, the Japanese keiretsu-based firms enjoyed 
     enormous resources, among other things, from their consumer 
     electronics divisions which, operating from a protected home 
     market export base, could finance or cross subsidize, a push 
     into the contested, strategic microelectronics sector. All of 
     the Japanese producers were able to underwrite losses in 
     their semiconductor divisions with profits from other 
     electronics product divisions, many of which were also 
     protected from foreign competitive pressure.
       Both of these factors--control over home market prices and 
     access to significant amounts of capital--relate to 
     investment risk. These factors lower the risk associated with 
     investing in new products. The threat of dumping increases 
     the risk of investing. As risk increases in a sector, 
     investment will decrease, and the industrial competitiveness 
     of that sector will decline. To the extent that the risk is 
     not equal between two countries, the competition will not be 
     equal and governments have a legitimate role to play in 
     correcting the distortion. Ideally, the correction will come 
     from opening markets. However, until markets are truly 
     integrated there will be a need for the antidumping law to 
     assure that industries are not lost to unfair competition.
       In the case of semiconductors, dumping cases, which led to 
     a negotiated semiconductor agreement with the Japanese, 
     worked to bring back an industry. Albeit, the industry is 
     much different today than it would have been without the 
     unfair trade actions and has still not regained its former 
     strength in the products where the dumping was most 
     concentrated. Although some questioned the use of the 
     antidumping law and the resulting agreement, there is not 
     question that they operated to prevent the demise of a 
     substantial portion of the U.S. industry, a demise which 
     would have been caused by practices that, by any definition, 
     were unfair. Nevertheless, dumping remains a real concern for 
     potential investors in the U.S. semiconductor industry 
     despite the fact that Japanese dumping on a massive scale has 
     not occurred since 1987. The pernicious effects of dumping 
     often remain long after the dumping itself has been 
     eliminated.

                                 Steel

       The classic example of sustained government intervention 
     that led to excess production and dumping is steel. For 
     years, European steel industries have benefited from 
     substantial subsidies and other structural support from their 
     governments. During the late 70's European governments tried 
     to maintain an artificial price floor in Europe; excess 
     capacity was dumped in the United States. Only when U.S. 
     industry filed antidumping and countervailing duty cases did 
     the onslaught of unfairly priced steel into the United States 
     subside. Subsequent to the filing of these cases, the United 
     States entered into a series of voluntary restraint 
     agreements (``VRAs'') with European, Japanese and other major 
     steel producing nations to regulate the flow of steel 
     imports. The VRAs expired in 1992, and the U.S. industry 
     again filed antidumping and countervailing duty petitions in 
     June of 1992. The Department of Commerce found dumping, 
     typically with large dumping margins, in every case. Although 
     injury was not found in a number of the cases, often because 
     of the greater health enjoyed by the U.S. industry as a 
     result of its own efforts to modernize and become more 
     efficient, dumping orders were issued in roughly half the 
     cases and remain in place today. Although many countries 
     have made significant efforts to reduce subsidies, 
     substantial subsidies persist, and their effects will be 
     felt for many years. The principal effect, of course, is a 
     persistent world overcapacity for steel, which alone makes 
     dumping virtually inevitable. Further, these cases make it 
     clear that the United States is still the principal 
     dumping ground for the world's excess steel capacity, and 
     will remain so as long as the policies in Europe and 
     elsewhere which give rise to dumping persist.
       When you think about these cases, it is evident to me that 
     the antidumping law is not an aggressive tool for protecting 
     U.S. industries from unwanted competition, but a defensive 
     instrument needed as an effective response to market 
     distortions abroad which create or foster unfairly priced and 
     injurious exports to the United States.

                     Attacks on the antidumping law

       While the U.S. antidumping law has a long history of 
     enforcement and has been administered in a manner consistent 
     with our GATT obligations, the use of the law has, for some 
     time, been attacked by foreign countries who want to protect 
     their industries' ability to dump in the United States at the 
     expense of U.S. industries. We had to fight hard to obtain 
     acceptable antidumping provisions in the Uruguay Round 
     Agreement.
       Authorization to take antidumping actions remains firmly 
     embedded in the multilateral trading system. Further, the 
     U.S. antidumping law will remain an effective remedy against 
     dumped imports. Nevertheless, there are those who argue that 
     while it may be consistent with international law, the 
     antidumping law is not in the best interest of the United 
     States.
       Here are some of the assertions that are made, and how I 
     would reply to them.

         The argument that the antidumping law harms consumers

       There are those who argue that the antidumping law serves 
     to keep domestic prices higher, thereby depriving the 
     domestic consumer of the benefits of competitively produced 
     goods from whatever source and placing domestic users of 
     dumped merchandise at a competitive disadvantage in relation 
     to foreign producers.
       Such critics tend to focus on the short-term benefits of 
     low-priced imports to consumers and consuming industries, 
     conveniently ignoring the effects of such imports on directly 
     competing U.S. industries.
       History has shown that the idea that we should simply 
     accept all low-priced foreign goods would be a disaster for 
     the manufacturing sector. The antidumping law has saved 
     numerous U.S. industries, not from more efficient 
     production or better products, but from competitors who 
     are able to sell in the United States at artificially low 
     prices, supported by government subsidies or profits 
     earned in protected home markets.
       When dumping results from price discrimination between the 
     home market of a foreign producer and the U.S. market, the 
     U.S. manufacturer who purchases the dumped inputs is not put 
     at a disadvantage globally by an antidumping order. That 
     manufacturer is simply required to pay a price comparable to 
     that of its foreign competition.
       In the case where dumping exists not because of price 
     discrimination, but because the foreign producer is selling 
     below cost in both the home market and the United States, a 
     different result occurs. An antidumping order only affects 
     prices in the U.S. market. As a result, customers of dumped 
     products may find themselves competing with firms that have 
     purchased the input at a lower price abroad. However, the 
     answer is not to sacrifice one domestic industry for another, 
     a producer for a consumer. In these cases, the trade laws 
     cannot bear all the burden. We must have a broad range of 
     policy devices to create a competitive environment. DRAMS are 
     a good example of this. We not only took trade actions to 
     provide short-term relief to the industry, but we also 
     created SEMATECH, which is a government-industry partnership, 
     to improve development and production processes for use by 
     American producers. This will help to assure the long term 
     competitiveness not only of the DRAMS producers but of the 
     users of DRAMS as well.
       In the short run, the consumer may have to pay higher 
     prices for individual goods. Let's acknowledge the painful 
     truth. However, without antidumping enforcement, in the long 
     run the consumer will ultimately be the one to pay as reduced 
     competition enables foreign producers to raise prices. 
     Moreover, the consumers as citizens will also pay in terms of 
     high unemployment as well. In the long run, the consumer will 
     ultimately benefit as increased supply by domestic producers 
     ensures a stable and competitive market place, in which 
     industrial users are not forced to rely only on off-shore 
     sources for components which may very well be controlled by 
     their direct competitors. Finally, we need to bring some 
     perspective to this short term picture. Antidumping orders 
     affect very limited amounts of U.S. imports. In 1993, less 
     than one percent, by value, of total merchandise imports were 
     covered by an antidumping duty order. Antidumping orders have 
     only a limited impact on consumers in the short run and 
     provide a long term benefit to the economy.

 The argument that if the problem is with markets that are not open we 
  should use the multilateral process to open markets as opposed to a 
                      unilateral dumping mechanism

       There are those that would argue that if closed or anti-
     competitive foreign markets are the problem, the United 
     States should use bilateral and multilateral negotiations to 
     open up markets.
       As I mentioned, it is among the highest priorities of the 
     Clinton Administration to press foreign governments to reduce 
     their barriers to trade. However, in the short run we cannot 
     afford to forgo immediate action where the effect of closed 
     markets is to cause immediate injury in our own market 
     through dumping. Critics fail to appreciate how quickly an 
     industry can be lost to dumping. Often there is simply not 
     time to negotiate, and our trading partners have often proven 
     less than willing to open their markets or have entered into 
     agreements that, in retrospect, actually changed nothing. 
     Furthermore, when the closed market is due to private 
     practices the task is even made more difficult.
       The more open an economy is, of course, the more vulnerable 
     its industries are to dumping, and the United States 
     unquestionably has the most open market of any country in the 
     world. The developing countries in particular typically 
     maintain relatively high tariff rates today, even though many 
     such countries are world-class competitors in some product 
     categories. Even developed countries maintain high tariffs on 
     some products. For example, Japan still has high tariffs on 
     petrochemical and related products, and paper.
       Less transparent than high tariff rates, and harder to 
     combat, are the other means that countries use to restrict 
     trade. Non-tariff barriers to trade and lack of internal 
     competition still foster the conditions under which dumping 
     can occur. The most important country where this is prevalent 
     is Japan.
       Although many of the overt trade barriers in Japan, such as 
     tariffs and quotas, have been eliminated or significantly 
     reduced, Japan remains an essentially closed market which 
     will not be as open as ours for many years to come at least. 
     The Japanese economy is characterized by numerous barriers 
     which stem from a variety of factors. Structural barriers 
     include an overall lack of transparent rules, statutes or 
     regulations which are not published or made available to 
     importers, exclusionary business practices, and close 
     government-business relations. Foreign firms must also 
     overcome excessive government regulations, burdensome 
     standard and certification requirements, and a multilayered, 
     antiquated distribution system that is extraordinarily costly 
     and difficult to enter. All these barriers work to limit the 
     ability of foreign firms across a wide range of sectors to 
     compete fairly in the Japanese marketplace.
       Japan is by no means the only country that maintains 
     barriers to trade. No country, including the United States, 
     is absolutely pure, and most countries maintain or tolerate 
     conditions, at least in some product sectors, which create 
     the distortions I discussed earlier. While the Administration 
     strongly supports free trade, and will continue to do so in 
     the future, the conditions which allow dumping to occur still 
     exist and will continue to exist in the foreseeable future. 
     This Administration is committed to addressing dumping 
     effectively when it is encountered, as well as to the 
     aggressive opening of markets.
       Ultimately opening markets will reduce the need for and use 
     of the antidumping law. This phenomenon can already be 
     observed in our trade with Canada. Although that country is 
     our largest single trading partner, there are very few 
     dumping cases involving Canadian goods. Not so 
     coincidentally, Canada, also an active user of its 
     antidumping law, has relatively few cases against U.S. 
     exports. We expect to see the same result with Mexico in the 
     near future.
       However, the opening of markets in the long run is no 
     solution for the manufacturer--or the manufacturer's 
     workers--to the problems created by unfair imports today. If 
     we remain passive and simply put our faith in the belief that 
     someday the global market will be truly open, we will have 
     lost significant portions of our industrial base in the 
     meantime. Dumping can have deleterious effects in a very 
     short period of time. Perhaps the semiconductor case presents 
     the most striking example of how quickly an industry can be 
     lost, or nearly so, to unfair trade practices and of the need 
     to respond rapidly and effectively when such practices occur. 
     The antidumping law, and no other U.S. trade law, provides 
     such an effective and relatively rapid remedy, and it does so 
     consistent with our international obligations.
       The economy is changing rapidly, in large part because of 
     increased globalization and rapid changes in technology, and 
     with it comes ever increasing competition. If we allow 
     ourselves to be the dumping ground for the world's excess 
     production and unemployment, investment dollars will flow out 
     of the United States, for investors are by no means limited 
     to investing here. Money will flow to any country that offers 
     the prospect of a high rate of return with low risk. If U.S. 
     industries are willing to put capital at risk here at home to 
     manufacture a product as efficiently and cost effectively as 
     it can be produced anywhere in the world, they should not be 
     denied the right to prosper because the trade laws are not 
     properly enforced.

The argument that if lack of competition is the problem, then we should 
               be using our competition laws to solve it

       Much of what I have been talking about today, the 
     conditions which may allow dumping to occur, involve a lack 
     of competition in the exporter's market. There are those who 
     argue that if the problem is lack of competition, then the 
     solution should be found in the competition or antitrust laws 
     and not the antidumping law.
       The argument that we could rely exclusively on our 
     antitrust laws is based on a fundamental misunderstanding of 
     the scope of the problems addressed by the antidumping law. 
     The Administration supports increased global standards in the 
     area of competition law and believes that, with success in 
     this effort, the need to invoke the antidumping law will be 
     reduced. Competition laws can and do work effectively 
     alongside the antidumping law, but are not a substitute for 
     it. The need for vigorous enforcement of the U.S. antidumping 
     law will continue for the foreseeable future.
       The proponents of sole reliance on antitrust measures have 
     a basic disagreement with us as to what is needed to promote 
     and protect competition internationally and therefore of the 
     purpose behind the two bodies of law. Both laws seek to 
     protect and foster competition. The antidumping law, however, 
     focuses on insuring that distortions in markets abroad do not 
     restrict the ability of U.S. producers to compete in their 
     own market. From the standpoint of some competition law 
     advocates, if there seems to be a large number of competitors 
     in the market, if prices are low, and if the consumer 
     benefits--all is as it should be. Where the products are 
     produced is irrelevant. However it would be a mistake to 
     assume that low prices to consumers always reflect a genuine 
     competitive market, and that this situation and low prices 
     will continue. If the low prices are the result of dumping 
     and the exporter succeeds in driving its U.S. competition out 
     of business, prices could still rise, likely to higher levels 
     than if there had never been dumping. Further, I would argue, 
     that where goods are produced does matter. If U.S. producers 
     leave markets because other countries have a comparative 
     advantage and U.S. producers enter other markets where they 
     have a competitive advantage, so be it. That, after all, is 
     what free trade is about. However, if they are forced out of 
     the market because they could not compete against dumped 
     imports, from producers which enjoy no real comparative 
     advantage, the country will be worse off, in my view.
       Remember what dumping does--it distorts the market signals 
     and thus the markets themselves. The low prices resulting 
     from dumping may temporarily please consumers, but they send 
     a signal that chills investment, with potential fatal 
     consequences for the industry and long run harm to the 
     consumer. In the case of semiconductors, for example, when 
     manufactures should have been investing in technology for 
     future generations of DRAMS, they were leaving the market. 
     Proponents of the application of competition law might say 
     ``yes plants are closing but the consumer is getting low 
     prices.'' I believe this is a shortsighted view that does 
     not reflect genuine free competition. Moreover, unemployed 
     workers make very bad consumers.
       Economic theory says that when everyone produces the goods 
     for which they have a comparative advantage, and trade is 
     free, the welfare of a nation is maximized. That is what we 
     have done in the United States. We have created a free market 
     among all the states and goods can move freely from state to 
     state. Competition laws are necessary and work well to 
     preserve the freedom of the U.S. market. It doesn't matter if 
     a good is produced in New York or Arizona so long as there is 
     sufficient competition to assure low prices.
       We are working on expanding free markets globally, but it 
     is highly questionable whether the competition laws of other 
     countries will ever mirror our own in both substance and zeal 
     of enforcement, and even more questionable how effective our 
     own competition laws can be in addressing and resolving 
     problems that arise outside the United States. At best, they 
     work much too slowly to be of meaningful benefit to U.S. 
     industries in urgent need of protection from unfairly traded 
     imports. Thus, the day when, for example, the U.S. and 
     Japanese markets are truly integrated is far off, if it ever 
     arrives. Even in the case of the U.S. and Canadian markets 
     there remain distortions, such as investment restrictions, 
     differences in technical standards, and sectors of the 
     economy are excluded not only from investment liberalization 
     but also from liberalization of the trade rules--the so 
     called ``cultural'' industries being perhaps the best 
     example. This is not to say that as the U.S. and Canadian 
     markets become more integrated there won't be a need for 
     greater harmonization in competition laws, but it will be a 
     while before they can be a substitute for the antidumping 
     law.
       I am hopeful that our goal of free trade and fully 
     integrated markets will someday be achieved. When this 
     occurs, either in North America or globally, then our 
     critical manufacturing industries will no longer be forced to 
     rely upon the antidumping law to have a fair chance to 
     compete.

 The argument that dumping margins will always be found due to either 
                       freight charges or tariffs

       Some would argue that the antidumping law is inherently 
     unfair because a manufacturer in some other country could 
     sell the identical product for the identical price in the 
     United States and the home market and still be found to be 
     dumping. Dumping may be found in this instance because the 
     law mandates a deduction of freight from both the U.S. and 
     home market price and import duties from the U.S. price. 
     Therefore, to the extent that there are import duties or 
     the transportation cost to the United States is higher 
     than the home market freight costs, there is dumping, and 
     I would argue that this result is accurate.
       Location is a comparative advantage. The steel manufacturer 
     who is located next to the automobile manufacturer has a 
     comparative advantage over the steel producer located a 
     thousand miles away. In a competitive market, the price 
     charged by the two producers should reflect differing 
     transportation costs, and to the extent that a manufacturer 
     can absorb the costs of transportation, this reflects market 
     inefficiency. The foreign producer should sell at the factory 
     gate at the same price for similar kinds of sales both to 
     domestic and foreign customers. If it absorbs the freight to 
     U.S. customers, it is engaging in price discrimination in 
     order to gain market share abroad unfairly at the expense of 
     its customers at home and of its U.S. competition. This also 
     results in an inefficient allocation of resources.
       A tariff is an ``artificial'' advantage. A major 
     achievement in the Uruguay Round was lowering tariff levels 
     worldwide. However, where they still exist the price should 
     include the import duties.

                      What was achieved in Geneva

       Let's turn to the latest round of global trade 
     negotiations--the Uruguay Round. I'd like to explain what 
     happened. In the area of antidumping, the United States faced 
     stiff opposition from a host of countries whose goal was to 
     weaken the U.S. antidumping law. Our goal in the negotiations 
     was to ensure the effectiveness of U.S. law was preserved 
     while at the same time hold over governments administering 
     antidumping laws accountable to the same standards of 
     transparency and due process that we apply under our system. 
     Put another way, we had to take into account both the 
     protection of our firms operating in the United States, and 
     those operating abroad.
       In attempting to achieve these goals we faced an uphill 
     battle in early November of last year. The GATT Secretariat 
     had produced a text--the so-called Dunkel Draft--which served 
     as a basis for the final phase of the negotiations. This 
     draft would have severely restricted effective antidumping 
     enforcement. It would have allowed arbitration panels of the 
     new World Trade Organization (``WTO'') to second-guess 
     national administering authorities, limited U.S. ability to 
     counteract circumvention of antidumping orders, and made 
     continuance of dumping orders after five years almost 
     impossible, among other things.
       I am happy to say that we achieved our goal, and the 
     worst aspects of the Dunkel Draft were changed. Among the 
     achievements were:
       Dispute Settlement and Standard of Review: The dispute 
     settlement system will be binding and efficient, allowing the 
     United States to use it to ensure other countries follow the 
     negotiated rules. The special standard of review for settling 
     antidumping and countervailing duty disputes will ensure that 
     well founded application of the U.S. trade laws will not be 
     summarily overturned.
       Sunset Reviews: While there will be reviews of antidumping 
     and countervailing duty orders every five years to determine 
     if they are still serving their purpose, these so called 
     ``sunset reviews'' will not prohibit us from continuing 
     duties if their removal would likely lead to renewed or 
     continued dumping and injury. This is in stark contrast to 
     the Dunkel Draft, which would have made continuance of duties 
     beyond five years nearly impossible.
       Anti-circumvention: Since 1988, the United States has had 
     legislative authority to take action to prevent the 
     circumvention of antidumping and countervailing duty orders 
     through the establishment of screwdriver assembly operations 
     in the United States or in third countries. The Dunkel Draft 
     would have placed fatal restrictions on our ability to 
     exercise this anti-circumvention authority. The final 
     agreements totally eliminated these restrictions.
       Initiation of Investigations: The Dunkel Draft would not 
     have recognized the right of U.S. workers to file antidumping 
     and countervailing petitions to protect their livelihoods 
     from injurious dumping and subsidization. This right has been 
     completely restored with this agreement.
       Under the new agreement U.S. industry will continue to have 
     a remedy against injuriously dumped imports. Given where we 
     began at the beginning of November last year, this 
     Administration did very well in protecting U.S. interests.

                    Antidumping law: selected issues

       While the law allows very limited discretion in the 
     administration of antidumping law, administration of the law 
     is not conducted in a policy vacuum. While I am an ardent 
     supporter of vigorous enforcement of the antidumping law, I 
     recognize that other interests must be considered as well.

 The need to pursue both the interests of American firms which use the 
  law for protection and the interest of U.S. exporters worried about 
   other nation's emulating our laws and using it against U.S. firms

       As I said in my introduction, when I first became Under 
     Secretary I heard both from those who said that the 
     antidumping law had to be protected and from those who were 
     concerned that antidumping laws were being unfairly applied 
     against U.S. exporters. Not only do I have a dual role of 
     promoting exports and administering the antidumping law, but 
     the Administration accords the very highest priority to each. 
     Put another way, we recognize both the need for protection 
     which must be provided to domestic industries from dumped 
     imports and the protection that must be provided to exporters 
     from arbitrary administration of foreign antidumping laws. 
     However, these two objectives are not in conflict and have 
     been an overriding theme in all of our recent negotiations.
       We cannot and should not stop countries from using their 
     antidumping law to counteract injurious dumping. At the same 
     time, the Administration supports the reasonable concerns of 
     our exporters. In both the NAFTA and Uruguay Round 
     agreements, we insisted that provisions be included to ensure 
     transparency in the administration of the laws and that 
     judicial review be provided. The Administration will continue 
     to fight to see that U.S. exporters are treated in a fair and 
     consistent manner, that they have a real opportunity to 
     defend themselves, and that dumping margins are not 
     calculated in a way which is not open to public scrutiny.
       We will also continue to give these same benefits to 
     foreign firms selling in the United States.
       Furthermore, as a result of the Uruguay Round, we will have 
     an increased opportunity to assist U.S. exporters. 
     Specifically, we will closely review the antidumping and 
     countervailing duty laws of other countries to ensure that 
     they are in compliance with the Uruguay Round agreement. If 
     we find that they are not, we will use the new dispute 
     settlement system to elicit compliance. We will also more 
     closely monitor subsidies provided by other countries. To the 
     extent that U.S. exporters lose sales overseas to subsidized 
     goods, action can now be taken in the World Trade 
     Organization to provide a remedy to those exporters.

The need to address both the interest of U.S. industry and our interest 
                       in economies in transition

       ``Economies in Transition'' are countries moving from one 
     economic system to another. Many of these economies, such as 
     Russia, Hungary, the Czech and Slovak Republics, are 
     suffering from 50 years of central planning under Communist 
     systems and the United States supports their efforts to 
     become market-oriented. This transformation cannot happen 
     overnight, and they have yet to fully achieve their goal. At 
     present, most of the economies in transition are still 
     considered non-market economies under the antidumping law.
       The United States strongly believes that increased 
     international trade is their best opportunity for 
     development. Because we are the most open large economy in 
     the world, however, there is a temptation on the part of many 
     nations to think that we will be the dumping ground of last 
     resort--much as we have been in the past. The Clinton 
     administration will not allow this to happen. Just as the 
     United States can no longer be the primary source of foreign 
     aid, we also cannot absorb all of the world's excess 
     production. We want to encourage trade with these countries 
     but we cannot allow domestic industries to be injured by 
     unfair pricing.
       To this end, we will continue to work with the economies in 
     transition so that they understand how the antidumping law 
     works and how to avoid having unnecessary problems under it. 
     As happened with Poland in 1993, moreover, as the economies 
     of these countries develop, the Department of Commerce will 
     change their designation from a non-market to a market 
     economy.
       However, the statute gives the Department limited 
     discretion in the administration of the law. If a case is 
     filed providing sufficient evidence that injurious dumping is 
     occurring, the Department must initiate the investigation. 
     Furthermore, the law specifies the methodology to be used in 
     NME cases. The existence of antidumping investigations should 
     not be interpreted as a policy decision to discourage trade 
     with economies in transition, but a realization of our 
     responsibility under the law not to become the dumping ground 
     for the world's excess production.
       Russia and the other ``economies in transition'' are going 
     to need help in making the transition to market economy 
     status, and they are going to have to make major adjustments 
     themselves. In dealing with these complicated issues we will 
     need to keep certain factors in mind:
       First, the integration of economies in transition into the 
     world economy is a challenge on the order of importance and 
     difficulty as the challenge of reintegrating Japan, Germany, 
     and many former colonies into the global economy after the 
     second World War. It won't happen overnight, and it will 
     require a herculean effort.
       Second, the burden of adjustment must be spread. The effort 
     must be multilateral and include both the economies in 
     transition and the market economies.
       Finally, we need policies that really are appropriate to 
     ``transition.'' This means having policies with enough 
     flexibility to reward economies in transition which are 
     taking tough adjustment measures, and the procedures to 
     differentiate those nations from others which are not making 
     those efforts.
       Thus far the global framework for helping them is barely 
     developed, We will need to think through the balance between 
     macro adjustments and industry-by-industry adjustments. We 
     will need to look again at barriers to market access that 
     these countries face, barriers which could keep them out of 
     world markets. We will have to think about sensible ways to 
     work with our own industries as they feel the brunt of new 
     production from economies in transition, and we must work 
     closely with the European Union, Japan and other industrial 
     market economies so that none of us is forced to accept 
     disproportionately the twin burdens of increased imports and 
     escalating foreign aid.

                     The People's Republic of China

       The People's Republic of China (``China'') is a special 
     case in terms of the antidumping law. It is first a non-
     market economy (``NME''), which separates it from our other 
     major trading partners. However, unlike other NME's, it is a 
     major trading partner. In 1993, the U.S. trade deficit with 
     China was $22.8 billion, or $4.5 billion more than in 1992. 
     U.S. merchandise exports to China were $8.8 billion, up $1.3 
     billion or 17 percent, from 1992. U.S. imports from China 
     totaled $31.5 billion in 1993, or 23 percent higher than 
     those in 1992. However, along with this increase in imports 
     dumping has become a significant problem. In all the 1980's, 
     the Department of Commerce had 11 antidumping investigations 
     against the PRC which resulted in dumping orders. We have 
     already imposed 14 antidumping orders against Chinese 
     products in the 1990's and 8 China investigations are 
     currently ongoing.
       Trade with China poses two particular problems. The first 
     is that the pricing of their exports has little relationship 
     to market prices, and second is that their markets are 
     significantly closed to U.S. products.
       Because the cost of production of goods in China, as in all 
     NME's, is not governed by market driven prices, the import 
     price charged to the Untied States also need not be driven by 
     the normal market forces of supply and demand. When Chinese 
     prices are compared to the cost of production using market 
     determined factor prices, the dumping margins are often in 
     excess of 50 percent. If China decides for whatever reason--
     either to earn hard currency or to maintain employment--to 
     increase production in a given industry even if the excess 
     will be dumped on the world market, the United States must 
     have some recourse to assure that the price charged is a fair 
     price.
       Moreover, China significantly impedes foreign goods from 
     its internal markets. This further shields Chinese producers 
     from market forces. China uses prohibitively high tariffs--
     in combination with import restrictions and foreign 
     exchange controls--to protect its domestic industry and 
     restrict imports. The Chinese government maintains a 
     system of licensing requirements which encompasses 53 
     large product categories of consumer goods, raw materials, 
     and some production equipment. Covering approximately 50 
     percent of total imports by value, China's import 
     licensing system acts as an effective import barrier.
       These are systemic problems with the Chinese economy which 
     will not be resolved by use of the antidumping law, and we 
     will continue to use other tools to achieve a more global 
     solution. The Administration is continuing to negotiate 
     market access opportunities for U.S. exporters in the Chinese 
     market. Furthermore, in the GATT accession process, the 
     Administration has made clear that we will only support 
     Chinese accession if it is on a sound commercial basis.
       The antidumping law is not the long term solution to either 
     of these problems. The antidumping law is, however, the only 
     effective remedy available to U.S. industries which are today 
     being injured by dumped Chinese goods.

                        The new multilateralism

       Since the end of the World War II the United States has 
     been at the forefront of international economic cooperation. 
     In the area of trade, these efforts occurred primarily 
     through the GATT and have resulted in increased economic 
     integration of the global economy. Several events over the 
     last year will increase the level of global integration and 
     expand multilateral trade cooperation. The two most important 
     events are the completion of the Uruguay Round and the 
     implementation of the NAFTA. These two events will help to 
     protect exporters from arbitrary and capricious use of trade 
     laws as protectionist tools, while at the same time 
     respecting a country's sovereign rights to administer its 
     laws.
       World Trade Organization: As I've said, we worked hard 
     during the Uruguay Round negotiations to maintain the 
     effectiveness of the antidumping laws. One of the most 
     important achievements under the new agreement was in the 
     area of dispute settlement. The new World Trade Organization 
     (``WTO'') dispute settlement process will be much more 
     effective than that of the old GATT system. Whereas in the 
     past parties could interminably delay the resolution of 
     disputes, dispute settlement procedures will now be subject 
     to strict deadlines and the adoption of panel findings will 
     be binding and all but automatic. Through binding dispute 
     settlement, we can ensure that other countries are 
     administering their trade laws in a manner consistent with 
     their international obligations.
       We, too, will adhere to our international obligations. But 
     we are taking several steps to ensure that the new process is 
     a success and does not infringe upon our sovereign rights.
       During the negotiations, we foresaw the need for special 
     rules for antidumping and countervailing duty cases. Some 
     other governments wanted the WTO panels to be able to 
     substitute their judgments for that of the Department of 
     Commerce and the International Trade Commission. In order to 
     avoid this problem, we insisted that a specific ``standard of 
     review'' be followed in panels involving antidumping and 
     countervailing duty orders.
       The standard of review sets the rules by which a panel 
     evaluates the challenged actions of a government in a 
     particular dispute. In terms of considering questions of 
     fact, a panel's job is to determine whether the establishment 
     of facts was proper and the evaluation of those facts was 
     unbiased and objective. If the findings of fact meets these 
     criteria even if the panel might have reached a different 
     conclusion, the panel cannot overturn a determination. For 
     questions of law, the panel must determine if the 
     interpretation of the agreement given by the national 
     authority is a ``permissible'' interpretation of the relevant 
     provisions of the agreement. In other words, even if there is 
     more than one way to interpret the wording of the agreement, 
     as long as the U.S. interpretation is an acceptable 
     interpretation, the U.S. action or law will not be 
     overturned. This is a critical concept, since the actual 
     language of international agreements is often artfully 
     crafted to allow parties with opposing views to accept it. 
     Without the ability to ``agree to disagree,'' negotiations 
     might never be concluded.
       The standard of review is designed to prevent the World 
     Trade Organization panel from overturning a U.S. antidumping 
     and countervailing duty decision unless our findings are 
     clearly inconsistent with the GATT Code. Also, if other 
     countries use their laws against our exporters in a biased 
     manner or their laws are inconsistent with their obligations, 
     we have a dispute settlement procedure with teeth to defend 
     the interests of U.S. exporters.
       The panel system was carefully crafted to provide a means 
     to ensure compliance with the agreement on one hand while 
     respecting a nation's sovereignty and right to implement its 
     own national laws on the other. The United States want to be 
     at forefront, working to ensure that the panel system is a 
     success. In order to do this, we will be intensely reviewing 
     the actions of WTO dispute settlement panels, and we will be 
     vocal in our criticisms in cases where a panel decision is 
     either not soundly reasoned or exceeds the scope of its 
     authority. This criticism will not be an attempt to undermine 
     the panel system but to ensure its longevity.
       WTO panels will not become substitutes for domestic courts. 
     As in the past, we will only implement panel decisions on a 
     prospective basis. If a foreign government believes a U.S. 
     action is contrary to our obligations, that government may 
     seek relief through a panel. If a panel rules against the 
     United States, we will either discontinue the practice or 
     face economic retaliation. The proper forum for a private 
     party to seek relief against an incorrectly calculated margin 
     will remain the U.S. court system (or, for NAFTA members, a 
     bi-national panel). In other words, the WTO panels will not 
     be a replacement for the domestic judicial system.
       Furthermore, we hope to minimize the need for panels at 
     all. As much as we may support the system, we would rather 
     not be litigants in it. In order to lessen the need for 
     dispute settlement panels, we (and we hope all of our trading 
     partners are doing the same) are drafting implementing 
     language in such a way as to guarantee that our laws are 
     consistent with the letter and the spirit of the GATT Uruguay 
     Round agreement. The agreement is only as good as the 
     implementing legislation both here and abroad. As vigilant as 
     we will be with our own legislation, we will be reviewing 
     other countries' laws for consistency with the agreement.
       Since the end of the war, the United States has been at the 
     forefront of liberalizing international trade. We have seen 
     the increased international trade and economic wealth which 
     have occurred with each subsequent GATT round. We are hopeful 
     that the World Trade Organization, as the successor 
     organization to the GATT, will be equally successful not only 
     in the area of dispute settlement, but in the many other 
     areas such as trade and the environment and worker's rights 
     which it will be called upon to tackle in the coming years.
       NAFTA: The North American Free Trade Agreement (``NAFTA'') 
     will also affect some disputes arising from antidumping 
     actions. The bi-national panel system which existed in the 
     Canadian Free Trade Agreement has been incorporated in NAFTA. 
     Furthermore, the agreement requires the Mexican government to 
     increase the level of transparency and provides access to 
     judicial or bi-national panel review. NAFTA will also bring 
     down trade barriers. As we have seen with Canada, as the 
     economies become more integrated we expect the use of the 
     antidumping law among NAFTA members will decline.
       Multilateralism: Both the WTO and the NAFTA agreements 
     point to the increasing importance of multilateralism in the 
     area of trade law. The United States must become an active 
     participant in this multilateral process. We will use the 
     tools available to protect U.S. interests and ensure that the 
     standard of review is respected so as to not undermine U.S. 
     sovereignty. We will also seek additional resources to review 
     the actions of other nations to ensure their conformity with 
     the Agreements.

            The importance of fair administration of the law

       Just as American producers can expect vigorous enforcement 
     of our laws, foreign exporters can expect fair and reasonable 
     treatment in our investigations. Effective enforcement does 
     not mean harassment. Relief from trade distortions can be 
     obtained without creating new barriers through unduly complex 
     or unreasonably demanding procedures.
       In conducting antidumping investigations we will adhere to 
     the following principles:
       Openness and transparency will be a hallmark of our system. 
     We will make every attempt to let people know our thinking 
     before it is final, so that their views can be fully 
     considered. Of course, while some may inevitably be 
     disappointed with particular decisions, they will know how 
     and why such decisions were reached.
       In this terribly complex area, even when there is 
     cooperation, simple mistakes and omissions can occur. In this 
     situation we will not mechanically reject information and 
     will apply reasoned judgement to the situation.
       Simplification will be pursued wherever possible. 
     Procedures should not provide an unnecessary burden to either 
     domestic or foreign producers.
       Respect will be given to all parties. The root causes of 
     dumping may be various, and the exporter concerned may not be 
     acting with the intent to injure anyone. While this is no 
     reason to ignore dumping, neither does it justify regarding 
     exporters as less than honorable persons.

 The need not to place all the burden of trade policy on unfair trade 
                                  laws

       The antidumping law, and the trade laws in general, cannot 
     bear all of the burden of supporting U.S. industry. As I have 
     said, the antidumping law is one, but only one, element of 
     sound environment for trade and investment.
       In the trade area, for example, the Administration is 
     aggressively pursuing market opening around the world. In 
     Latin America, President Clinton began with the conclusion of 
     NAFTA and is now embarked on an effort to extend free trade 
     throughout the hemisphere. In Asia, the Administration 
     brought together the heads-of-state of the nations in the 
     Pacific Basin last November, and we continue to pursue freer 
     trade in the region. In Japan, in particular, we have 
     pressed for more open markets with considerable intensity. 
     The United States took the lead in the Uruguay Round to 
     conclude seven years of negotiations and we will not let 
     up in our efforts to make the multilateral system more 
     open and effective.
       The Administration is making other efforts to create a 
     climate in which U.S. firms can better compete in the world 
     marketplace. In 1993, the President's leadership brought 
     about major deficit reduction. This helped to create the 
     lowest interest rates in 20 years. This year the President 
     submitted a tough new budget, and the prospect is for three 
     consecutive years of declining deficits for the first time 
     since the Truman Administration. With low interest rates and 
     reduced deficits freeing up resources for the private sector, 
     business investment is growing at seven times the rate of the 
     previous four years and leading the economy's expansion.
       Along with cutting spending, the Administration has pushed 
     to reorient spending toward productive public uses such as 
     infrastructure, technology, and education. We are committed 
     to the information superhighway, increased spending for 
     research and development. We are committed to a comprehensive 
     agenda of education and training, starting before 
     kindergarten and extending into the workplace. This includes 
     an expanded Head Start, higher performance standards for 
     teachers and students known as Goals 2000, a new School-to-
     Work program to provide work-related training for students 
     still in high school, the recently passed National Service 
     Program to provide opportunities for community service and 
     help send more Americans to college, and a new program for 
     dislocated workers including retraining.
       All of these efforts are intended to increase the 
     competitiveness of the nation. They are already paying off.

                               Conclusion

       Being in charge of the International Trade Administration, 
     I believe I have one of the most interesting portfolios in 
     the American government. One of our divisons--the U.S. and 
     Foreign Commercial Service--is composed of over a thousand 
     men and women whose job it is to promote American exports. 
     Two divisions focus on the development of trade policy and 
     the promotion of U.S. exports--one does it by industry, the 
     other by geographical region. And then there is the Import 
     Administration, which administers the antidumping and 
     countervailing duty laws.
       I am often asked whether I need to be schizophrenic to 
     focus on both export promotion and import administration. My 
     answer-- a resounding ``no.'' Everything I do is geared to 
     promoting a more open trading system in which U.S. 
     companies have the best shot at competing. Given a fair 
     chance, I am convinced that U.S. firms are poised to 
     increase their presence all over the world. Our economy is 
     now strong, many of our firms have gone through painful 
     restructuring, and our policies are moving in the right 
     direction. The Japanese are still reeling from the 1980's, 
     the Germans are mired in domestic problems, the big 
     Emerging Markets--from China to Mexico, and from India to 
     Brazil--are growing fast and becoming new frontiers for 
     our products. I truly believe that the rest of the 1990's 
     is America's moment. A strong and balanced approach to 
     trade policy will help us seize it--for all our firms.
       [Note.--This speech is one in a series on ``America in A 
     Changing World Economy.'' The others have dealt with Asia, 
     Europe, Latin America, the Big Emerging Markets, the U.S. and 
     India, the U.S. and Brazil, the National Export Strategy, 
     Trade and Technology. Upcoming presentations will include 
     ``The United States and China,'' ``The Future of American 
     Trade Law: New Rules, New Institutions,'' and ``Trade, 
     Foreign Policy, and National Security.'' These are available 
     from the Office of Public Affairs, International Trade 
     Administration, Department of Commerce, tel (202) 482-3809, 
     fax (202) 482-5819.

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