[Congressional Record Volume 140, Number 62 (Wednesday, May 18, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: May 18, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                           U.S. TRADE POLICY

                                 ______


                          HON. SANDER M. LEVIN

                              of michigan

                    in the house of representatives

                         Tuesday, May 17, 1994

  Mr. LEVIN. Mr. Speaker, in the near future, Congress will be asked to 
approve the GATT Uruguay Round Trade Agreement--the most significant 
international trade pact in more than 15 years. The rules and 
obligations agreed to by the parties to the agreement will govern 
international world trade well into the 21st century. This agreement 
provides substantial new opportunities for U.S. businesses by breaking 
down many of the trade barriers that have long prevented free trade 
throughout the world.
  While I believe this trade pact on the whole will expand global 
trade, many of us are concerned about various specific provisions and 
whether the U.S. trade laws will be so weakened by the agreement that 
the U.S. manufacturing base will be exposed to unfair trade practices 
in our own market without real access to a remedy under our laws. It is 
very important, as we work on the implementing legislation, that we are 
careful to ensure strong and effective antidumping, countervailing duty 
and market access laws.
  Recently, Jeffrey E. Garten, Under Secretary of Commerce for 
International Trade, spoke before the U.S. Chamber of Commerce on the 
antidumping laws and U.S. trade policy. Mr. Garten's speech, I believe, 
provided a sound description of the historical and economic rationales 
for effective antidumping laws. It successfully refuted the notion that 
products dumped by foreign competitors lower consumer costs by 
demonstrating that the dumping of products into the U.S. market 
actually undermines our manufacturing base. As a result, U.S. consumers 
ultimately are captive to inflated prices imposed by the foreign 
producers who no longer have any U.S. competition to maintain fair and 
reasonable pricing.
  As we prepare for the debate on the Uruguay Round Trade Agreement, I 
believe it helpful for us to read the key points raised by Mr. Garten 
in his speech. I have excerpted the major elements of Mr. Garten's 
remarks to be printed in the Record at the conclusion of my statement.

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.
       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.
       ``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.''


                   the purpose of the antidumping law

       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 or 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 his 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 completing 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 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.
       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 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.


                     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.


         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 artifically low prices, supported by 
     government subsidies or profits earned in protected home 
     markets.
       When dumping result from price discrimination between the 
     home market of a foreign producer and the U.S. market, the 
     U.S. manufacturer who purchases the dumped input 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 price 
     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.

                          ____________________