[Congressional Record (Bound Edition), Volume 150 (2004), Part 15]
[Senate]
[Pages 20720-20722]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      NAFTA INJURY PANEL DECISION

  Mr. CRAIG. Mr. President, I rise today to express my deep concern 
that the rights of U.S. lumber producers to remedy against unfairly 
traded imports from Canada have been improperly curtailed by a runaway 
NAFTA Chapter 19 dispute settlement panel.
  Because of the significant impact on many of our States, today I am 
joined by Mr. Baucus, Mr. Chambliss, Mrs. Lincoln, Mr. Crapo, Mr. 
Smith, and Mr. Wyden for a discussion about the NAFTA Injury Panel and 
Order of August 31, 2004.
  On August 31, 2004, this already rogue panel ordered the U.S. 
International Trade Commission to reverse its earlier rulings that, in 
fact, the U.S. lumber industry is injured by imports of subsidized and 
dumped Canadian lumber. In doing so, the NAFTA panel clearly exceeded 
its authority under U.S. law.
  As we all know, Chapter 19 panels reviewing U.S. trade cases are to 
decide issues under U.S. law just like U.S. courts, applying the same 
legal standards and subject to the same limitations on their 
jurisdiction and authority. In fact, as it is structured, NAFTA panels 
have less authority because they do not have the ability to issue 
injunctions the way federal courts do.
  As many of my colleagues know, just last year the U.S. Court of 
Appeals for the Federal Circuit, interpreting Supreme Court precedent, 
stated explicitly that a Federal court cannot simply reverse an ITC 
decision and cannot order the ITC to change its ruling from affirmative 
to negative. However, this is just what the NAFTA panel did in this 
case--told the United States ITC to change its previous ruling. U.S. 
courts have long determined that if some aspect of an ITC decision is 
not adequately supported by the evidence cited by the ITC, the proper 
action by a court is to remand the case to the ITC for further 
substantive analysis. Yet, in the lumber case the NAFTA panel expressly 
told the ITC it could not further analyze the facts and issues before 
it, but could only issue a new decision consistent with the NAFTA 
panel's view that the U.S. industry is not threatened with injury. This 
very action is usurping due process.
  In other words, the NAFTA panel has effectively tied the hands of 
U.S. courts and prevented U.S. Federal courts from acting. This is 
exactly why I voted against NAFTA when it came up for a vote years ago. 
Simply put, here we go again having an international body, full of 
individuals who disregard U.S. law, dictating to the U.S. courts how to 
interpret our own laws. Not on my watch. I ask the rhetorical question, 
how can this NAFTA ruling be consistent with the requirements of the 
NAFTA agreement that Chapter 19 panels are to follow U.S. law when 
reviewing U.S. agency decisions? This ruling, without question, is a 
fundamental breach of the terms of the agreement--a breach that goes to 
the very integrity of the NAFTA dispute settlement system itself.
  The ITC, as it is required by the NAFTA law Congress passed, has 
complied with the NAFTA panel order to reverse its affirmative threat 
of injury determination. Thankfully, however, the ITC emphasized that 
the NAFTA panel had ``violated U.S. law and exceeded its authority as 
established by the NAFTA [by] failing to apply the correct standard of 
review and by substituting its own judgment for that of the 
Commission.'' The Commission further described ``the panel's decisions 
throughout this proceeding as overstepping its authority, violating the 
NAFTA, seriously departing from fundamental rules of procedure, and 
committing legal error.''
  My confidence in the NAFTA has always been shaky at best, but today 
that confidence is completely eroded. The Commission's expressed views 
on this matter are highly telling and descriptive of the NAFTA panel's 
over-reaching and exceeding of its authority. I therefore wish to enter 
in their entirety into the Record the ``Views of the Commission in 
Response to the Panel Decision and Order of August 31, 2004'' issued by 
the Commission on September 10, 2004.
  Mr. BAUCUS. Mr. President, I share the concerns of my colleague. For 
many U.S. industries, the laws against unfair trade are the last line 
of defense. American workers and their families should be able to count 
on the enforcement of U.S. antidumping and countervailing duty laws to 
provide a level playing field, and they should be able to rely on the 
Congress to ensure that those laws are fully enforced. The manner in 
which agency decisions are affected by NAFTA panel decisions should be 
closely scrutinized by the Senate.
  As my colleague indicated, under the terms of the NAFTA, Chapter 19 
panels are supposed to apply the law just as would a U.S. court. They 
are supposed to be bound by U.S. court precedents in their 
interpretation of U.S. law. Unfortunately, it has become clear that 
some of these panels think they do not have to abide by these rules. 
Again, one of the most blatant examples of this problem involves the 
ongoing lumber case.
  Earlier this year, the same panel that recently ordered the ITC to 
reverse itself had questioned some of the reasoning of the ITC in its 
injury decision and sent the case back to the ITC for further 
explanation. My understanding is that the Federal courts issue such 
remand orders all the time. Here, however, the panel not only told the 
ITC to reconsider its decision, but then gave the Commission only 7 
business days in which to complete its remand determination, instead of 
the 60 to 90 days that a court would normally give.
  In response to this order from the panel, the Commission requested 
additional time, and explained that to properly address the panel's 
concerns, the ITC would have to gather new evidence and request 
additional comments from the parties to the case, so that all views 
could be heard. This should have been an easy request for the panel to 
grant, because just a few months earlier the U.S. Court of Appeals for 
the Federal Circuit had issued an opinion stating plainly that the 
decision to reopen the record on remand rested exclusively with the 
ITC. Incredibly, the NAFTA panel ignored this binding court ruling and 
forbade the Commission to consider new evidence, and

[[Page 20721]]

again demanded a new determination by the ITC in a mere 7 business 
days. This is another clear case of overreaching by a NAFTA panel that 
should not be permitted.
  Continued support for free trade initiatives such as NAFTA rests upon 
the promise of full enforcement of U.S. laws. American industries and 
workers must be able to rely on the promises made to them by the 
Congress that unfair trade practices will not be tolerated. When NAFTA 
panels exceed their authority, confidence is lost not only in the 
dispute settlement system but in trade agreements generally. We need to 
inject credibility back into the NAFTA system by reforming Chapter 19.
  Mr. CHAMBLISS. I wholeheartedly concur with the concerns of my 
colleagues regarding the far-reaching effects of NAFTA panel decisions. 
I am especially troubled by the fact that NAFTA panels often blatantly 
fail to apply the required standard of review.
  NAFTA requires panels to apply the standard of review of the country 
imposing the duty. The panels are thus obliged to apply the same 
standard as would the U.S. Court of International Trade--namely, to 
determine whether the ITC's decision was reasonable and supported by 
substantial evidence on the record of the case, even if there was also 
evidence supporting an alternative conclusion. The courts--and NAFTA 
panels--are not supposed to second-guess the ITC or reweigh the 
evidence considered by the ITC, but simply to ensure there is a 
reasonable basis in the record to support the Commission's conclusions. 
In practice, however, NAFTA panels have often ignored this requirement 
and have instead substituted their judgment for that of the ITC or the 
Commerce Department.
  This is especially problematic given that agencies review all of the 
evidence collected during a proceeding, have substantial experience 
administering the laws, and often consult with and advise Congress in 
the drafting of the statutes.
  Unlike a court or a panel, the ITC has the resources--including 
industry analysts, economists, and accountants--and the expertise 
needed to review and analyze the often voluminous records in these 
proceedings. The Commission is therefore plainly better suited to make 
determinations based on the facts. As a result, U.S. law could not be 
clearer: Courts and panels are not to second-guess an agency but are 
only to ensure that the agency followed the express requirements of the 
statute and that there is substantial evidence--``more than a 
scintilla''--in support of the agency's ultimate conclusion. While the 
U.S. courts follow this essential element of review in administrative 
cases, the NAFTA panels do not.
  Indeed, as the recent ITC decision referenced by my colleague makes 
clear, in the softwood lumber injury case the NAFTA panel substituted 
its judgment for that of the International Trade Commission on any 
number of evidentiary questions. Unfortunately, the lumber panel is 
just the latest example of a proceeding in which NAFTA panels have 
reached legally untenable results completely at odds with U.S. law and 
NAFTA requirements. We in Congress must monitor this situation very 
closely. We cannot allow our domestic industries and their workers to 
become defenseless against unfairly traded imports due to flawed 
decisions by runaway panels. A better means of dispute settlement 
within the NAFTA must be created, and the proper standard of review 
requirements must be enforced.
  Mrs. LINCOLN. Mr. President, there is another aspect of the recent 
softwood lumber NAFTA panel process that deserves our attention. As you 
know, NAFTA Chapter 19 is a unique form of international dispute 
settlement that applies to antidumping and subsidy cases involving 
Canada and Mexico. Normally, U.S. Government decisions to impose duties 
on unfairly traded goods are reviewed by the U.S. Court of 
International Trade, a Federal court with judges appointed by the 
President with the advice and consent of the Senate. For dumped and 
subsidized goods from Canada and Mexico, however, court review is often 
replaced with review by a panel of private citizens--mostly members of 
the bar or other private citizens who are experts in various 
capacities, but who are not themselves U.S. jurists.
  Chapter 19 empowers these panelists to review U.S. legal decisions 
according to whether they are consistent with NAFTA obligations. Unlike 
any dispute settlement system in any other trade agreement to which the 
U.S. is a party, Chapter 19 also empowers these panelists to review 
cases according to whether they are consistent with U.S. law. NAFTA 
inherited this particular power from the preceding U.S.-Canada Free 
Trade Agreement. Unfortunately, as in the softwood case, this system 
has led to panel judgments that actually overturn valid U.S. legal 
decisions.
  I find this state of affairs to be extremely troubling. In my view, 
Chapter 19 is clearly in need of reform, and the Senate must be 
prepared to act to revise this system to prevent unjust situations. If 
we hope to maintain confidence in, and public support for, our system 
of trade, then we have to repair the system when it doesn't work. The 
NAFTA panel in the softwood case has dealt a major blow to our faith in 
the system. It is time we did something about it.
  Mr. CRAPO. Mr. President, I concur with my colleague that the 
integrity of the NAFTA panel system has been put into serious doubt as 
a result of the recent panel decision in the softwood lumber case. When 
NAFTA panels prevent appropriate enforcement of the U.S. trade laws, 
the public will cease supporting our participation in NAFTA. It is 
simply unacceptable for a NAFTA panel to dictate the outcome of an 
investigation to any U.S. court or agency. That is not the purpose of a 
NAFTA panel. Such authority was not granted by the U.S. Congress to the 
NAFTA, the WTO, or any other foreign organization.
  Congress approved the NAFTA based on its understanding that effective 
trade remedies would not be eroded. Preservation of these remedies is 
essential to the overall process of opening foreign markets to imports 
of goods and services and to prevent harm to American industry and 
agriculture. Popular support for the principles of free trade and the 
NAFTA as a whole will be weakened if the dispute settlement system is 
continually misused to overturn legitimate agency decisions.
  In my view, it is essential that future NAFTA panel decisions are 
carefully scrutinized by Congress. With respect to the seriously flawed 
NAFTA panel decision in the softwood lumber case, I believe the U.S. 
Government must pursue an Extraordinary Challenge Committee appeal in 
order to restore the rights of the American industry and its workers.
  Mr. SMITH. Mr. President, I would like to join my colleagues in 
expressing concern about the Canadian lumber NAFTA panel decision. The 
experience in the lumber case suggests that greater safeguards may be 
needed to prevent abuse by rogue panels. Without such reform, I fear 
Canada will continue its strategy of litigation over negotiation. 
Indeed, the softwood lumber dispute has reached a critical phase. Since 
backing away from a tentative agreement reached in December 2003, the 
Canadian Government has pursued an even more aggressive litigation 
strategy in an effort to insulate its unfair practices. Most recently, 
the Canadian Government has urged the Commerce Department to act 
contrary to U.S. law and return on a retroactive basis antidumping and 
countervailing duties collected prior to recent Chapter 19 rulings.
  In my view, it is imperative that the Commerce Department clearly and 
emphatically reject requests that deposits already collected be repaid 
as a consequent result of Chapter 19 panel decisions. U.S. law clearly 
follows the generally-accepted convention that international dispute 
settlement decisions are to be implemented prospectively only. The 
Commerce Department cannot repay deposits already made without express 
statutory authorization. And the law as passed by the Congress is clear 
that entries prior to any panel decisions would be ``liquidated'' in 
the circumstances of the lumber case at

[[Page 20722]]

the duty rates that Commerce Department established in its original 
countervailing duty and antidumping duty determinations in 2002.
  I find the Canadian Government's current position with respect to 
repayment of duties to be particularly remarkable considering the 
Commerce Department's treatment of this issue in the previous softwood 
lumber dispute. In 1994, the Commerce Department stated that the 
statute implementing the U.S.-Canada Free Trade Agreement did not 
permit it to refund deposits paid prior to the implementation date of a 
panel decision. Since the relevant statutory provisions under the NAFTA 
remain the same, the Canadian parties know that their position is wrong 
as a matter of U.S. law. Canadian parties could have appealed the 2002 
lumber trade findings to the Court of International Trade, which might 
have issued an injunction to protect their ability to obtain a 
retroactive refund of the deposits, but they chose the NAFTA panel 
route knowing full well that NAFTA panels cannot issue such 
injunctions.
  Of course, the deposits made could always be returned as part of a 
negotiated settlement that preserves the interests of U.S. workers and 
sawmills, as was done in 1994. But the Commerce Department is otherwise 
forbidden by law from refunding the deposits made prior to 
international panel rulings. I expect the Commerce Department to make 
this clear to Canada.
  I think it is important for each of us to encourage the stakeholders 
to come back in good faith to negotiations to resolve these cases once 
and for all. I believe there will be a window of opportunity later this 
year and will work with all parties to encourage meaningful 
negotiations to find a balanced solution.
  Mr. WYDEN. I, too, rise today to share concerns about the recent 
NAFTA panel decision. Today, the Canadian share of lumber in the U.S. 
market is reaching record highs. Canada's practice of dumping 
subsidized timber in our domestic market continues to wreak havoc on 
U.S. mills and jobs. My own State of Oregon has been hit especially 
hard, losing over 3000 jobs in the timber industry since 2002. For 
years now, my colleagues and I have worked with the International Trade 
Commission, the Department of Commerce, and the U.S. Trade 
Representative to help maintain mill operations and keep jobs in our 
country.
  As my colleagues have made clear today, I believe the blatant 
disregard for U.S. law by the panel will further damage already 
suffering U.S. timber workers.
  Moreover, I cannot refrain from adding, as I watch jobs in the timber 
industry continue to disappear at an alarming rate, I find recent 
decisions by the administration to lower the duties, as a result of 
administrative reviews, to be particularly egregious and out of line. 
These decisions have exacerbated an already terrible crisis, and 
weakened my confidence in the administration's willingness to help our 
timber workers.
  Simply put, I believe it is time to move toward a fix for a system 
that currently appears to be broken.

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