[Congressional Record (Bound Edition), Volume 153 (2007), Part 5]
[Senate]
[Pages 7522-7523]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     STOPPING OVERSEAS SUBSIDIES ACT

   Ms. COLLINS. Mr. President, our Nation's manufacturers and their 
employees can compete against the best in the world, but they cannot 
compete against nations that provide huge subsidies and other unfair 
advantages to their producers. Time and time again, I hear from 
manufacturers in my State whose efforts to compete successfully in the 
global economy simply cannot overcome the practices of illegal pricing 
and subsidies of nations such as China. The results of these unfair 
practices are lost jobs, shuttered factories, and decimated 
communities.
  Consider this one example that affects my home State. The American 
residential wood furniture industry has experienced devastating losses 
due to surges of unfairly priced furniture imports from China. 
According to the U.S. Bureau of Labor Statistics, 146,600 jobs, or 
about 22 percent of the workforce, have been lost in the U.S. furniture 
industry since 2000. Unfairly priced imports from China are a leading 
cause in these job losses. China's wooden bedroom furniture exports to 
the U.S., which amounted to just $169 million in 1999, reached an 
estimated $1.8 billion in 2006. By subsidizing investments in furniture 
manufacturing facilities, China is exploiting the U.S. market to the 
benefit of its producers and putting our employees at an unfair 
advantage.
  One fine furniture manufacturer in Maine, Moosehead Manufacturing, 
struggled for years to cope with the onslaught of unfair imports from 
China. Despite the company's quality products and attempts to survive 
through several rounds of layoffs and participation in the Federal 
Trade Adjustment for Firms program, Moosehead was not able to keep its 
doors open in the face of unfair Chinese imports. The company announced 
its closing on February 8, 2007. This is a tragic development--for this 
family-owned business, for its skilled employees, and for the community 
and State.
  It is because of the experience of manufacturers such as Moosehead 
that I reintroduced the Stopping Overseas Subsidies Act. I am pleased 
to be joined by my friend and colleague from Indiana, Senator Bayh, who 
has worked closely with me on this legislation. The core provision of 
this bill revises current trade remedy laws to ensure that U.S. 
countervailing duty laws apply to imports from nonmarket economies, 
such as China.
  Our Nation's trade remedy laws are intended to give American 
industries and their employees relief from the effects of illegal trade 
practices. Unfortunately, some countries in the world choose to cheat 
instead of compete fairly. In these cases, U.S. industries can file 
petitions under U.S. trade remedy laws for relief.
  Up until recently, the practice of the Department of Commerce was to 
accept an antisubsidy petition against any market economy--such as 
Canada or Chile--but not against a nonmarket economy such as China. As 
a result, nonmarket countries that subsidize their industries the most 
heavily and cause the most injury to U.S. industries and workers, such 
as China, were exempt from the reach of American countervailing duty 
laws.
  The countervailing duty statute on its face in no way limits the 
application of the law to any country. There is 


[[Page 7523]]

nothing in the 
countervailing duty provisions per se, or anywhere else in the statute, 
that limits the broad language applying countervailing duty remedies to 
every ``country.'' Unfortunately, the Department's interpretation of 
this statute for the last two decades has been that it does not apply 
to nonmarket economies, and this policy was upheld by a 1986 Federal 
court decision that maintained that Congress needs to clarify the 
statute on this issue.
  The good news is that, on November 22, 2007, the Department of 
Commerce finally accepted the first countervailing duty petition 
against a nonmarket economy since the 1986 court decision. The case was 
filed against China by New Page Corporation, a coated free sheet paper 
company with operations in Maine, Ohio, and Maryland. Despite its 
efficient, state-of-the-art mills, skilled and dedicated employees, 
strong relationships with customers, strategically located mills and 
distribution facilities and growing markets for its products, New Page 
had to shut down an entire paper line as a result of unfair foreign 
competition.
  Jim Tyrone, senior vice president of New Page Corporation, testified 
before the Ways and Means Committee on February 15, 2007, regarding the 
illegal subsidies that China is providing to its paper industry. 
Starting in the late 1990s the Government of China targeted its 
domestic coated paper industry for rapid development. As part of this 
development plan, the Chinese Government provides low-cost policy loans 
through government-owned banks. It also provides grants for the 
development of new paper capacity, and tax breaks based on export 
performance and domestic equipment purchases. Moreover, Tyrone 
testified, government banks in China forgave at least $660 million in 
loans they had provided to China's largest paper producer, Asia Pulp & 
Paper, when that company declared bankruptcy in 2003.
  The result is that in the United States, Chinese coated free sheet 
market share has increased by an average 75 percent annually over the 
past four years based on publicly available data, despite having to 
ship their products thousands of miles to reach the U.S. market. 
Ironically, and in contrast to U.S. paper producers, China has no 
natural advantage in the production of paper. It does not have an 
abundant supply of the requisite inputs, and must import much of the 
pulp that it uses to make paper. It is only because of illegal 
subsidization that China can compete in the paper products market in 
the U.S. and Europe.
  According to a 2005 study by the American Forest and Paper Products 
Association, China is using an array of subsidies to promote the 
development of timber and pulp production in China. These include 
government loans and loan subsidies for technology renovation, 
promotion of foreign investment in state-owned enterprises, and 
protection of debt-ridden state-owned enterprises that maintain excess 
or idle production capacity through local government ``soft'' loans and 
loan forgiveness.
  In its 2006 Report to Congress, the U.S.-China Economic and Security 
Review Commission, a bipartisan organization established by Congress in 
2000 to provide recommendations to Congress on the relationship between 
the United States and China, noted:
  China has a centralized industrial policy that employs a wide variety 
of tools to promote favored industries. In particular, China has used a 
range of subsidies to encourage the manufacture of goods meant for 
export over the manufacture of goods meant for domestic consumption, 
and to secure foreign investment in the manufacturing sector.
  Similar conclusions are contained in the United States Trade 
Representative's 2006 Report to Congress, which concludes:
  China continues to pursue problematic industrial policies that rely 
on trade-distorting measures such as local content requirements, import 
and export restrictions, discriminatory regulations and prohibited 
subsidies, all of which raise serious WTO concerns.
  These practices run counter to China's obligations under its 2001 
World Trade Organization accession agreement. In its accession 
protocol, China explicitly agreed that it would be subject to the 
subsidy disciplines of other member countries. In fact, it agreed to 
specific provisions in article 15 of the protocol which permit WTO 
countries to use alternative benchmarks for measuring subsidies in 
China. Yet, unbelievably, the Government of China is arguing in the New 
Page case that the Department of Commerce is legally prohibited from 
applying countervailing duty laws to imports from China.
  This is exactly why our legislation is still needed, despite the 
Department of Commerce's acceptance of New Page's case. If U.S. law is 
clear on the subject of whether anti-subsidy petitions can be filed 
against nonmarket economies, countries such as China cannot use U.S. 
courts to dispute that fact. In addition, the Department of Commerce 
will not be able to summarily reject future antisubsidy petitions 
against nonmarket economies due to a change in leadership in the 
department or for political reasons.
  I want to point out that this bill also includes a number of new 
provisions that are designed to strengthen our government's ability to 
hold our trading partners accountable for their illegal trade 
practices. The bill makes clear that the United States can use 
information from third countries and alternative methodologies when 
calculating China's subsidies. This is consistent with what China 
itself agreed to in its WTO accession protocol. The bill provides that 
a determination by the Department of Commerce to revoke a country's 
status as a nonmarket economy under U.S. antidumping law must be 
approved by Congress. Finally, the bill requires the U.S. International 
Trade Commission to conduct a study regarding how the People's Republic 
of China uses government intervention to promote investment, 
employment, and exports.
  Unfair market conditions cannot continue to cause our manufacturers 
to hemorrhage jobs. No State understands this more than my home State 
of Maine. According to the United States Department of Labor, 10,400 
manufacturing jobs in Maine have been lost since 2001, a 14.8 percent 
decline. This is why organizations such as the Maine Forest Products 
Council and the Maine Wood Products Association have strongly endorsed 
our proposal to extend U.S. countervailing duty laws to nonmarket 
economies.
  The stopping overseas subsidies bill is a bipartisan, bicameral bill 
that has a broad range of support across many industries and 
geographical areas. A companion bill has been introduced in the House 
by Representatives by Artur Davis of Alabama and Phil English of 
Pennsylvania.
  U.S. industries don't want protection--they want fair competition. 
Illegal subsidies distort fair competition, regardless of the economic 
system in which they are used. Our legislation simply levels the 
playing field by allowing antisubsidy petitions to be brought against 
nonmarket economies in addition to market economies.
  Some countries, such as China, want to have all the benefits of 
engaging in international trading institutions and systems yet continue 
to cheat on the system with no penalties. It is time these countries 
were held to the same standards as other countries around the world. I 
ask you to join me in supporting the SOS bill to ensure that all 
countries are held accountable for their trade practices.

                          ____________________