United States' Trade Remedy Laws and Non-market Economies: A Legal Overview

Publication Date: April 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

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Abstract:

In the United States, there are two major forms of domestic trade remedy laws: antidumping law (AD), which combats the sale of goods at less than their fair market value, and countervailing duty law (CVD), which assess duties on imported goods to offset the amount of government or other public entity subsidization. Both of these remedies are available when the imported goods come from competitor countries that have free market policies. Since 1984, however, only AD law has been applied to those imported goods that come from non-market or other "transitional" economies. With the continued economic growth of some non-market and "transitional" economies, such as China and Vietnam, pressure has increased on the U.S. government to more aggressively utilize domestic trade remedy laws such as AD and CVD against unfair imports from these countries.

AD law has been amended several times since its initial inception in 1921. Each modern amendment has allowed for a new methodology for dealing with imports from non-market economies. With Congress's continued statutory guidance, the Department of Commerce (DOC) has developed and implemented several different methodologies for applying AD law, even when the fair market value in the originating country is not readily ascertainable.

CVD law, however, has not been used against non-market economies since the DOC concluded in 1984 that it could not determine subsidization in such situations. This decision by the DOC was upheld as reasonable by the Court of Appeals for the Federal Circuit in Georgetown Steel Corporation v. United States. Since that time, with the noted exception of a 1991 petition against China, the DOC has refused to review CVD petitions against non-market economies. In November 2006, however, the DOC accepted a petition seeking a countervailing duty against imported "coated free-sheet paper" from China to offset alleged government subsidization. In April 2007, the DOC published a preliminary determination levying duties against the Chinese imports, as well as a memorandum distinguishing the Chinese economy from those economies that were at issue in the Georgetown Steel case.

While such an action appears to be consistent with U.S. law, a review of U.S. international obligations under the World Trade Organization's (WTO's) Agreement on Subsidies and Countervailing Measures, as well as China's accession agreement to the WTO is also required. Both agreements appear to accept and sanction the use of surrogate country data in the application of domestic AD or CVD law. As a result, while a challenge to its actions at the WTO is always a possibility, the United States appears to have acted in a manner consistent with its obligations.

Several pieces of legislation have been introduced in the 110th Congress to specifically address the application of CVD laws to non-market economies. These include, but are not limited to, H.R. 708, H.R. 910, H.R. 1127, H.R. 1229, S. 364, and S. 974. This report will be updated as events warrant.