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• National Agricultural Law Center

Summary

Concern regarding the mounting U.S. trade deficit with China (designated a nonmarket economy country according to U.S. trade laws), combined with China's refusal to allow its exchange rate to float, has led some in Congress to introduce legislation proposing to make countervailing duty laws applicable to China and other nonmarket economy countries. These laws provide for the assessment of duties on imports whose production and/or importation are found to be subsidized by a public entity in their country of origin and are injurious to a U.S. producer of similar merchandise. Antidumping, another kind of trade remedy action, addresses products sold in the United States at less than their fair value (as defined by law) in a similar manner. Although antidumping (AD) and countervailing duty (CVD) laws and procedures generally parallel each other, CVD laws contain no specific provisions for investigations on imports from nonmarket economy (NME) countries, while the AD statute does provide such guidelines. Initial administrative attempts in 1983 to apply countervailing remedies to allegedly subsidized imports from several NME countries led to determinations by the International Trade Administration (ITA) of the Department of Commerce (the U.S. agency charged with determining the existence and extent of subsidies) that subsidies within the meaning of the countervailing law, cannot be found in nonmarket economies. These ITA determinations were challenged in the U.S. Court of International Trade (CIT), which held that they were "not in accordance with the law," reversed them, and remanded the cases to the ITA. On appeal, the U.S. Court of Appeals for the Federal Circuit reversed, and reinstated the ITA's original determinations -- thus affirming that the ITA has the discretion not to apply the CVD law to NME countries. On March 30, 2007, the ITA reversed some of its previous conclusions -- at least with regard to products from China -- by announcing a preliminary affirmative determination of subsidy on imports of coated free sheet paper from China. Legislation to prevent further exemption of NME countries from countervailing action has been introduced in the 110th Congress. This legislation includes S. 364 (Rockefeller, introduced January 23, 2007), H.R. 571 (Tancredo, introduced January 18, 2007), H.R. 708 (English, introduced January 29, 2007), H.R. 782 (Ryan/Hunter, introduced January 31, 2007) and its companion bill S. 796 (Bunning/Stabenow, introduced March 7, 2007), and H.R. 1229 (Davis/English, introduced February 28, 2007). The Bush Administration has also taken some recent steps to address the issue. First, on November 27, 2006, the ITA initiated a CVD investigation against an NME country (China) for the first time since 1991. Second, on February 2, 2007, U.S. negotiators requested World Trade Organization (WTO) talks with China on subsidies, and consultations with China are ongoing as of this writing.

Related Legislation:
• S.364
• H.R.571
• H.R.708
• H.R.782
• S.796
• H.R.1229

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