Article by Peter D. Ehrenhaft and Charlotte G. Meriwether
The heat of the morning of July 26, 1979 matched the warmth of the rhetoric accompanying President Carter's signature of the Trade Agreements Act of 1979 (TAA). Government officials responsible for trade and economic matters, lawyers, lobbyists, press folk-the usual assortment of Washington witnesses to such events-hailed what many in the group believed to be the launch of a brilliant effort in the regulation of international trade. First, it was thought that the TAA would clarify and strengthen the nation's laws combatting “unfair trade,” particularly those laws governing the imposition of antidumping and countervailing duties. Second, it would confirm the nation's participation in the series of international codes that the United States had pressed on its trading partners (and, to a degree, vice versa) in nearly five years of tedious Multilateral Trade Negotiations. Third, the TAA was to reform America's unique procedures for valuing imports and conform them to a global model. And, hidden among its 173 pages were assorted benefits for cheese producers, cattle ranchers, and chocolate crumblers, which helped assure overwhelming approval of the measure by both Houses of Congress.
Title I of the new law—which was rightly perceived, in terms of immediate practical significance, as the most important part of the statute-revised the administration of the antidumping and countervailing duty laws by providing strict timetables for administrative decisionmaking and, with Title X, subjecting virtually all such decisions to both interlocutory and final judicial review. But the TAA was only the first of three related changes in the administration and enforcement of those laws. With the second change, the President (at considerable congressional urging) moved responsibility for administering the antidumping and countervailing duty rules from the Treasury to the Department of Commerce. And, third, a few months into 1980, Congress renamed the Customs Court and gave it enhanced status and powers as the Court of International Trade, befitting the significant new opportunities and responsibilities for judicial oversight accorded that tribunal by the TAA itself.
Four years have passed since these changes became effective. It is time to take a reading. What has change wrought? Does the law accomplish what its sponsors and supporters hoped and promised? Does it make a meaningful contribution to trade policy, to economic rationalization of U.S. trade laws, or to political pacification of protectionists?
Such an evaluation is particularly timely now, as the United States is experiencing record trade deficits—a problem not ameliorated, and probably enhanced, by the recent economic “recovery.” In the past year, this concern found an outlet in the Subcommittee on Trade of the House Committee on Ways and Means, which conducted seven days of hearings and emerged with a series of yet additional amendments to the antidumping and countervailing duty laws for introduction during 1984.
How is this possible? Was the TAA so deficient in design or in implementation? The answer is both “yes” and “no.” Adopted with great fanfare and received with high expectation, its promise seems to have fizzled. The remedies in the law are what they were (or were not), only getting them has become more costly. Whether they address the important issues in the trade world remains doubtful. Then why the constant effort to strengthen and revise these laws? What is their appeal?
First, and perhaps most important, the antidumping and countervailing duty laws are essentially the only measures for trade “relief” that are not subject to express discretionary “override” by the President on the grounds of foreign policy, domestic economic considerations, or political expediency. If a domestic industry initiates a case and duties are determined to be due, they cannot be avoided. Hence the pressure to put more and more trade remedies under the antidumping or countervailing duty rubric.
Second, these laws seem appealing because they permit trade barriers to be erected in the name of “fair trade” rather than of protectionism, thus permitting their supporters to contend that the laws unite the interests of consumers and producers (as opposed to the situation involving a “protectionist” tariff, in which consumer interests are frankly placed second). Moreover, antidumping and countervailing duties are not supposed to ignore the ultimate economic efficiencies of free trade; indeed, ostensibly they exist only to ensure “fair pricing” in the marketplace, ultimately to produce an equilibrium at a more efficient level.
Third, proponents of such special levies may properly claim that the U.S. need not fear trade retaliation, at least under the international rules of the General Agreement on Tariffs and Trade (GATT), since these rules allow a country to levy duties to offset “unfair” pricing practices on a country-specific, nonretaliatory basis. However, the GATT does permit retaliatory action by countries adversely affected by certain other forms of trade restrictions; the recent announcements by the European Economic Community that it will retaliate against U.S. quotas on specialty steel and the effective cut-back of purchases of U.S. farm produce by the Peoples' Republic of China in response to tighter textile quotas confirm that these are not merely academic provisions.
For all these reasons, “enhanced” antidumping and countervailing measures have a seductive appeal. But their siren song deserves close attention.
Virtually no facts have ever been systematically gathered to support the view that these statutes have significantly promoted even their stated purposes; indeed, the limited facts that are available suggest the contrary. The volume of trade affected directly by antidumping and countervailing duty orders is in general a tiny fraction of our total imports. And though it could be argued that this demonstrates the effective prophylactic impact of the laws—that they are not invoked because they work so well to deter “unfair” behavior—the argument is unconvincing, because the laws are time and again applied to the same foreign industries without apparent deterrent effect. If ever recidivism were rampant, it must be in foreign steel mills.
Nor, for all we know, has the existence or recent “reform” of these laws enhanced the health of the U.S. economy-particularly of those few sectors that have repeatedly sought the benefits the laws are thought to provide. We do know that the 1979 and 1980 “reforms” have intensified a process aptly described as a “judicialization” of our trade laws: the antidumping or countervailing duty proceeding has become a large-scale litigation involving complex economic issues, a process ever more time-consuming and costly to all participants. It may not even be too much to say that the principal beneficiaries of the “reformed” statutes have been the members of the trade bar. They have managed to find an enormous number of issues about which to squabble and squawk before administrators and judges. But is it more than “sound and fury, signifying nothing?” What has the law done to improve the health of our steel industry, of the textiles trade, of cement producers?
It would, nevertheless, be futile to suggest—at least for the time being—that the laws be scrapped. They have a long history; they have a recent history. Rather, this article suggests that before Congress embarks on any ambitious attempts to amend these statutes once more—for example, to broaden their reach to make them “more effective” (and of course more complex), as proposed by the Subcommittee on Trade—it do a simple thing: get more facts. The laws are already an epitome of legalism, so detailed and burdensome that it may seem incredible that their stated purpose is the mere imposition of a customs duty. Yet they can be, and are, used for a different purpose: as a political and commercial weapon for U.S. industries seeking broader protectionist measures.
This article contends that there is no convincing evidence that the laws, even when properly used, do any measurable good. Even their economic rationale is shaky. Their history reflects a consistent congressional effort, at the constant urging of certain powerful sectors of U.S. industry and labor, to protect U.S. industries against import competition. In the course of this effort, Congress has taken from the executive branch, gradually but inexorably, virtually all express discretion to deal with such trade issues, even though their resolution is fraught with sensitive foreign policy issues. At the same time, the laws ignore the underlying causes of the problems our industries face.
The real problem is coping with “adjustment,” the process by which firms that historically begin supplying the market adapt to changes in technology, geography, consumer taste-or to entry into the market by more efficient foreign competitors. In a free market economy, businesses theoretically should be left to their own devices, to adapt and survive if they can. But when an industry important to the economy is left behind in the competitive race-especially, if not logically, when its problems seem to stem from foreign competition-it can mount a powerful claim for governmental aid in adjusting to the new environment, or for protection from the new competitive forces. The adjustment problem is difficult and costly to solve, and becomes increasingly more so as economic change accelerates and expectations for “quick fixes” proliferate around the world. Ultimately it must be faced. But the antidumping and countervailing duty laws do not encourage or facilitate needed adjustments to changing technologies and novel market conditions; on the contrary they give the very industries most in need of modernization and adaptation a means of sheltering themselves from market forces, and thus consciously pour sand into the economy's gears to prevent needed change. In the long run it seems unlikely that such a process is helpful to our nation.
Therefore, before leaping into the fray once more, Congress should at least gather some facts about the effects of the laws we have, to find out whether imposing duties really has any beneficial effects and whether other effects undercut the “benefits” so gained. It should then reconsider the current statutory allocation of power between domestic industry and the government in dealing with the inevitable problems that all trade creates. Presumably, such a study would demonstrate that trade is but one of the phenomena to which the economy must constantly adjust. Change in trade patterns is not a calamity like an earthquake. Thus disaster relief is not the right response. Rather, as with technological change, adjustment and adaptation should be the aim.
About the Author
Peter D. Ehrenhaft. A.B., LL.B., M.I.A., Columbia University. Member, New York and District of Columbia bars. Partner, Bryan, Cave, McPheeters & McRoberts. Deputy Assistant Secretary and Special Counsel (Tariff Affairs), U.S. Department of the Treasury (1977-79).
Charlotte G. Meriwether. B.A. New College; J.D. Yale University. Member, New York bar. Assistant Professor of Law, Benjamin N. Cardozo School of Law.
Citation
58 Tul. L. Rev. 1107 (1984)