China-U.S. Trade Law : International Trade Lawyer & Attorney : Baker Hostetler Law Firm : Trade Remedies, Customs & Export Controls

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Only the President can impose a restriction on imports to the United States without a finding of wrongdoing by a foreign producer or exporter. The United Steelworkers of America have asked the President, pursuant to Section 421 of the U.S. trade law (the “special safeguard” for China), to restrict the importation of low grade commercial tires. By law, the President must decide whether to grant or deny the union’s request by September 17. See Attack On China Rolls On New Tires, posted on August 13.

The safeguard law provides for consultations intended to lead to settlements of disputes arising under Section 421. It also specifies a period for consultations that, in this case, expired on August 17. Prior to August 17, some meetings of Chinese and American officials were reported, but there have been no public reports of what was discussed, nor at what level. The law calls for consultations only after the United States International Trade Commission (“ITC”) has found a harmful surge of Chinese product and has recommended a remedy, a period that began on June 18.

President Obama will make his decision after reviewing the ITC’s recommendation, the recommendation of the Trade Policy Staff Committee (“TPSC”) chaired by the United States Trade Representative ("USTR") and in this case including the Departments of State, Treasury, Labor, and Commerce, his National Security Council, the Office of Management and Budget, the National Economic Council, and Council of Economic Advisers. He will weigh the interests of the union, the industry, the national economy, and foreign relations with China and other trade partners.

In a safeguard process it is appropriate for parties to seek consultations with all offices of government involved. It now appears that China, albeit after the statutory deadline, has been pursuing such consultations. During the week of August 24, MOFCOM Deputy Minister Zhong Shan reportedly met with the Secretary of Commerce (Gary Locke), the National Security Council’s Senior Director for Asia (Jeffrey Bader), the Deputy National Security Adviser for International Economic Affairs (Michael Froman), the Deputy United States Trade Representative (Demetrios Marantis), and the Acting Under Secretary for International Trade (Michelle O’Neill). All of these officials will have something to say to the President. It is appropriate and prudent for a senior Chinese official to have spoken with them.

The 60-day window for consultations in the statute (running from the time of the ITC’s finding of injury) is not strict. It would have been better to have had consultations at such high levels sooner (and perhaps there were, albeit unreported), but it remains important that they have been taking place.

There has been no mention of senior level consultations with the TPSC members. The USTR by law will advise the President, on behalf of the TPSC, on September 2. China should have been consulting with the Departments of Treasury, Labor, and State, in addition to Commerce and USTR itself. Maybe such consultations have taken place. None has been reported.

Even more important than the meetings themselves is the content of the meetings. Of this subject there have been no reports. China should not have been pursuing the line taken publicly, however, in the legal briefs submitted to the TPSC and at the public hearing convened by USTR on August 7. There, the Chinese side called for acceptance of the tire manufacturers’ express offshoring of jobs to China, a position amplified by two of the companies themselves, Toyo Tires and Cooper Tire and Rubber Company, in eleventh hour submissions (after remaining silent throughout the ITC proceedings in the spring and the TPSC proceedings, through the August 7 hearing, in the summer). This line ignores the President’s political debt to the unions, his political commitments to keep jobs in the United States, and his political priorities focused, at this very moment, on health care reform that requires vigorous union support. There are more creative, legally-based considerations available (see Attack On China Rolls On New Tires, posted on August 13) that would seem essential for Chinese interests to succeed.
 

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When companies see their access to the U.S. market threatened by actions of U.S. Government agencies in trade cases, whether antidumping, countervailing duty, or safeguards, often they want to ask their government to challenge those actions at the World Trade Organization (“WTO”). Many governments, too, think they should take their grievances over U.S. policies to the WTO rather than challenge U.S. government actions in U.S. courts. However, companies, and governments, should first consider whether the likely benefits to them outweigh the potential costs.

The WTO dispute resolution process is designed to vindicate the rights of sovereign governments, not necessarily those of the private parties to trade disputes. Only governments may appear, and even a victory may not bring meaningful relief to the government or to the affected private parties. Also, the WTO process could put at risk meaningful relief that the private companies might be able to obtain on their own in U.S. courts.

The WTO process lacks a remand mechanism. Thus, should the WTO Appellate Body determine that a dispute resolution panel made a mistake, it could not send the issue back to the panel to correct the mistake. In many cases, this lack of remand authority means that an Appellate Body reversal, even on relatively minor grounds, terminates the proceedings without any resolution.

Without a remand capability, the Appellate Body cannot gather additional information when it has determined that panels below did not gather enough. The Appellate Body is not empowered to go beyond the record. So, the Appellate Body has to conclude that the record is inadequate, whereupon it may decline to rule, either on the whole case, or on some, often important, parts of it.

Even when the WTO finds that the U.S. actions were contrary to WTO obligations, this vindication may be of little practical benefit for a complaining government or an affected company. The WTO retaliation scheme often involves retaliation in other industry sectors, but unless the pain of the retaliation is enough to cause the United States to comply, it typically does not benefit the industry sector that is the focus of the dispute. The government authorized to exact compensation through retaliation must navigate domestic politics to pick industries for retaliation, and often finds it impossible not to incur the wrath of one industry or another. After all, antidumping and countervailing duty cases erupt because one country believes another is shipping too much of a product at an unfair or subsidized price. It would be unusual for the second country to be shipping similar quantities of the same merchandise in the other direction. Retaliation – restricting imports – is never likely to be on the same merchandise. Therefore, the government may be vindicated, and almost inevitably at a political price, and the company frequently gets no relief at all.

Another factor that companies, especially, should consider is whether a WTO challenge could put at risk more meaningful relief that the company might obtain through appeal of the agency actions in U.S. courts. Just as there is a possibility that victory before the WTO could improve the chances of victory before a U.S. court, there is risk that a loss before the WTO could undermine the company’s U.S. court appeal. This risk is acute in antidumping cases because WTO panelists are almost always former government dumping officials: their training and experience is in imposing duties on goods being imported into their countries. They are not very sympathetic with exporting companies, nor as comfortable with interpreting the law from an exporter’s perspective. Also, less obvious, but nonetheless real, is the risk that a victory at the WTO might be used by the United States to trump a victory in U.S. court.

This latter risk arose in the Softwood Lumber case where Canada and the Canadian lumber industry pursued a strategy of challenging an affirmative U.S. International Trade Commission (“ITC”) threat of injury determination under both U.S. law and the WTO. Canada won on both fronts. However, the U.S. Government claimed that the new ITC determination made to “comply” with the WTO ruling allowed the United States to keep its antidumping and countervailing duty orders in place even in the face of an order requiring the ITC to make a negative determination as a matter of U.S. domestic law. The U.S. Court of International Trade (“CIT”) eventually struck down that claim in Tembec, Inc. v. United States, USCIT Slip Op. 06-152 (Oct. 13, 2006). However, by the time the court’s decision became final, the United States had collected billions more in estimated antidumping and countervailing duties and Canada had acquiesced in a settlement that deprived the court decision of precedential effect.

Were the United States to try again what the CIT struck down in Tembec, it surely would fail again. That conclusion, however, does not mean the United States might not try, and for the time being, with the Tembec decision having been denied precedential effect, the United States could again indulge in the principle that justice delayed is justice denied (i.e., the delay and continued collection of cash deposits would force a settlement unfavorable to the respondents).

There are cases that should be taken to the WTO, both by governments and by private companies. More often, however, challenges to market protectionism should be brought in U.S. courts. In some cases, such as the U.S. Commerce Department’s use of a technique known as “zeroing” to find dumping and to inflate antidumping margins, the WTO offers the best chance of obtaining relief. The law does not require choosing forums, but it is prudent to do so, and particularly wise to overcome the reflex suggesting that the WTO could be a panacea for unfair protectionism.

 

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The United Steelworkers, qualifying as an “entity” “representative of an industry” under Section 201 of the U.S. Trade Act of 1974, petitioned the Obama Administration in April 2009 to enact a temporary “safeguard” remedy to protect the manufacture and sale of low-grade commercial tires in the United States against a surge of imports from China. Petition Seeking Relief from Market Disruption Caused by Imports of Consumer Tires from China, Inv. No. TA-421-07, April 20, 2009.  Even though the union filed the petition without cooperation or support from any company manufacturing tires in the U.S., and safeguards exist primarily to protect productive industries, the Obama Administration is under exceptional political pressure to honor the union’s request. 

The special safeguard law for China, Section 421, expires in 2012 in accordance with China’s Protocol of Accession to the World Trade Organization.  Thereafter, China will be subject only to the same safeguard provisions as every other country. Until then, the Obama Administration will have to weigh its relations with China against domestic interests and priorities. All safeguards, uniquely among trade remedies, require presidential decisions.

The United States International Trade Commission (“ITC”) issued a report on June 18 finding “market disruption,” the statutory basis for recommending trade relief for a domestic industry under the special safeguard for China. The ITC recommended, on July 9, three years of very high but gradually reducing tariffs. Ten United States Senators then wrote President Obama endorsing the ITC recommendations.

Relying on the ITC record, a Trade Policy Staff Committee (“TPSC”) assembled for this case and comprised of the Departments of State, Commerce, Labor, and Treasury, chaired by the Office of the United States Trade Representative (“USTR”), must make its own recommendation to the President as to whether he should grant any relief to the industry and, were he to do so, how much and in what form. The final public hearing on the case, convened by the TPSC, was held in Washington, D.C. on August 7. All written submissions were due from all parties by August 11.

The statute provides expressly for settlement of disputes where market disruption has been found, but should China want to settle this dispute, it must do so by August 17. The TPSC is expected to make its recommendation to the President by September 2. In the absence of a settlement, the President must decide the question of remedy for the market disruption found by the ITC by September 17.

China’s strategy in this case has been to adopt a “Republican” political and policy position – that the market forces surrounding the choices of the companies to give up the manufacture of low-grade tires should govern, allowing thousands of jobs to move offshore to lower cost manufacturers. China’s opposition to safeguard remedies has been articulated as a preference for market forces over the employment of American workers, and for economic analysis that contradicts the ITC’s report. Advocates for the Chinese side have given the law little attention.

The Chinese strategy opposing the imposition of safeguard remedies neglects both the politics of the American two-party system, and the legal purpose of safeguard provisions. Its reliance on dueling economic analyses, instead of law and a keener appreciation of the political situation of the President, probably will mean that the special safeguard for China will be applied for the first time. China may have something still to say, however, about the severity of the application.

The President is not likely to provide the full measure of relief proposed by the ITC because he may not want to gamble on the predictions that the tariffs would be prohibitive and cause even more market disruption, but he may be inclined to provide more “relief” than China would find acceptable. The August 17 deadline is not absolute (the statutory language instructing that the Trade Representative “should seek to conclude such agreement before the expiration of the 60-days consultation period” would seem equivocal enough were China to express immediately a commitment to a politically sensitive settlement). The statute also permits later review, on the President’s initiative, for modification, reduction, or termination of imposed relief. Mutual sensitivity to the domestic political implications of this case in both China and the United States could lead to an amicable compromise, albeit probably somewhat unsatisfactory (as compromises and settlements are supposed to be) for everyone. 

To continue reading the full article click here.
 

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The Commerce Department on August 12 postponed its preliminary determination in Prestressed Concrete Steel Wire Strand from the People’s Republic of China to October 24 claiming it needed more time due to the large number and complexity of the subsidy programs alleged in the case.  However, most of the allegations involve programs that Commerce has investigated recently in other cases.  A more likely explanation, therefore, is that the civil servants temporarily acting while political positions in the Commerce Department remain vacant want more time in hopes that more politial guidance wil be provided before critical policy decisions must be made.  A recent article in Inside U.S. Trade's World Trade Online took note of the large number of vacancies in the political positions in the Commerce Department.  We discussed how these vacancies are affecting trade policy in a recent posting on this blog.

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The U.S. House of Representatives approved an amendment to the 2010 Energy and Water Appropriations bill, just before recessing for an August holiday, that would forbid the use of appropriated funds to “purchase passenger motor vehicles other than those manufactured by Ford, GM, or Chrysler.” The bill does not require that the vehicles be made in the United States, so cars manufactured by BMW, Honda, Toyota, Hyundai and others might be excluded from government fleets, but not necessarily a Chrysler made in Mexico or a Ford made in Germany. Congressmen may have been reasoning that cars made by companies effectively owned by the government should be given preference, but that thinking would have excluded Ford. Ford, then, would have been excluded because it was the only one of the “Big Three” American manufacturers that did not require a government bailout. It would have been politically impossible to exclude from government purchases the one traditional American manufacturer that has managed its own way through the economic crisis. The bill, otherwise, favors neither American workers nor vehicles made in the United States.

This amendment is unlikely to become law because the Obama Administration almost certainly will oppose it, as will Senators representing the thousands of U.S. workers who make Toyotas, Hondas, Hyundais, BMWs and the cars of other foreign-owned manufacturers in the United States.  Nevertheless, the amendment is a good indication of current protectionist sentiment in the U.S. Congress.  The Financial Times quoted Dr. Elliot J. Feldman last week condemning the Buy Ford, GM or Chrysler amendment.

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Senior U.S. officials revealed privately in the days prior to the first Strategic and Economic Dialogue (“S&ED”) of the Obama Administration, convening in Washington, D.C. on July 27, 2009, that they planned to ask China to subscribe to the Government Procurement Agreement (“GPA”) of the World Trade Organization (“WTO”). They assigned this quest, they said, a high priority, even as the subject seemed to escape public notice.

China did not begin discussing the GPA at the WTO until December 2007, even though upon its WTO accession in 2001 it was expected to negotiate GPA accession “as soon as possible.” China has sent out officials to study the terms under which other countries have signed the Agreement, and is working on a written proposal that would open its government procurement to foreign enterprises while protecting certain areas of economic activity.

China’s trade partners had attached no particular urgency to China’s GPA accession until the autumn of 2008, when China as well as more developed countries, led by the United States, began committing hundreds of billions of dollars to government expenditure for recovery from a global economic recession. It then became important for manufacturers to gain access to the planned expenditures of foreign governments, and the GPA appeared to be the key to access.
The United States would like its manufacturers to be able to participate in the Chinese Government’s expenditures for recovery and so wants China to sign the GPA. China, of course, would like the same for its manufacturers -- to have governments in the United States, Europe, and Japan buy Chinese goods with the funds the governments are spending for recovery. But signing the GPA is not so easy. The signatories have carved out many restrictive exceptions. China does not want to give away more than it gets. In every country, nationalist sentiment clamors for job creation at home, not for government expenditures to buy foreign goods and, hence, to create jobs abroad.

At the very moment, in February 2009, when the United States was asking the world to shun protectionism and recognize that free trade is a necessary element of global recovery, the United States Congress was inscribing in the American Recovery and Reinvestment Act of 2009 (“ARRA”) a requirement for governments of all levels to “Buy American” when spending $787 billion. The provisions were summarized upon notification to the WTO:

• Section 604 of the ARRA requires the Department of Homeland Security (DHS) to procure US-manufactured textile and apparel goods, subject to certain exceptions (including non availability, de minimis, purchases outside the United States, and small purchases). This provision becomes effective 180 days after the date of enactment of the ARRA, which was 17 February 2009. Section 604(k) requires DHS to apply the "buy American" provision in a manner consistent with US obligations under international agreements.
• Section 1605 requires that only US-produced iron, steel and manufactured goods be used in public buildings and public works funded by the ARRA, subject to certain exceptions (public interest, non-availability, or unreasonable cost). Section 1605(d) requires the "buy American" provision be applied in a manner consistent with US obligations under international agreements.

The commitment to apply these restrictions “in a manner consistent with US obligations under international agreements” followed public pledges by the newly inaugurated lawyer-President “that we are going to abide by our World Trade Organization and NAFTA obligations just as we always have.” The President had come under fire from the Government of Canada, in particular, because of the ARRA provisions.

President Obama struggled to minimize the significance of the “Buy American” provisions by emphasizing that they would not alter the American commitment to respect all international obligations. He recognized the importance of not sending a signal of protectionism. He told a Canadian Broadcasting Corporation interviewer, “I think that if you look at history one of the most important things during a worldwide recession of the sort that we’re seeing now is that each country does not resort to ‘beggar they neighbor’ policies, protectionist policies, they can end up further contracting world trade.” Yet, he acknowledged, “a lot of governors and mayors are going to want to try to find U.S. equipment or services.”

Provincial premiers and mayors in Canada decided to copy the Buy American provisions, and the protectionist fever that began with the United States, at least symbolically, inevitably spread. The National Development and Reform Commission (“NDRC”) issued on May 27 in China Circular 1361, Opinions on the Implementation of Decisions on Expanding Domestic Demand and Promoting Economic Growth and Further Strengthening Supervision of Tendering and Bidding for Construction Projects. Were the title not to have said it all, a summary might read, “Buy China.” According to the Circular, “Government investment projects that are under government procurement should purchase domestic products, unless these domestic goods, construction engineering or services are not available in China or cannot be acquired on reasonable commercial terms. Projects requiring imported products will need prior approval from relevant government authorities.”

The United States is a signatory to the GPA. China is not. Consequently, Chinese enterprises have no rights of access to government procurement in the United States, nor have U.S companies rights to participate in government procurement in China. Were the congressional objective in the ARRA to keep out China, there was no legislative need for the provision. State and local governments, by international agreement, were free without the legislation to discriminate against Chinese goods. Both countries have included escape clauses -- the U.S. in its legislation and China in the non-binding NDRC Circular -- requiring goods to be available on “commercial terms” at home before prohibiting imports, but both are structured to spend their stimulus packages to create domestic, not foreign jobs.

The concept of free trade, which President Obama recognized, requires mutual access to government procurement. However, the United States, when it subscribed to the GPA in 1998, attached hundreds of exceptions, including especially total exceptions for thirteen state and local governments and qualified exceptions for most of the other thirty-seven. Exceptions for highway and mass transit funding apply to all fifty states and exceptions for procurement of construction grade steel cover most states. Most of the ARRA expenditures are slated for state and local governments, with an emphasis on infrastructure, so the commitment to abide by international obligations offsets almost not at all the Buy American provisions that are consistent with the restrictive U.S. implementation of the GPA.

Much of China’s recovery expenditures are anticipated to be provincial and local, the likely “relevant government authorities” in Circular 1361. China’s absence from the GPA means foreign enterprises have no rights to government procurement in China, but provincial and local governments could buy from them. Circular 1361 converts the absence of a right into an effective prohibition. China and the United States are closed to each other’s government procurement, with governments retaining considerable discretion to open up as needed.

The ARRA, and Circular 1361, are signals. The U.S. interest in pressing China to sign the GPA will not produce quick or meaningful results as long as the United States sends protectionist signals, and China likely will reveal a competing protectionism unless it believes there will be a reciprocal opening. Despite the U.S. pressure, the two countries only agreed, as to the GPA, to treat all goods manufactured domestically as domestic products, regardless whether there might be foreign ownership -- a reaffirmation of current law.  The United States must step beyond assurances about compliance with international obligations and provide examples of a free procurement market; China must make purchases from abroad to enhance domestic stimulus projects. Without such concrete steps, both countries will be sending protectionist signals, and the more they press each other in settings like the S&ED, the more they may harm the cause of free trade. 

Dr. Feldman was quoted recently in a Business Week report on the S&ED.  He also discussed the June 2008 Strategic Economic Dialogue meetings in an interview with CNBC.

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Despite what people might think, and notwithstanding an election eight months ago that turned out the Republican Party from both Congress and the White House, the Bush Administration still effectively is governing U.S. trade policy toward China, at least with respect to countervailing duty and antidumping cases. The key offices that make policy decisions on these cases are occupied by temporary placeholders without the political authority or policy knowledge to alter policies left over from President Bush; the Obama replacements either have not been named or have not been confirmed by the Senate to take over. Consequently, the Commerce Department continues to make critical decisions on issues important to China in several antidumping and countervailing duty cases without political guidance from the new Obama Administration.

The Obama Administration, after six months in office, has yet to fill most of the political appointee level positions in the Commerce Department. Instead, lower level career bureaucrats are filling in as “Acting” senior officials on a temporary basis. Obama Administration appointees are particularly absent in the International Trade Administration (“ITA”), which is responsible for enforcing the antidumping and countervailing duty laws and for developing and implementing other policies to counter alleged unfair trading practices. ITA is operating without Obama appointees for the Under Secretary for International Trade; Assistant Secretary for Import Administration; Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations; Deputy Assistant Secretary for Policy and Negotiations; and Deputy Assistant Secretary for Textiles and Apparel. 

Until these positions are filled with permanent political appointees, companies involved in antidumping or countervailing duty proceedings should expect continued paralysis in Commerce’s ability to make policy decisions. Companies should expect the “Acting” officials to avoid policy decisions and therefore to delay cases and decisions as much as possible.

Decisions that must be made due to statutory deadlines are likely to result in a de facto continuation of Bush Administration policy choices. Foreign observers may think this situation to be a positive development based on the perceived notion, reinforced by the recent U.S. presidential campaign, that Democrats are more protectionist than Republicans. However, when it has come to case-by-case enforcement of trade remedies, the Bush Administration Commerce Department was more protectionist than any recent Democratic administration and, effectively remaining now in power, can be expected to continue this way.

It was the Bush Administration that first imposed countervailing duties on China in the Coated Free Sheet Paper case, while still treating it as a non-market economy for antidumping purposes. The Obama Administration is unlikely to reverse that decision, but there is a reasonable chance that it would make changes on the margins to blunt the Bush policy’s overtly protectionist impact.

There is little doubt that President Obama and new Commerce Secretary Gary Locke, are more committed to the rule of law than their predecessors, and consequently are more likely to respect legal interpretations that reasonably cannot be particularly protectionist. For example, Obama may decide to make modifications to the non-market economy dumping methodology to avoid the double counting problem in which the use of third country surrogate values results in dumping duties that already offset the impact of any subsidies to production. He may also decide to comply with the legal requirement that Commerce use in-country benchmarks to measure subsidies in countervailing duty cases.

There have been several antidumping and countervailing cases initiated in recent months. Should those cases reach critical decision stages before the Obama political appointees are fully in place, it will become more difficult for Obama and his appointees to ameliorate the worst protectionist impacts of the Bush Administration polices. It may become strategically wise for Chinese respondents to seek extensions and delays in cases so as to increase the possibility that key policy decisions ultimately will be taken by the new Administration.

Commerce also is now faced with the decision of whether to apply the countervailing duty law to Vietnam in the Polyethylene Retail Carrier Bags case, while still treating it as a non-market economy. There are important differences between Vietnam and China that could lead the Obama Administration to treat it differently than China. However, with the absence of political appointees who could make such a policy decision, it is likely that Commerce would assume, without thorough analysis, that Vietnam and China should be treated in the same way.

Commerce Secretary Gary Locke has a strong export-oriented trade background with a particular emphasis on promoting trade with China. His appointment as Commerce Secretary is a hopeful sign that, once President Obama has a full team of his own appointees, the Commerce Department would be more likely to resist protectionist pressures to disregard the rule of law. And it may be more likely to take into account a broader range of trade considerations, such as the impact on U.S. exports should trade partners copy U.S. protectionist measures, when making policy decisions in trade remedies cases. There probably has never been a Commerce Secretary with greater potential for productive commercial relations between China and the United States 

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U.S. trading partners can learn a lot from the way the United States treats the countries it actively calls its friends in trade disputes and when interpreting trade agreements.  Canada is unmistakably the United States’ best friend.  Despite this close friendship, the United States has not treated Canada kindly in trade disputes.  The softwood lumber wars are illustrative.  Four times since 1982 the U.S. lumber industry has petitioned against Canada for trade relief.  Although U.S. agencies have found in favor of the U.S. industry repeatedly, U.S. courts, binational panels convened under the Canadian-U.S. Free Trade Agreement and the North American Free Trade Agreement, and panels convened at the World Trade Organization have all found, repeatedly, to the contrary.  Despite these legal outcomes, Canada capitulated in 2006 because of continuous U.S. pressure and apparently interminable litigation. The United States was withholding from Canadian industry $5.5 billion that the courts ultimately said should be returned to Canadians, but the withholding crippled Canadian operations.  In order to get the money back, Canada entered the Softwood Lumber Agreement of 2006 restricting trade. 

Canada made a minor, inadvertent, error in managing the agreement, which the United States challenged successfully in London Court of International Arbitration CASE NO. 7941.  It was not enough for the United States to see the error corrected and the violation of the agreement to end.  Nor was it enough to receive a significant cash award for the breach, even though the breach arose from excess shipments that promptly were followed by shipments well below allowances.  According to the United States, compensation for breach of the agreement, however inadvertent the breach, had to punish the sector of the Canadian industry that supposedly benefitted from the breach, even as the Government of Canada argued that punishment was inappropriate and that the U.S. action, with help from the tribunal, could devastate a portion of Canadian industry and create significant unemployment.  Canada, the United States said, should have understood what it was signing and must accept the consequences.

There are several lessons to be learned here about the United States:

• The United States will use legal proceedings for trade advantages.
• The United States does not accept losing legal proceedings.
• The United States will use correlative means – legislation, publicity, illegal withholding of funds – when it is unable to prevail in the legal process.
• The United States will prolong legal proceedings as long as necessary to make foreign competitors feel the pain of a protracted legal contest.
• The United States will give no quarter when negotiating a trade agreement.
• The United States will always interpret the law to the advantage of its industry.
• The United States is not interested in equitable arguments.
• The United States will interpret the law or an agreement in the harshest possible light with respect to its trade partner.
• The United States demands strict compliance with trade laws, particularly to the detriment of trade partners.
• The United States takes into account in trade disputes only the substance of the dispute itself, unaffected by other aspects of the bilateral relationship.

China will never be able to claim a level of friendship with the United States comparable to Canada’s.   The way the United States treats Canada in trade should teach Chinese that in trade even the best friends of the United States can expect no favors, must endlessly fight for their rights, and must contest every word and action, just as the United States will do with them.  The United States does not like linking trade disputes to any other considerations.  It may be that eventually the United States cannot always have its way with respect to trade, and that partners will link trade disputes to other foreign policy questions successfully. But for now, and for the foreseeable future, partners must understand that friendship does not translate into friendly treatment and that, in trade disputes, the United States does not treat its partners as friends.

We discuss this issue in greater detail in the following article: How The United States Treats Its Friends In Trade Disputes: A Recent Revealing Example.

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