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The final part of “Nothing Unites The United States Congress Like China (And Not In A Good Way): Treating China Like Canada (Maybe Even Worse),” we present this week. It is called, “Lessons From Canada.” Part One, entitled “Rewriting Subsidies Law To Fit Chinese Facts,” was posted two weeks ago; Part Two, “The Broken Promise To China,” was posted last week.

China is not the first trade partner of the United States to experience losing by winning, going through the process by the rules only to have Congress change them. Perhaps there is something in the American culture that accepts Lucy enticing Charlie Brown and then snatching the football from him. We cautioned, in an article posted August 2, 2009, about “How The U.S. Treats Its Friends In Trade Disputes.” We did not elaborate there on changing the law, but Canada has experienced exactly what has now happened to China, and it has left a lasting impression on Canadians.

To overcome what it interpreted as an intractable bias against foreign countries and entities in U.S. courts, Canada successfully negotiated an alternative dispute resolution system for trade cases, Chapter 19 of the Canada-U.S. Free Trade Agreement, that became Chapter 19 of the North American Free Trade Agreement (“NAFTA”). Chapter 19 creates binational panels of trade experts from both Canada and the United States to replace the U.S. Court of International Trade for appeals of administrative determinations on countervailing duty and antidumping investigations at the Department of Commerce and the U.S. International Trade Commission. The binational panel decisions cannot be appealed except for limited “extraordinary challenges” brought by the governments for gross panelist misconduct or ultra vires panel actions that threaten the review process, so the panels replace the Court of Appeals for the Federal Circuit as well as the Court of International Trade.

Chapter 19 came into effect in 1989 and Canada won some of its first appeals to binational panels within the year. The United States promptly began to curtail the authority of Chapter 19 panel decisions. The Department of Commerce refused to recognize panel decisions from one administrative review to another, forcing Canadian entities to appeal every year determinations finding certain programs to be countervailable subsidies after binational panels had found, in the previous year, that they were not. This practice did not deviate radically from the Department of Commerce’s tendency to ignore CIT decisions as well, but Canada had thought that the Free Trade Agreement would mean greater comity.

Canada found the United States continuously ignoring binational panel decisions. When binational panels decided that the United States Customs Service had no legal authority to collect more than $1 billion in duty deposits, the United States refused to return the money to Canadians as the law seemed to require. The United States used the money as leverage to force Canada into a settlement of a case that Canada had won.

Most egregious, perhaps, and most consistent with China’s experience now, Congress used the occasion of implementing trade liberalization – the Uruguay Round Agreements Act of 1994 – to enhance protectionism, explicitly changing trade rules in the law to reverse adverse judicial decisions in the ongoing feud with Canada over softwood lumber. A section of the trade law, 19 U.S.C. § 1677(A)(5A)(D)(iii), was scripted by U.S. petitioners expressly to overcome decisions favoring Canada in trade remedy judicial appeals.

During the last war over softwood lumber, the United States forced Canada into extraordinary challenges under NAFTA and into U.S. courts to enforce NAFTA and WTO decisions. The United States turned its defeats at the WTO into opportunities to rehabilitate rejected agency determinations. Matters were prolonged for years while Customs collected deposits on duties that would never be owed. The United States accumulated $5.5 billion while bleeding out the cash flow of Canadian companies.

Canadians became completely discouraged. No matter how many times they won legal decisions, the United States kept collecting and holding onto their money. The dispute dragged on for five years. All the while, Canadians remembered well how the United States was willing and able to change the laws when Canadians had enjoyed legal victories, or to interpret laws in novel and doubtful ways.

Nor was the experience with the Uruguay Round implementation entirely new. The Department of Commerce, invoking Section 304 of the trade law, had imposed “interim measures” against Canadian softwood lumber in October 1991, collecting duty deposits, without a petition, self-initiation, nor a preliminary determination. It took two years for an international panel of the General Agreement on Tariffs and Trade (“GATT”) to find this action “inconsistent with Article 5:1 [of the GATT]. The United States then did nothing to comply with the GATT decision. This experience, too, Canadians remembered many years later.

Eventually, Canadians gave up, entering an agreement in which they handed over $1 billion to the United States, half of which was given to the U.S. industry that had lost the legal battles. It was not the first such cash payment to settle a trade dispute (Mexican cement companies paid $150 million), but it was the first not to result in free trade. The Canadians accepted managed trade at higher duty rates than prevailing at the time of the settlement when the legal process had promised free trade. The United States persuaded Canadians that, in the end, they could not win, no matter how much the law supported them. International rulings could not be enforced, and the domestic law could always be changed.

The United States deployed a powerful combination of actions against Canada, defying adverse legal decisions, collecting and withholding money illegally, changing the law. In the end, the United States got its way, not by celebrating the rule of law, but by bending the law to its will. Nothing impressed Canadians more negatively than completing a cycle of the judicial process only to have the law changed.

China Is Not Canada
In addition to the common lessons for China and Canada from different cases – that participation in the judicial process is no guarantee of a fair outcome – there are lessons, too, from the same cases. To pursue subsidies allegations against a non-market economy, the Department of Commerce adopted a methodology in parallel to its antidumping methodology for NMEs. Eschewing values in an economy with no market, the Department has looked to values in other countries. These surrogate values are meant to substitute for values in China that cannot be relied upon absent market forces.

The caprice in selecting surrogate values is perhaps inescapable, but the Department of Commerce has been aggressive in abusing the virtually unlimited discretion it enjoys with a silent statute. The NME methodology for antidumping has statutory rules concerning the selection of surrogate values. Because no statute ever authorized countervailing duty investigations in NME countries, there are no rules. H.R. 4015’s pithy two pages introduce none.

In the countervailing duty investigation of Laminated Woven Sacks, the Department used land values in Bangkok as surrogates for rural Shandong Province. The Department did not even acknowledge in its final determination the testimony of a land use expert that such comparisons of land values across countries and between urban and rural areas are nonsensical.

The Department of Commerce justified its use of out-of-country benchmarks to evaluate subsidy allegations against products from China by citing its final determination in Softwood Lumber from Canada, the very trade dispute in which the United States kept changing the rules. There, the Department had reasoned that provincial government ownership of Canadian forests meant excessive government control of the market and prices, preventing the Department from measuring alleged subsidies. The Department therefore selected prices from the United States, “cross-border benchmarks,” effectively treating Canada as a non-market economy.

A Canada-U.S. Free Trade Agreement binational panel had struck down the cross-border benchmarks in a previous iteration of the dispute over softwood lumber, and a NAFTA panel, more than a decade later, rejected them again. The WTO Appellate Body ruled that out-of-country benchmarks might be justified in some cases, but not in this one. Claiming the WTO rejection of the cross-border benchmarks in this case to be an approval of cross-border benchmarks in principle, the Department of Commerce persisted in using them until Canada capitulated more generally for a settlement.

The Softwood Lumber final determination – repudiated by a binational panel and hardly endorsed by the WTO – has been the legal basis for the Department of Commerce’s methodology in applying surrogate values to China in the subsidies cases that the U.S. Congress has now blessed. The legislation never addressed this issue at all, and China has failed to challenge judicially this fundamental infirmity in the legal process. The Chinese countervailing duty cases are, therefore, the direct progeny of the U.S. treatment of Canada, its best friend and leading trade partner.

Although China is experiencing what Canada has experienced, China is not Canada. Four decades have passed since Canada underwent a drastic reappraisal of its relations with the United States and decided it had to diversify, only to conclude in a Royal Commission Report thirteen years later that Canada would always be dependent on the United States and needed to secure access to the American market. The free trade agreements were supposed to provide that security, but once binational panels began ruling in favor of Canada, the United States hastened to change, in fact and in legal interpretation, the terms to which it had agreed.

The United States has always taken Canada for granted. Canada has not always had to accept that relationship, but it has almost always elected to do so.

The United States cannot now, and never will be able, to take China for granted the way it does Canada. China will not bend so easily to the American will. During the last decade it has been chic in Canada to talk about a foreign policy that “punches above its weight,” highlighting the contradiction between Canada’s prosperity and international influence, on the one hand, and its very small population, on the other. China, by contrast, is thought not to punch its weight at all, still presenting itself partially as a developing country not ready for a full international role. Yet, the Chinese economy already surpasses Canada’s in size and is second only to Canada’s in two-way trade with the United States. Canada will never be a regional power in a region with the United States; China is already a regional power and is growing more powerful.

The United States cannot reasonably expect China to accept the kind of international trade treatment it has gotten Canada to accept. China will have no less a memory of what has happened, and may have no less bitterness that, having played by the rules and participated in the process, China had to face the United States simply changing the rules. But unlike Canada, China will not accept merely what the United States will permit it to have.

The Dangers Of What Has Been Done
Notwithstanding the celebration of bipartisanship and the suggestion of national unity against China in legislating H.R. 4015, the United States has embarked on a perilous course. Following the way it has treated Canada, the United States risks a trade war and endless antagonism with China. It risks, too, the whole international trading system now defined by the WTO, which the United States carefully has built over the last sixty-five years.

It is hazardous to exaggerate U.S. dependence on China as the leading creditor and emerging export market for the United States. China, on many dimensions including trade, is dependent on the United States. Nor should one romanticize the role China plays in the international marketplace. China’s economy is largely controlled from the center and the government does try to pick winners and losers. Notwithstanding protest and denial from China’s Minister of Commerce, there are instances when the appropriate question is not whether the state subsidizes, but whether those subsidies are actionable under U.S. and WTO laws and obligations.

The United States will remain for many years to come a greater power than China in virtually every respect. But unlike Canada, whose ambitions have been contained in a desire to be a faithful and trusted friend and ally, China’s ambitions are to be America’s equal. Probably nothing more; certainly nothing less.

China could interpret this most recent experience as a reason to give up on the rules, to bow out of the judicial processes. To a startling degree, that is what has happened with Canada.

China could devise ways to retaliate or, perhaps worse, imitate American conduct. China will not be inclined from the overheated rhetoric in the United States to conciliate, and it surely will not, like Canada, capitulate. The United States does not need a hostile or antagonistic China, and China will not benefit from a trade war with the United States. This latest episode, however, could be a turning point, as it was for Canadians who harbor an eternal resentment about the American willingness to change the rules when the United States does not like an outcome. Crowing about changing the rules after losing a legal proceeding is no way for the United States to avoid alienating the Chinese the way it has alienated many Canadians. To most Americans, it may not matter how Canadians feel. They still bend. But this time, with China, the United States is dealing with a much less forgiving and compliant friend.

从加拿大汲取经验

            中国并不是唯一面临这种虽赢犹输、依法行事却被国会改变一切的国家。早在2009年8月2日的文章中我们就提醒中国《美国在纠纷中如何对待贸易伙伴》。加拿大的经历和中国经历如出一辙,令加拿大人永远不能忘怀。

            加拿大认为美国法庭歧视国外政府及企业,因此和美国谈判后签署了另一争端解决体系——《美加自由贸易协定》第十九章。根据第十九章,两国选派贸易专家建立多个双边仲裁委员会以取代美国国际贸易法庭重新审阅美国商务部和国际贸易委员会的反补贴、反倾销调查结果。只有两国政府可以向根据《美加自由贸易协定》建立的特别委员会提出重新审理上诉双边仲裁委员会裁决的申请,且只有当委员的不当举动或是仲裁委员会的行动阻碍进程时才可上诉。如此,这两个级别的委员会取代美国联邦上诉庭及美国国际贸易法庭进程。

            《美加自由贸易协定》第十九章于1989年生效,同年加拿大赢得第一批案件的胜利。美国立即开始削弱第十九章委员会裁决的法律效力。美国商务部在一年一度的行政复审中拒绝承认委员会裁决,迫使加拿大每年上诉反补贴裁定。这并未改变美国商务部对国际贸易法庭裁决置之不理的恶习,但这打破了此前加拿大认为《美加自由贸易协定》更具效力的错觉。

            此后,加拿大发现美国持之以恒地忽视双边仲裁委员会的裁决。例如,双边仲裁委员会裁定美国海关收缴10亿美金关税定金的行为没有法律依据,但是美国拒绝依法将这笔巨款退还加拿大。相反,美国利用这笔巨款作为谈判筹码,迫使加拿大参与谈判已经获胜的案件并达成和解。

        与中国的经历极其相似,美国国会利用开放贸易的时机——1994年《乌拉圭协定法案》增强贸易保护主义,修改贸易法以改变不利于美国软木行业的司法裁定。19 U.S.C. § 1677(A)(5A)(D)(iii)即为美方杰作,针对加拿大取得的一系列司法上诉胜利,他们推动制定了这一新章节。

            在上一轮软木大战中, 美国迫使加拿大运用《美加自由贸易协定》特殊上诉机构和美国法庭以敦促美国实施美加自由贸易协定和世贸组织裁定。美国虽然在世贸组织挫败,但却迟迟不执行世贸组织裁定。加拿大企业一边滴血,一边眼睁睁地看着美国海关不断收缴关税定金。这几十亿美金永远也不可能返还加拿大。

            毫无疑问,加拿大深感挫败。无论加拿大取得多少法律胜利,美国总是能设法收缴并保留税金。这一纠纷持续了五年,这五年里美国修改法律以挫败加拿大的法律胜利让加拿大记忆深刻。

            美国实施乌拉圭回合谈判的表现也不再让加拿大惊讶。美国商务部于1991年10月在没有接到调查申请书、未自发展开调查、未发布初裁结果的情形下向加拿大软木采取“暂时措施”,征收关税定金。世贸组织前身——关贸总协定历时两年才裁定这一举措不符合关贸协定第5:1条。但是美国并未采取任何行动实施这一裁定。时隔多年,加拿大仍记忆犹新 。

            最终加拿大不得不放弃,与美国签订协定并将10亿美金拱手让给美国,其中二分之一被 败诉的美国企业获得。此前墨西哥在水泥案中也付出价值1.5亿的赔偿金,但在自由贸易时代这还是第一次。虽然司法裁定支持自由贸易,但加拿大仍被迫签署限制贸易、高税率的软木贸易协定。 美国成功说服加拿大,无论法律如何支持加拿大,国际裁定无法在美国落实,而美国法律总可被修改。

            总而言之,美国运用了一系列武器对付加拿大:重新解释不利裁决、 非法扣留税金、 修改法律。最终美国并非通过依法行事、而是通过扭曲法律实现自己的目标。这只给加拿大留下负面印象。

中国不是加拿大

            中加两国可从这些案件中汲取一共同教训—— 参与司法程序并不保证公平结果,此外还有更多经验教训值得中国参考。美国商务部对非市场经济国家展开反补贴、反倾销调查时使用了特殊计算方法,即使用第三国价格作为参考价格。美国商务部认为中国没有市场,因此中国的价格不具参考价值,必须用第三国价格取代。

            任意选择第三国价格无法避免,但是美国商务部竭尽全力充分利用这一调查方法令人发指。美国法律对反倾销调查中选择第三国价格有详尽规定。但是因为美国法律并未授权对非市场经济国家展开反补贴调查,因此并未就此制定法规。薄薄两页的H.R. 4105也并未触及这一重要问题。

            在复合编织袋反补贴调查中,美国商务部使用曼谷的土地价格作为山东农村土地价格的参考价格。土地专家作证指出,这种跨越国界、城市价格取代农村价格的做法极不合理,但是美国商务部在发布终裁结果时甚至未提及这一证词。

            美国商务部引述加拿大软木终裁结果这一案例法为自己使用第三国价格指标衡量补贴辩解,而这一案件正是美国不断修改法律维护自身利益的最好例证。在软木案中,美国商务部认为加拿大省政府拥有森林资源,这意味着政府过分控制市场和价格,美商务部无法估量补贴指控。因此美国商务部选择美国价格,即“第三国价格指标”,视加拿大为非市场经济体。

            美加自由贸易协定双边仲裁委员会在仲裁软木案时裁定,使用第三国价格指标违法;十多年后,另一仲裁委员会再次否定这一计算方法。世贸组织上诉机构则裁定,在某些案件中使用第三国价格指标合法,但在软木案件中不合法。美国商务部却声称世贸组织的裁定表明世贸组织原则上支持使用第三国价格指标,美国商务部一直使用这一调查计算方法直至美加两国签署协议和解这一贸易纠纷。

            这一被美加自由贸易协定双边仲裁委员会以及世贸组织否定的终裁结果却成为美国商务部计算向中国产品征收反补贴税税率的法律依据,更不可思议地得到美国国会支持。最近通过的法案没有触及这一重要法律问题,中国在司法诉讼中也并未挑战这一原则性错误。因此,中国成为美国错误对待加拿大的受害者。

            虽然中国重蹈加拿大覆辙,但中国不是加拿大。四十多年前加拿大评估美加关系,总结认为应当使双边贸易更加多元化。十三年后,加拿大却总结得出加拿大将永远依赖美国市场,因此必须确保美国市场对加拿大产品开放。《美加自由贸易协定》理应为加拿大提供保障,但是当看到双边仲裁委员会的裁决有利于加拿大时,美国立即修改法律并重新诠释它的法律承诺。

            美国一直视加拿大的态度为理所当然。虽然加拿大可以改变这一惯例,但是加拿大总是选择避免采取这一行动。

            美国现在无法像对待加拿大那样任意摆布中国,将来更不可能。中国不会轻易屈服于美国压力。过去十年,加拿大流行一说法“轻量级选手的重量级出击”,即加拿大的富裕及国际影响与其有限人口形成鲜明对比。与此相反,中国却有所保留、并未使出全力,以尚不能承担国际领袖职责的发展中国家出现。但是中国的经济实力已经远远超出加拿大,中美双边贸易量仅次于美加双边贸易。加拿大永远不能和美国并肩成为区域领袖,但是中国已经是强大、且茁壮成长的区域领袖。

            理智的美国不会期待中国接受加拿大已经接受的贸易待遇。中国参与世界贸易体系、遵循贸易规则,但它可能将长久品位苦涩。