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.
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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