We begin today one story in three parts, “Nothing Unites The United States Congress Like China (And Not In A Good Way): Treating China Like Canada (Maybe Even Worse)” by Dr. Elliot J. Feldman. Part One, “Rewriting Subsidies Law To Fit Chinese Facts,” examines the first legislation expressly for trade with China passed by the United States Congress and signed by the President since China’s accession to the WTO a decade ago. Over the years various bills have been introduced aimed at China, especially on currency valuation, but H.R. 4105, mandating the imposition of countervailing duties determined in investigations of subsidy allegations in non-market economies, is the first to win bipartisan and presidential support.
Part Two, which will appear next week, sharply criticizes this legislation because it breaks a promise to China concerning acceptance of the international rule of law and does not conform with WTO obligations. Dr. Feldman demonstrates that the passage of the new law, in deliberately overturning a judicial decision while failing to comply with a related WTO decision, suggests to China that it cannot rely on the rule of law to settle trade disputes with the United States.
Part Three, which will appear two weeks from now, explains that the American treatment of China with respect to the WTO and U.S. domestic law is reminiscent of the American treatment of Canada with reference to NAFTA, the WTO (the GATT at the time) and U.S. law. The United States, after losing trade disputes in the judicial process, changed the law. Dr. Feldman describes the impact of that conduct on trade relations with Canada and predicts that China will react differently and with much greater risk for the international trading system.
Rewriting Subsidies Law To Fit Chinese Facts
The Congress of the United States has been gridlocked for years now by partisan bickering on almost every issue to come before it but one – China. And, in confronting China, the suddenly bipartisan Congress usually has presidential support. As Bill Reinsch, President of the National Foreign Trade Council, recently stated, “For the last 20 years, every presidential challenger has run against every incumbent by accusing him of being soft on China. Any intelligent, prepared administration will do its best to inoculate itself, and this administration has chosen to do that by launching much more aggressive enforcement [of trade actions against China].”
The Administration of Barack Obama and all the remaining Republican candidates for President agree that China trades unfairly in the international marketplace. In a stunning bipartisan display, it took Congress less than three months to become seized of a need for a legislative change and to complete the process. The process itself unfolded in less than a week, and it took only a few days for the President to sign into law the congressional action.
What Happened Before Congress Stepped In?
The United States Court of Appeals for the Federal Circuit, as previously reported on this blog, ruled on December 19, 2011 that U.S. law forbids the application of countervailing duties to non-market economies. GPX International Tire Corporation et. al. v. United States. On March 8, 2012, the U.S. House of Representatives completed the process of overturning the decision of the Court of Appeals, rewriting U.S. law.
From 1986 until November 2006, U.S. law on the subject of non-market economies had been governed by a Court of Appeals decision, Georgetown Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir.1986). By defining “subsidy” to be a financial contribution by a government that distorts a market, there could be no “subsidy” without a market and, as the Georgetown Steel court suggested, non-market economy governments “would in effect be subsidizing themselves.”
Democrats seized control of Congress in the November 2006 mid-term elections and the Department of Commerce, two weeks later, accepted a petition for countervailing duties on imports of coated free-sheet paper from China. It promptly became routine for petitioners to couple countervailing duty with antidumping petitions, and routine for the Department of Commerce to find both dumping and subsidies by applying, in both, non-market economy methodologies that repudiate domestic values in favor of surrogate prices from third countries.
The United States Court of International Trade (“CIT”) had struck down the subsidy finding of the Department of Commerce on GPX tires twice before, in 2009 and in October 2010, but on narrower grounds effectively affirmed by the World Trade Organization on a Chinese appeal in March 2011. These decisions did not conclude that the application of countervailing duties was forbidden by U.S. law, nor by WTO obligations, but that countervailing duty and antidumping cases potentially lead to a double-counting that unlawfully would exaggerate remedies. The CIT had ruled that the Department of Commerce could not pursue both simultaneously without a methodology to solve the double-counting problem.
The Court of Appeals in the GPX case skipped over the double-counting problem and went straight to the underlying premises of Georgetown Steel. The law, the Court of Appeals concluded, does not permit the assessment of countervailing duties against non-market economies.
Congress To The Rescue
The U.S. Congress in 2012 agrees on almost nothing except an antagonism toward China. Maps and globes still display China as a huge land mass, and most Americans believe that some 1.3 billion people are working there to produce goods that will overwhelm American manufacturing and put Americans out of work, all with the aggressive financial support of a centralized Communist Government.
This capitalist image is little changed from the American caricature of China since the founding of the People’s Republic in 1949. The traditional, sympathetic American view of China, captured best, perhaps, by Pearl Buck’s The Good Earth, transformed with the Cold War. In both the Korean and Vietnamese Wars, Americans envisioned Chinese hordes pouring southward into narrow peninsulas, threatening the survival of nascent democracies. Now, Americans envision those same hordes, but hard at work in soulless factories, exploiting child labor, for the advancement of the Communist state against western capitalism.
Successive Presidents have strived to cure Americans of these distorted images, but every two years when it is time to elect a new Congress, the classic demagoguery of conjuring a common foe has fixed China as a popular target. The unanimous Court of Appeals decision from a three-judge panel chaired by the Chief Judge in December 2011 started a clock because, without a successful request for rehearing en banc or a successful writ of certiorari to the Supreme Court – both improbable – all of the pending and prior countervailing duty determinations against China would be stopped or reversed. Only Congress could prevent a chaotic turnabout, a role Congress (now Republican, confirming the bipartisan antipathy toward China) welcomed because of its popular resonance.
The House of Representatives Ways and Means Committee referred the corrective legislation to the full House on the same day it had been introduced to the Committee, February 29. Less than a week later, on March 6, the Committee’s Republican Chair moved to suspend the rules in order to expedite passage of the bill. All on that same day the House suspended the rules, debated the bill, proceeded through various rule technicalities and voted the bill itself 370-39. It went to the Senate the next day.
On March 7, the Senate read the bill twice, considered it, read it a third time, and passed it without amendment by Unanimous Consent. It was sent to the White House one day later, and was signed by the President on March 13. For anyone wondering how often bills go from committee introduction to presidential signature in a fortnight: not often, but not often is there legislation targeting China on which almost everyone agrees.
What The Legislation Does, And Does Not, Do
H.R. 4105 (112th Congress), “To apply the countervailing duty provisions of the Tariff Act of 1930 to nonmarket economy countries, and for other purposes,” statutorily directs the imposition of countervailing duties on merchandise imported from non-market economy countries with one exception, where “the economy of that country is essentially comprised of a single entity.” This language reflects continuity with one aspect of Georgetown Steel (the reference to subsidizing itself), but also supports the rationale offered by the Department of Commerce in 2007 for finding subsidies in China: there is enough of a market in China, according to the Department of Commerce, to find subsidies, but not enough to treat China as a market economy, nor to find any sector sufficiently market-based to be treated as “market oriented.” It is a position probably indefensible in logic or law prior to H.R. 4105, but now provided with some statutory support, albeit still indirect.
In response to an initial Republican resistance to the new legislation, voiced by House Ways and Means Committee Chairman Dave Camp (R-Michigan), the bill contains a second section, “Adjustment of Antidumping Duty In Certain Proceedings Relating To Imports From Nonmarket Economy Countries.” Camp was concerned that the legislation could violate WTO obligations enunciated in the March 2011 Appellate Body decision warning against double-counting. Officially, the Obama Administration has avoided public pronouncements as to whether the legislation accomplishes Camp’s goal. At the very end of his March 13, 2012 White House press briefing, Administration spokesman Jay Carney was asked:
“Also, the China commerce minister believes that the bill that President signed into law today should not only break the WTO rules but also sort of violate the U.S. domestic trade laws, which America -- trade laws.”
Carney answered evasively:
“Well, I haven’t heard those comments. Obviously the President signed the bill because he thought it was -- it merited signing. So I don’t have any comments with regards to that official's statement.”
Privately, nonetheless, the White House appears convinced that this section of the bill assures that the legislation conforms with WTO obligations. Unfortunately, China’s Commerce Minister is right. The legislation does not comply with WTO obligations.
H.R. 4105 directs the Department of Commerce when finding both dumping and subsidies, to “reduce the antidumping duty by the amount of the increase in the weighted average dumping margin estimated by the administering authority [i.e., the Department of Commerce] . . .” This reduction depends, however upon the Department of Commerce’s ability to “reasonably estimate the extent to which the countervailable subsidy . . . in combination with the use of normal value [from the antidumping calculation] has increased the weighted average dumping margin for the class or kind of merchandise.” When it cannot make that estimate, it cannot make the adjustment, but by statute it must still assess countervailing duties. This statutory mandate is not materially different from the CIT conclusion that effectively halted countervailing duty cases against merchandise from China inasmuch as it instructs the Department of Commerce to do something it does not know how to do, but whereas the CIT concluded that the Department of Commerce consequently should not do it, the statute instructs that it must.
The CIT had ordered the Department of Commerce to figure out a solution to the double-counting problem before finding subsidies. The new legislation orders the Department to find subsidies and then figure out a solution. Under this instruction, the Department is no more likely to figure out a lawful solution than before, but now it will, under statutory direction, double-count. Companies in non-market economies will be required to contest the illegal double-counting on a case-by-case basis.
Finally, the new law contains an astonishing provision regarding its effective date because it “applies to . . . all proceedings initiated . . . on or after November 20, 2006.” The Department of Commerce thus is ordered by statute to revisit all countervailing duty petitions filed against China and Vietnam since November 20, 2006 and find subsidies without regard to double-counting and without regard to decisions of the CIT and the Court of Appeals for the Federal Circuit. It then, to the extent it can figure out how, must try to adjust for double-counting. Petitioners are granted the benefit of a law that did not exist when they filed their petitions.
Belt And Suspenders: Request For Rehearing
The United States and its petitioning allies could avoid reversal of the final subsidies determination in GPX International Tire Corporation and other countervailing duty cases against China and Vietnam only by congressional act or by en banc appeal in the Court of Appeals for the Federal Circuit by March 5. As quickly as Congress moved, the legislation was not in place on time.
The U.S. Department of Justice and the petitioners, including above all the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union of the AFL-CIO-CLC, filed separate petitions at the Court of Appeals for rehearing en banc on March 5. Because the Court of Appeals decision is final (but subject to further appeal), H.R. 4105 could not overturn it as to the parties in the GPX case. Only the court can reverse the specific outcome. The legislation does reach twenty-four existing orders and six pending investigations, none of which went to final decision in the U.S. courts, but only the rehearing petitions can help the GPX petitioners.
Next Week: The Broken Promise to China
美国国会多年来一直对急需讨论的事项争执不休，只有一个例外——中国。当与中国正面冲突时，国会总是突然统一战线，还获得总统支持。就像美国全国对外贸易委员会( National Foreign Trade Council) 主席Bill Reinsch所指出的那样：“过去二十多年里，每个竞选总统职位的在野党候选人总是指责总统对待中国太软弱。包括本届政府在内的任何智慧、准备充分的政府都竭尽全力（针对中国）采取更严厉的贸易举措。”
一开始，筹款委员会主席米歇根州Dave Camp众议员为首的众议院共和党人抵制这一新议案，因此这一议案新增了“调整向非市场经济国家出口品征收的反倾销税。”Camp众议员担心这一议案将违反世贸组织承诺，因为2011年世贸组织上诉机构的裁定禁止双重征税。奥巴马政府在公开场合避免就这一议案是否实现了Camp的目标发表官方评论。2012年3月13日白宫新闻发布会上，有记者提问：“中国商务部部长认为总统签署的这一法案不仅违背了世贸章程，也违背了美国贸易法。”白宫新闻发言人Jay Carney回答：“我并未获悉这一评论。总统签署了这一法案，显然他认为这一议案应当成为法律。因此我对中国官员的意见没有任何评论。”