10/20/2000
The Asian Wall Street Journal

By Greg Rushford

Some of America's largest exporters are furious. So are trade officials and diplomats from Tokyo to Brussels. The object of their anxiety? New legislation that threatens to undermine U.S. trade policy by allowing American companies to reap millions of dollars from punitive antidumping tariffs.

The legislation passed the U.S. Senate Wednesday after clearing the House of Representatives earlier this month. The administration of President Bill Clinton originally opposed the measure. But in an election year, with Vice President Al Gore struggling for votes in America's industrial and heavily unionized central states, Mr. Clinton has apparently changed his mind.

On Oct. 3, West Virginia Senator Robert Byrd, a Democrat, managed to insert the provision as a rider to a $78 billion agriculture appropriations bill. The measure requires the U.S. Treasury to turn over the tariffs to American companies and farmers that prove they were harmed by the "unfair" low prices of their foreign competitors. The windfall for domestic businesses that win an antidumping case could be substantial; U.S. Customs collected more than $400 million in such duties in 1998 and `99.

Although it took Mr. Byrd's savvy and finely honed sense of timing to pull this idea off, as usual in these affairs the ploy was bipartisan. First-term Senator Mike DeWine, an Ohio Republican, had been trying all year to push the same idea, without success. Both senators were responding to domestic steel interests, which drive U.S. domestic political support for antidumping laws. U.S. steelmakers and their unions have been on the antidumping warpath against foreigners since 1998, when the Asian financial crisis sent a surge of cheap steel into U.S. markets.

In making his move, Mr. Byrd successfully portrayed the measure as both noncontroversial and most likely to benefit U.S. farm interests, especially for products like apples and mushrooms, that have filed antidumping actions targeting China. Unfortunately, there were no public hearings on the provision and no opportunity for debate. Nobody mentioned that the idea had been on the steel lobby's wish list for decades. Stealthily, Mr. Byrd and his supporters tucked it away into the overall bill, which is not subject to further amendment.

Mr. Byrd says his provision would "provide fair retribution for U.S. industries cheated out of vital revenues as a result of illegal trade." If only the antidumping laws worked to protect innocent competitors that way. They don't.Antidumping laws are contrary to free and open markets. They are a blight on perfectly legitimate competition. While the political rhetoric that drives these laws is couched in terms of combating "unfair" foreign predatory pricing, the laws themselves have nothing to do with predation.

Take Senator DeWine's home state of Ohio. An Ohio widget maker is free to sell his wares across America below the prices he can command in Ohio. "Loss leaders" routinely bring customers into stores, where even ruthless price-cutting is praised as legitimate competition (as long as there is no evidence of predatory pricing designed to ruin competitors and gain monopoly market power).But the antidumping laws penalize this price discrimination when it crosses international borders.

When foreigners try to engage in price competition in U.S. markets, some domestic petitioner is likely to come along and accuse them of "unfair dumping." Moreover, American antidumping petitioners are not required to show any evidence of predatory pricing -- only that the sales in the United States are at lower prices than in, say, Japan or Canada.

And while Ohio steelmakers may benefit by raking in antidumping tariffs collected by U.S. Customs, other important Ohio businesses stand to be hurt. Hundreds of small Ohio companies that make things of steel -- precision metal-formers, for example -- are hurt when the costs of imported raw materials rise because of antidumping tariffs. Likewise, U.S. consumers are also hurt when the tariffs are passed along in the form of higher prices.

Ohio-based Procter & Gamble, for example, has reason to worry about the Byrd amendment. Like more than 130 other American exporters in recent years, P&G has had to defend itself when accused of "dumping" by countries that have enacted copycat versions of the draconian U.S. antidumping laws. Last year, P&G was accused of dumping its Pampers baby diapers in Israel. While authorities there ultimately dismissed that case, it easy to see how this business can get stinky for all American exporters."

Do we really want U.S. companies' funds to be paid over to subsidize their Asian competitors?" asks Ed Sim, an American lawyer based in Singapore who represents American businesses accused of dumping in the region. "Would we think that this is fair?"

If Congress had held public hearings before Mr. Byrd slipped in his provision, those questions could have been asked of American executives who have been accused of "dumping" abroad. The list is long. Micron Electronics has been accused of dumping semiconductors by Taiwan. Dow Chemical, which was happily exporting polystyrene (used to make refrigerators) from Hong Kong to India, has been shut out of Indian markets because of an antidumping case. Phelps Dodge's Columbian Chemicals division is now defending itself before Indonesian antidumping authorities, allegedly for selling carbon black (the chemical that makes tires black) too cheaply there. In South Africa, Gold Kist chickens are under a similar attack. Weyerhaeuser isn't able to export American newsprint to China, since Beijing slapped it with whopping 78% antidumping tariffs.

The lesson for U.S. business: What goes around, comes around. Micron Electronics -- which has wielded U.S. antidumping laws against its Asian competitors with a vengeance -- complained that Taiwan's antidumping retaliation was unfair and nontransparent. That's exactly what Koreans and Taiwanese have said about Micron's use of the same laws in the U.S.

While the economic pain that such cases are beginning to inflict hasn't yet reached the level where U.S. business is screaming, there is a growing awareness that the antidumping hysteria is already hurting vital American commercial interests. Last November, when WTO ministers met in Seattle hoping to launch a new round of trade-liberalizing talks, the Clinton administration's refusal to negotiate reforms of U.S. antidumping practices was one of the major reasons the talks collapsed.

Despite the actions of Congress, U.S. business leaders are speaking out. The National Foreign Trade Council and the Emergency Committee for American Trade -- whose members include such blue-chip exporters as Cargill, Caterpillar and Emerson Electric -- have taken a strong stand against the Byrd amendment. They all warn that the law will undercut U.S. leadership of the global trading system. Mr. Clinton should listen.

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