The Unmanageability of Managed Trade

Last week the U.S. International Trade Committee gave the green light to impose countervailing (anti-subsidy) and antidumping duties on imports of circular welded carbon steel pipe from China. The decision was noteworthy because it represents the first affirmative finding of injurious subsidization against China since the Bush administration lifted the informal 22-year old moratorium on using the CVD law against China. (The coated paper case last year was the first CVD case against China initiated post-moratorium, but ultimately the ITC did not find the domestic industry to be injured in that case, and thus no duties were imposed).

But the steel pipe case is noteworthy for another reason. It perfectly exemplifies the absurdity of our trade remedy laws. Under the antidumping and countervailing duty laws, consumers of the subject merchandise have no formal standing in the process. Under the statutes, the ITC is not permitted to consider the impact of prospective duties on these interests, nor is it required to even hear arguments from consuming interests.

Now, let’s juxtapose economic and business reality on this trade remedy law setup.

In 2001, the United States imposed antidumping duties on imports from several countries (including China) of hot-rolled carbon steel. (Despite record revenues, profits, and the unprecedented market power of U.S. steel producers, the ITC voted to continue those 2001 antidumping orders for another five years in 2007.)

Hot-rolled steel is a commodity product from which many different kinds of steel products are made, including circular welded carbon steel pipe. Before the 2001 order was imposed, Chinese producers could sell hot-rolled steel to Chinese and American producers of downstream steel products. After the antidumping order was imposed in 2001, the supply of hot-rolled steel for Chinese producers of downstream products – like circular welded carbon steel pipe – increased, and the price declined. Meanwhile, the supply of hot-rolled available to U.S. pipe producers, declined, and the price increased. What to make of all this?

Well for one thing, it’s not only plausible, but probable, that the reason U.S. pipe producers may be struggling is that access to their most important material input is stunted relative to their Chinese competitors’. The price of hot-rolled steel in the United States has been at record highs over the past couple years. And the antidumping order against hot-rolled is a tax on U.S. pipe producers and a subsidy to Chinese pipe producers.

If the antidumping law included a consumer interest provision (see “Mandate a Public Interest Test” on page 33), where the impact of prospective antidumping measures on downstream users and, indeed, on the economy as a whole was considered, there would be less demand for protectionist measures to compensate for the effects of protectionist measures.