Commentary

U.S. Antidumping Law Hurts Americans

With the congressional debate on Trade Promotion Authority heating up, talks on the future of U.S. trade policy are underway. One of the most contested issues is whether U.S. trade laws — in particular, the antidumping law — should be open to negotiation. It should, for the benefit of U.S. consumers and U.S. businesses.

Antidumping laws have long been abused by protectionist U.S. industries seeking a reprieve from foreign competition. However, in recent years, the tables have begun to turn and U.S. exporters are increasingly under target from foreign governments flexing their own antidumping muscle.

Despite this trend, an alarming number of U.S. policy-makers have declared antidumping a sacred cow, off limits to revision and discussion in any future trade agreements. A recent letter to President Bush from Senate Finance Committee Chairman Max Baucus (D-Mont.) and signed by 61 senators expressed this view.

That position risks stalling future trade talks because other countries may balk at opening their markets if we refuse to reform our own trade barriers. Furthermore, U.S. antidumping supporters ignore the new reality: Antidumping laws are proliferating rapidly worldwide, closing or limiting markets to U.S. exporters at a growing clip, threatening to reverse gains achieved through years of market access liberalization.

Until the 1990s, antidumping was a vice practiced almost exclusively by a few rich countries: the United States, Canada, Australia and Europe. High tariffs and quota systems in the less-developed countries rendered antidumping superfluous to their heavily protected industries. As tariffs and other trade barriers have declined in the developing world in accordance with WTO obligations, the appeal of antidumping has risen. An examination of this trend and its implications is the subject of a recent Cato Institute study. Some of the major findings include:

  • Between 1921 (the first year of the U.S. antidumping law) and 1967, there were 75 instances in which U.S. industries succeeded in obtaining protectionist relief.
  • Changes to the antidumping law in the 1970s, making it easier to find dumping margins, precipitated a flood of new cases. In the 1980s, the United States launched 398 antidumping investigations and Australia, Europe, and Canada combined launched 1,091.
  • In the 1990s, 2,483 investigations were launched worldwide, representing a greater than 50 percent increase over the record of the 1980s.
  • Sixty-two countries now have antidumping laws on their books.
  • Twenty-eight jurisdictions (EU is one jurisdiction comprising 15 countries) used their antidumping laws to impose definitive measures against imports between 1995 and 2000..
  • Thirteen of those 28 countries launched cases against U.S. exports during 1995-2000..
  • The United States has become the third largest target of antidumping actions around the world - trailing only China and Japan..
  • Among countries that would comprise a Free Trade Area of the Americas (FTAA), the United States was the number one target of antidumping in 1995-2000..

The likelihood of continued antidumping proliferation poses a significant threat to U.S. export growth. The product groups hardest hit by antidumping protectionism worldwide during 1995-2000 (i.e., base metals and articles of metal, chemicals, pharmaceuticals and allied products, machinery and electrical equipment, and textiles) comprised 55 percent of U.S. export value in 2000. With respect to potential FTAA partners Brazil and Argentina, 75 percent of U.S. exports were of products produced by the four most active antidumping user groups there.

As the world’s largest exporter, the United States should expect to be targeted even more as new countries learn how to wield the antidumping hatchet. Traditional trade barriers are still high in developing countries, which will find great comfort in the availability of a WTO-sanctioned tool to replace those barriers. It is difficult to imagine how China, heretofore relatively restrained in its antidumping actions, will be able to resist pleas from its import-competing industries for antidumping assistance, particularly since it has endured the most antidumping abuse.

Declaring antidumping negotiations off-limits ignores the fact that U.S. interests stand to benefit the most from imposing restrictions on their use. Conversely, allowing antidumping proliferation to continue will hurt U.S. interests the most. America’s policy-makers should welcome opportunities for antidumping negotiations in the World Trade Organization, the FTAA, or in bilateral talks. The overriding national interest in a free and open international trading system demands action to restrain antidumping abuses before they spiral completely out of control.

Dan Ikenson is a trade policy analyst with Cato’s Center for Trade Policy Studies.