Advocates of new U.S. restrictions on international trade often cite relatively low U.S. tariff rates while ignoring all the other ways that the federal government can – and does – discourage voluntary cross‐border commerce. Perhaps the most common of these non‐tariff barriers are U.S. “trade remedies” – antidumping, countervailing duty, and safeguard measures – that apply special duties to covered imports found to harm domestic companies and workers. These measures are not only common – there are more than 500 in place today – but are also subject to abuse by the agencies implementing them, resulting in prohibitive duties at ridiculously high rates (100 percent, 200 percent, or even higher). The abuse can also come directly from laws that Congress has repeatedly revised to further tilt the field toward U.S. producers/unions.
Cato scholars have been tracking abuse of anti‐dumping laws for a long time. Our latest salvo is here and focuses on an issue known as “particular market situation,” where “the cost of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade.” In these circumstances, the Department of Commerce “may use another calculation methodology under this subtitle or any other calculation methodology.” That “other calculation methodology” is almost certainly going to lead to higher anti‐dumping duties than would otherwise be found to exist. Indeed, that’s the whole point of the provision, which Congress added to U.S. Antidumping Law in 2015.
Another abusive approach employed by Commerce is known as “adverse facts available” — in which, loosely speaking, the Department decides that foreign respondents haven’t been “cooperative” and thus rejects their data and calculates duty rates using proxy information that’s intentionally adverse to them (often provided by the domestic companies seeking import protection). Just like PMS, AFA inflates duty rates – indeed, most of those absurdly‐high rates stem from Commerce’s use of AFA. It is no doubt true that foreign companies and governments occasionally are actually non‐cooperative, but their lawyers report (quietly, of course) that Commerce’s AFA decisions are increasingly abusive – for example, by invoking AFA after establishing unreasonably short and rigid deadlines for providing mountains of information (that often must be translated); by applying AFA (instead of the more benign “facts available”) for minor and unintentional technical errors; or by throwing out all evidence submitted by foreign respondents (“total AFA”) where only a small amount of data is in question.
Even without these practices, U.S. trade remedy laws would raise significant problems, but these two are probably the most egregious and harmful. And new data show that the number of AFA and PMS determinations has been on the rise (AFA cases are remaining steady as a percentage of total cases, but there are more total cases these days; PMS is being used more often in percentage terms):
Such practices not only harm U.S. consumers — the same study shows that the average duty rate applied to imports in AFA (full or partial) cases was 141.03 percent over the period examined – but also have a way of boomeranging back to American exporters too. As noted here, for example, these and other questionable trade remedies practices are spreading to other countries. Trade remedy abuse is a loss when we do it to others; the loss is compounded when others do it back to us.
Commerce’s behavior – and the laws authorizing it — also serves as a warning about the perils of U.S. protectionism and industrial policy: even in systems administered by a “neutral” bureaucratic arbiter and designed to be insulated from the political process, the administering agency can become “captured” by powerful domestic interests and the rules can be corrupted by politicians eager to reward attentive constituents with highly technical changes hidden from the vast majority of the American public.
Unfortunately, it’s that majority paying the bill.