Congress Must Fix America’s Unconstitutional Trade Laws

This article appeared on The Hill (Online) on May 29, 2020.
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The Supreme Court soon will decide whether to hear a case challenging the constitutionality of Section 232 of the Trade Expansion Act of 1962, the “national security” statute President Trump invoked to impose his sweeping steel and aluminum tariffs. The main argument is that—by giving the president carte blanche regarding when to act, what actions to take, against whom, and for how long—the law is an unconstitutional delegation of legislative authority.

A ruling that the law is unconstitutional would end the Commerce Department’s capricious tariff scheme and its opaque tariff‐​exemption process under Section 232, helping to restore some balance to the separation of powers. It could also open the door to similar challenges of other routinely abused trade statutes, such as the antidumping law.

The antidumping law is like Section 232 in several respects. It bestows boundless discretion on Commerce to do almost anything it wishes, raising similarly serious constitutional questions. It provides the veneer of legal legitimacy behind which Commerce routinely imposes tariffs for political ends. And it’s a major irritant between the United States and its trade partners.

Dumping is defined as the sale of a commodity by a foreign company in the United States at a price less than “normal value”—an average usually based on the foreign company’s home market price or the cost of production. Although the law is presumed to protect U.S. companies from “unfairly low” foreign prices, its sordid procedural details and methodological sleights of hand rig the process to ensnare companies engaged in perfectly legitimate commercial practices.

Consider “Enforcement and Compliance,” the Commerce Department agency that administers the law. Its mission is to “safeguard and enhance the competitive strength of U.S. industries against unfair trade.” Carrying out that mission requires the agency to conduct “investigations and administrative reviews to determine if imports are being sold at less than fair value,” while simultaneously “counseling U.S. industries on how to petition the U.S. government to seek relief from injurious and unfairly traded imports.” Conflict? You bet.

According to the Commerce Department’s own Inspector General, Commerce officials regularly meet with and:

[H]ave shared advance draft investigation results with the congressional Steel Caucus well before they were announced in final form, allowing the Steel Caucus to “comment” on them. Time and again high‐​level officials within the agency have exerted pressure on lower level Department of Commerce staff conducting investigations of foreign steel producers to rerun calculations and alter methodologies, resulting in increased AD/CVD tariffs.

Changes to the law in the 1970s and 1980s, making affirmative findings more likely and more lucrative, transformed antidumping into a commercial weapon used primarily by U.S. producers of industrial inputs to assert advantages over U.S. producers that consume those inputs—their customers.

In 2015, at the urging of the Congressional Steel Caucus, Congress amended the antidumping statute more aggressively than ever before, abandoning any remaining pretenses of objectivity and crossing into the realm of lawlessness. The most corrosive change authorizes Commerce—for purposes of calculating antidumping duty rates—to reject foreign producers’ submitted production cost data and to use, instead, whatever it wants to use. Section 773(e) of the Trade Preferences Extension Act reads:

“[I]f a particular market situation exists such that 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, the administering authority may use another calculation methodology under the subtitle or any other calculation methodology.”

That promiscuous language seems to permit the president license to be a king. In April 2017, for the first time under the new law, Commerce monarchically used the “particular market situation” rule to reject the submitted cost data of South Korean steel tube manufacturers even though South Korea is a market economy and even though the producers’ cost data reconciled to their audited financial statements.

Unsurprisingly, a few months earlier, in the preliminary determination of the same case, Commerce had rejected the domestic industry’s argument that a “particular market situation” existed in South Korea and proceeded to calculate relatively low antidumping rates. But when word of this outcome reached Capitol Hill and the White House, Commerce came under pressure—most emphatically from Peter Navarro, the president’s director of trade and manufacturing policy—to take full advantage of the new antidumping provisions.

Submitting to that pressure, Commerce reversed its decision, found a “particular market situation,” and significantly inflated the cost values, which produced substantially higher antidumping duty rates on imports from Korea. Commerce since has found a “particular market situation” in 12 more antidumping cases involving six other countries, giving it license to produce dumping margins out of thin air.

Arguably, the antidumping law and Section 232 are both unconstitutional. Unarguably, they are both bad laws that confer too much unconstrained discretion on the executive branch. It’s time for Congress to act to restore the rule of law.

Daniel J. Ikenson

Dan Ikenson directs the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.