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Dumping Cases on China Imports Rise Since WTO Accession

U.S. retailers challenge imposition of temporary textile quotas

By Bruce Odessey
Washington File Staff Writer

This article is one in a series on U.S.-China economic relations.

Washington -- The number of U.S. dumping cases against imports from China is up, but the Commerce Department says that is because the volume of U.S.-China trade is up.

Wooden bedroom furniture, crepe paper, hand trucks, shrimp, ironing tables, plastic shopping bags, color televisions, steel fence posts, iron pipe fittings, saccharin -- more than 50 categories of goods from China are now subject to U.S. anti-dumping duties.

"The significant expansion in U.S.-China trade has led to a greater number of disputes than in the past," according to a Commerce Department official.

For example, imports of wooden bedroom furniture from China attained a 48 percent share of the U.S. market with sales of $1.2 billion in 2003 before anti-dumping duties were imposed, the department says.

The Commerce official rejects criticism that dumping cases amount to protectionism.

"The Department of Commerce is committed to the vigorous enforcement of the laws preventing unfair trade," the official said.  "Unfair foreign pricing and government subsidies distort the free flow of goods and adversely affect American business in the global marketplace."

Vigorous enforcement of U.S. laws against unfair trade was a crucial demand made by members of Congress in 2000 when they passed legislation approving China's accession to the World Trade Organization (WTO).

Also crucial to passage was the part of the WTO accession agreement allowing other countries to treat China as a nonmarket economy through 2015.

To calculate dumping margins for a nonmarket economy, the Commerce Department uses prices and other information not from the country under investigation but from a surrogate country that has a market economy.  For example, the department has used production and price information from India to determine a fair price for an investigation of imports from China.

Imposition of anti-dumping duties requires final affirmative determinations both from the Department of Commerce that dumping occurred and from the U.S. International Trade Commission (USITC) that the imports injured or threatened to injure U.S. industry.

Dumping is the import of goods at a price below the cost of production or below the home-market or, as in the case of China, a third-country price.  A dumping margin represents the percentage by which the fair-value price exceeds the dumped price.

China has been pressing its trading partners to give it market economy status, especially in negotiation of trade agreements with its Asian and Pacific neighbors.  So far it has agreements with many of its Asian neighbors and a number of other economies around the world.  For example, Association of Southeast Asian Nations members extended market-economy status to China in November 2004.  Latin American countries such as Brazil, Argentina, Chile and Peru also recently gave China market-economy status.

Unlike many of these countries, the United States does not negotiate market-economy status.  Under U.S. law, foreign governments that are currently considered nonmarket economies and wish to be re-evaluated and considered for market-economy status must formally apply with the Department of Commerce's Import Administration.  The U.S. statutory criteria for market-economy status include, among other factors, the extent to which a currency is convertible into foreign currencies and the extent to which wage rates are established by free bargaining.

"Right now it's difficult to say that either of those criteria for China could be met," a U.S. official who asked not to be identified said in a recent interview.

Other statutory criteria include the extent to which foreign companies can invest, the extent of government ownership or control of the means of production, and the extent of government control over resource allocation and decisions setting output and prices.

During dumping investigations, foreign producers in nonmarket economy countries may also request to be evaluated using actual market rates.  Several Chinese firms requested this and were granted the opportunity during a 2004 dumping case against a number of Chinese wooden bedroom furniture makers.

In 2004, under the auspices of the U.S.-China Joint Commission on Commerce and Trade, the United States and China set up a joint working group to guide China toward market-economy status.

"That's something that we want to continue to use to move China in the direction of economic reforms," the official said.

C. Richard D'Amato, chairman of the U.S.-China Economic and Security Review Commission established by Congress, said at a February commission meeting that he welcomed any legitimate moves by China toward market-economy reform.

"We are concerned, however, with the possibility that market-economy status will be treated as a bargaining chip to be traded away as part of a political strategy, rather than granted only when warranted by economic developments," D'Amato said.  "China is a far, far cry from a market economy ... today."

U.S. trade officials in Beijing reject the idea that market-economy status could be granted on the basis of political factors.  “Our story is and remains that determinations of market orientation are based solely on the factors outlined in the statute,” one official said.

Other provisions of China's WTO accession agreement offer U.S. industry the possibility of imposing temporary trade barriers, called safeguards, against a surge of imports from China.

The agreement and U.S. law make available two safeguard provisions, one called the product-specific safeguard, which expires in 2013, and the other called the China textile safeguard, which expires in 2008.

The USITC makes recommendations to the president on the China product-specific safeguard requests.

In 2002 and 2003, the USITC recommended to President Bush that he impose temporary trade barriers on imports of pedestal actuators (quotas), steel wire garment hangers (duties) and ductile iron waterworks fittings (duties) from China.

The president decided against imposing safeguards, citing national economic interest, in all three cases over strong objections from affected U.S. industries and some members of Congress.

In two other cases the USITC recommended against import relief.

In February testimony before the U.S.-China Economic and Security Review Commission, Washington lawyer Terence Stewart said U.S. businesses have become frustrated about obtaining relief from the product-specific safeguard provision.

"The likely reason that there have been no new petitions in the past year is not because there has been a decrease in Chinese imports (which have continued to increase rapidly)," Stewart said in prepared testimony, "but because U.S. industries have observed the results of the first five cases and have judged that the prospective relief to be gained from a petition is not worth the costs and time to bring it."

Under the textile safeguard, however, the Bush administration has acted to impose temporary quotas based on actual import surges of Chinese knit fabric, dressing gowns, brassieres and socks, of which only the socks quota is still in place.

Safeguard decisions on textiles and apparel imports are made by an interagency group called the Committee to Implement Textile Agreements (CITA).  Under the WTO accession agreement, increases in subject imports from China could be restricted to no more than 7.5 percent from the previous year.

Ahead of the December 31, 2004, expiration of the WTO's decades-old global quota regime for textiles and apparel, a coalition of U.S. textile industries filed petitions for safeguard measures against imports covered under a number of apparel categories from China, based on the threat of an import surge rather than an actual surge.

On December 30, 2004, however, a judge of the U.S. Court of International Trade in New York issued a temporary injunction blocking CITA from acting on those threat-based petitions.  A coalition of retail importers had challenged CITA's authority to impose safeguards based on a threat only. The court injunction is not applicable to safeguard requests based on actual market disruption.

In February, the U.S. Justice Department filed a formal appeal to lift the injunction.  Scheduled for release March 11, meanwhile, are preliminary trade numbers from January that might indicate whether a surge was real or remained only a threat.

The WTO has predicted that China's share of the world market in textiles and apparel will jump to 50 percent in 2007 from 17 percent in 2003.