U.S. ’Pointing Fingers’ With Trade Bill: China

Chinese Commerce Minister Chen Deming said a U.S. bill aimed at offsetting government subsidies in countries including China amounted to "pointing fingers," and was inconsistent with American law.

China's central government hasn't given banned subsidies to businesses, while aid below the federal level may be more "problematic," Chen told reporters in Beijing today. The bill, passed yesterday in the Senate, isn't in line with World Trade Organization rules, Chen said, raising the potential of a trade case should President Barack Obama sign it.

The bill responds to a Dec. 19 decision by a U.S. appeals court in Washington that said existing law doesn’t authorize the agency to set tariffs on goods from countries lacking a domestic market to establish prices. The House yesterday passed the legislation 370-39 after the Senate backed it March 5. U.S. Trade Representative Ron Kirk said last week the Obama administration helped to craft the measure.

Passage marked a rare achievement for a divided Congress that has yielded few accomplishments since Republicans took control of the House last year.

“I hope this is the beginning of more bipartisan trade negotiations,” Representative Bill Pascrell, a New Jersey Democrat, said yesterday on the House floor. “I think it’s healthy. Let’s not stop with the passage of this bill but continue to move forward on a fair trade policy that puts American workers and businesses first.”

Companies that have benefited from U.S. duties on undervalued China imports include U.S. paper and steel manufacturers. Photo: Daniel Acker/Bloomberg Close

Companies that have benefited from U.S. duties on undervalued China imports include... Read More

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Companies that have benefited from U.S. duties on undervalued China imports include U.S. paper and steel manufacturers. Photo: Daniel Acker/Bloomberg

The legislation overcomes a court’s challenge of a policy, in place since President George W. Bush’s administration, that led to U.S. duties on undervalued imports of about two dozen Chinese products. Companies that have benefited from duties include U.S. paper and steel manufacturers. Since 2007, the policy helped protect an estimated 80,000 U.S. jobs, Baucus and Thune said in a statement.

Duties in Jeopardy

The court ruling had put in jeopardy duties on tires, steel, aluminum, paper, chemicals and other imports valued at $4.7 billion a year, according to a legislative report by Bloomberg Government. The U.S. had issued 24 orders on the imports, mostly from China and Vietnam, according to the analysis.

China’s central government has “no prohibited subsidies provided to economic entities,” Chen said today in Beijing at a press briefing during the annual meeting of the National People’s Congress, according to a live English translation broadcast on China Central Television. He said China is a big country and there might be “problematic” subsidies at regional levels.

“The U.S. has been pointing fingers,” Chen said. Congress’s action is not consistent with U.S. laws and “it’s not in line with WTO rules,” he said.

House, Senate Sponsors

Republican Representatives Dave Camp of Michigan, chairman of the House Ways and Means Committee, and Kevin Brady of Texas, as well as Sander Levin of Michigan, the senior Democrat on the committee, and Jim McDermott, a Washington Democrat, co- sponsored the House version. The Senate version was sponsored by Senator Max Baucus, a Montana Democrat who leads the Finance Committee, and John Thune of South Dakota, the senior Republican on the committee’s trade panel.

Camp and Brady issued statements saying the legislation was compliant with U.S. obligations to the WTO.

The House and Senate have been riven in the past year by partisan battles over spending, which brought the U.S. to the brink of government shutdowns four times last year. Debate on steps to cut the deficit collapsed in November.

This year, Congress extended a payroll tax cut through December, though lawmakers in both parties say little else may get done besides bills funding federal agencies.

Public Contempt

The public’s contempt for Congress has grown amid the inactivity. Last month, the Gallup Poll registered the lowest- ever approval rating for Congress, with just 10 percent of Americans saying they approved of the job Congress is doing. That was down from 13 percent in a January poll and a previous low of 11 percent in December. The nationwide poll of 1,029 adults was conducted Feb. 2-5.

The Club for Growth, an anti-tax advocacy group based in Washington, opposes the House bill, saying it will hurt U.S. businesses and the nation’s trade relationship with China.

“These duties restrict economic liberty and are anti- growth,” the group said in a statement to lawmakers posted on its website, warning that it will hold them accountable for their votes. “We strongly urge members of Congress to defeat this proposal.”

The countervailing duties legislation also seeks to resolve a World Trade Organization determination in 2011 that said a method the Commerce Department uses to determine duty margins violates U.S. international trade obligations.

‘Unfairly Subsidized’

“It is critical to leveling the playing field for American employers and workers who face unfairly subsidized imports from countries like China.” Kirk said in an e-mailed statement.

In December, the U.S. Court of Appeals for the Federal Circuit ruled unanimously that Commerce needed action by Congress to set tariffs on subsidized goods from nations, such as China and Vietnam, that lack a domestic market. The three- judge panel upheld a U.S. Court of International Trade decision that declared illegal tariffs on Chinese tires.

Anti-dumping duties apply to goods sold overseas at or below the price in the home country. Countervailing duties aim to offset the benefits of government subsidies to industries.

The House bill is H.R. 4105.

To contact the reporters on this story: Eric Martin in Washington at emartin21@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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