Obama Administration Proposes Steps to Tighten U.S. Trade Rules

Commerce Secretary Gary Locke
Commerce Secretary Gary Locke said the Obama administration “is committed to aggressively enforcing our trade laws to ensure a level playing field for U.S. companies and their workers." Photographer: Andrew Harrer/Bloomberg

The Obama administration, vowing to crack down on countries such as China that it says help subsidize exports of cheap goods to the U.S., introduced 14 measures to toughen enforcement of trade laws.

Proposals offered yesterday include changes to make it harder for individual companies to be excused from country-wide duties, adjustments in methods of anti-dumping calculations and alterations to how labor rates are calculated when determining if products are being sold at artificially low prices.

“Generally, this is targeted at China, and China will see it as such,” said David Spooner, a former Bush administration official who is now a trade lawyer with Squire Sanders in Washington and represented Chinese companies in a tariffs disputes. “The aim is to raise the price of goods from China.”

The U.S. Commerce Department developed the proposals to crack down on illegal import practices and require parties to pay the full amount of any duties, according to a statement. The process to adopt the plan, which the department said is especially aimed at countries where the government has control over markets, will begin later this year.

It is part of the administration’s effort to double exports in the next five years to spur job growth, a goal President Barack Obama set in his State of the Union speech in January. Doubling exports would help support 2 million new jobs, the administration said. The American Iron and Steel Institute said that plan won’t succeed “if we allow competitive U.S. manufacturers to be weakened or destroyed” by dumped and subsidized imports.

‘Important Move’

“This is a very important move on the part of the administration,” said Dan DiMicco, chief executive officer of Nucor Corp., the largest U.S. steelmaker. He said the U.S. also needs to resolve issues tied to the yuan because China’s currency is undervalued by as much as 60 percent.

“Before American manufacturers get out of bed in the morning, they’re already at a 40 to 60 percent disadvantage,” DiMicco said in a telephone interview. “As long as we continue to let them get away with it, they’ll keep doing it.”

DiMicco, a member of an administration advisory panel on manufacturing issues, said the proposals are consistent with recommendations from the group.

“China is now a market economy country and the Chinese enterprises conduct business with foreign enterprises in accordance with its obligation upon joining” the World Trade Organization, said Wang Baodong, a spokesman for the Chinese Embassy in Washington. “Foreign countries should not in any way set up obstacles to normal economic cooperation and trade between China and foreign enterprises.”

Duty Exemptions

The proposals would end the practice of letting individual foreign companies seek an exemption from extra duties if they show they weren’t dumping or receiving subsidies during a certain period. Under the plan, companies would have to wait for the normal country-wide expiration of the duties.

Also, importers would have pay a cash deposit to continue bringing products into the U.S. during an investigation, instead of being able to post a bond for the estimated duties owed. The department said that, in the past, that estimate was too low.

The measures will give U.S. companies “a more certain sense that the injury they believe they’ve had because of unfair trade practices can be addressed,” said Ronald Lorentzen, deputy assistant secretary for import administration, which enforces laws tied to unfair trade acts.

Some changes will align the U.S. with practices followed by other countries and deal with issues the department has seen in past cases, he said. Comment from the public will be sought before the changes take effect.

Wage Rate Decisions

Another proposal would alter how the department determines a country’s wage rate, which is used to calculate whether products are being sold in the U.S. at artificially low prices.

The proposals are designed to improve the effectiveness of the International Trade Administration, which investigates whether foreign companies exporting products to the U.S. are receiving unfair subsidies from their home countries or flooding U.S. markets to undercut American businesses.

“U.S. enterprises have been enjoying high rate of returns from their trade with and investment in China, and China will continue to work on further improving its commercial and investment environment for foreign enterprises,” said Wang, the embassy spokesman. “At the same time, we hope the U.S. side will remove obstacles to normal trade and investment activities of Chinese enterprises in the U.S.”

Exports, Employment

The Commerce Department estimated that American exports accounted for 7 percent of employment and one in three manufacturing jobs in 2008. Exports increased 17 percent in the first four months of 2010 from the same period a year earlier, the department said.

Last year, the ITA’s Import Administration began 34 anti-dumping and countervailing duty investigations, compared with 19 in 2008, the department said.

Senator Charles Schumer, a New York Democrat, and 14 colleagues in February said Chinese exporters should face stiffer U.S. tariffs to compensate for the advantage they get from the undervalued yuan, an issue that’s part of a dispute over glossy paper imports from China. Spooner said that the department probably will avoid the currency issue.

“Commerce will almost surely refuse to investigate Chinese currency as a subsidy and this announcement today is meant to take the political sting out of that,” Spooner said.

DiMicco said the administration has gone further than its two predecessors, Republican George W. Bush and Democrat Bill Clinton, in addressing some of the issues with China and needs to go further.

“They recognize there’s a massive manipulation going on, but they’re doing the same things the Bush and Clinton administrations did -- try to negotiate,” DiMicco said. “They need to enforce the rules and make sure people play by the rules or we will not be able to turn this around.”

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