- The Washington Times - Wednesday, December 21, 2005

The World Trade Organization is credited with bringing American-style rule of law to the once jungle-like international trade system. Yet Congress is about to deprive U.S. producers of a bedrock protection provided by our legal system, which entitles victims of wrongful injury to compensation from the guilty.

The target: a U.S. statute called the Continued Dumping and Subsidy Offset Act (CDSOA), which distributes duties collected on illegally dumped and subsidized imports to the industries harmed by them. CDSOA is informally known as the Byrd Amendment, after its sponsor, West Virginia Democratic Sen. Robert Byrd.

Last weekend, congressional conferees agreed to repeal it as of Oct. 1, 2007, as part of budget reconciliation talks having nothing to do with trade policy. The House has now narrowly endorsed this move, but the Senate, which strongly upheld Byrd in a 71-20 vote last week, has yet to act finally.

Byrd’s opponents condemn it as a government giveaway to uncompetitive American companies, and observe the WTO declared Byrd illegal in 2003. Yet the measure has helped maintain American production capacity and jobs threatened by foreign rivals that are not superior, but subsidized.

Since no current WTO rules explicitly outlaw such duty distribution — as the Bush administration has noted — it’s clear that the organization’s anti-Byrd rulings simply reflect the economic interests of the numerous WTO member states that are relentlessly predatory traders, not sound jurisprudence.

The dangers to American production from subsidization and dumping are beyond reasonable doubt. After all, foreign government payments are usually needed to enable exporters to price export goods below their production costs. These supports usually come from governments unable or unwilling to generate adequate demand at home for their output — because of sluggish growth, low wages, or mercantilist national economic strategies. Therefore, these countries are highly dependent on maximizing overseas sales to create and maintain wealth and jobs.

Tolerating such subsidization and dumping would allow these countries to export their unemployment and lower wages to America along with their goods. In addition, it would penalize well-run U.S. firms for reasons totally unrelated to free market forces. Just as important, it would encourage more such government interventionism, and move the world further away from sound trade liberalization and rules-based economic freedom, not closer to it.

Indeed, the dangers of such predatory trade are so widely understood that anti-dumping laws have been on America’s books since 1921, and injurious dumping is “condemned” by the world trade law that the WTO is supposed to administer.

The Byrd Amendment supports realistic trade liberalization in two necessary and judiciously applied ways entirely consistent with the American system of justice — and plain common sense. First, the measure recognizes that some predatory traders are so stubborn that their transgressions require special responses. Second, Byrd recognizes that in these cases, the best way to right the wrong and punish the guilty is to award the duties collected by Customs directly to the affected U.S. industries and not to the government — just like the result from victory in a U.S. tort law case.

The reasoning, moreover, draws on venerable American and Common Law principles: Channeling the duties to victimized U.S. industries in effect forces the lawbreakers to help strengthen their targets as long as the lawbreaking continues. The price the offenders pay is further increased by the fact Byrd distribution recipients often spend the duties on productive assets that will of course be used against them.

Could there be a better deterrent to economic lawbreaking? Indeed, Byrd’s effectiveness no doubt explains the sharp foreign complaints it has elicited.

Much more puzzling are domestic criticisms. The measure’s opponents, for example, claim only a few large corporations benefit. But according to a September, 2005 General Accounting Office report, during Byrd’s first four years on the books — 2001-2004 — 770 companies in 48 states received payments. They ranged from companies in the bearings, candle, lumber, and steel industries to family-owned concerns producing garlic, raspberries and honey. Indeed, Byrd payments are a major piece of the de facto post-Katrina social safety net for small-scale crawfish producers devastated by the hurricane.

Opponents claim the measure costs consumers and taxpayers millions of dollars. Yet the existence of any Byrd payments is evidence imports continue to be priced below fair value — i.e., prices have not gone up.

Opponents claim Byrd encourages frivolous trade law complaints. But the trade law filings have declined to their lowest in years, as documented by the House Appropriations Committee and the Commerce Department.

Opponents claim that since the WTO declared Byrd illegal, foreign countries have imposed large retaliatory tariffs that outweigh any of Byrd’s benefits. Yet the tariffs so far have equaled less than half the average annual distributions made under Byrd between 2001 and 2004, and cover only 0.02 percent of U.S. exports to the retaliating countries.

Finally, opponents claim WTO law requires the United States to repeal Byrd immediately. Yet even if Byrd were WTO-illegal, all members are entitled to negotiate solutions to such disputes. And the current round of global trade talks provides the perfect opportunity. Byrd gives America a valuable bargaining chip for obtaining equally valuable trade concessions. Why are the critics seeking prematurely and needlessly to weaken Washington’s hand?

Clearly, some Byrd opponents are economic utopians who simply view all U.S. trade laws as transparent protectionism — even though mountains of evidence compiled over decades in trade law cases reveal a wide and thick web of anticompetitive practices around the world that harm U.S. producers.

Other opponents represent outsourcing multinational companies that supply the U.S. market from foreign factories that benefit from the subsidies targeted by Byrd.

Yet if the utopians want to disarm American businesses and workers unilaterally, and if some multinationals want to keep using foreign subsidies to displace American production and jobs, they should say so openly. Now it’s up to the Senate to draw a line in the sand for deserving American producers and tell the House there will be no budget unless the Byrd Amendment is reinstated.

Alan Tonelson, a research fellow with the U.S. Business and Industry Council Educational Foundation, writes for the council’s Web site and is author of “The Race to the Bottom” (Perseus Books).



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