Trade Compliance

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Do As I Say, Not As I Do: The Sweet Hypocrisy of U.S. Trade Protection

Posted August 29, 2014

Dan Ikenson, a trade policy director at the libertarian Cato Institute and co-author of Antidumping Exposed: The Devilish Details of Unfair Trade Law wrote a wickedly brilliant article last month in Forbes Magazine concerning the hypocrisy of U.S. trade policy when it comes to U.S. lawmakers and businesses complaining about other countries not abiding by global trade rules, but ignoring America’s own egregious track-record of protectionism, anti-dumping abuse, and WTO violations, which taken together, arguably make it “the world’s primary trade scofflaw.”
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The article focused on the curious case of alleged dumping by South Korean exporters of “Oil Country Tubular Goods” (OCTG) to demonstrate how, according to Ikenson, the levers of antidumping administration within the U.S. Commerce Department have essentially been “captured” by domestic steel producers to obtain what is in effect illegal trade protection from foreign competition.

“Politicians and protectionists have been served by the enduring myth that the United States is the most open market in the world and its government earnestly adheres to the rules of trade, while others, intent on exploiting U.S. naivety, cheat and pursue state-sponsored mercantilism,” he writes. In practice however, the U.S. frequently demonstrates an “above-the-rules” attitude that, says Ikenson, is perhaps best revealed by “the fact that no other WTO member is out of compliance (i.e., has not brought its offending actions, laws, policies or procedures into conformity with its WTO commitments) on more matters or has been so for a longer duration than the United States.”

In another case of reality asserting itself against the myth of the U.S. being, as Ikenson sarcastically puts it, “some upstanding citizen fighting for trade justice and the proverbial level playing field,” it was announced yesterday that Department of Commerce will be imposing new duties on Mexican sugar imports. A preliminary determination charges that government subsidies are giving Mexico’s sugar mills (many of which are state-owned) an unfair trade advantage over U.S. producers. A spokesman for the American Sugar Alliance, praised the Commerce Department’s action saying that its finding “validates our claim that the flood of Mexican sugar, which is harming America’s sugar producers and workers, is subsidized by the Mexican government.”

Accusing Mexican subsidies of distorting the sugar trade is a laughable notion however given that the U.S. sugar industry is one of the most heavily protected and subsidized in the world – and has been since 1789 when Congress enacted the first tariff against foreign-produced sugar. Today, the industry not only enjoys generous government price support through preferential loan agreements, but also highly restrictive domestic market controls and a protective regime of import tariff-rate quotas. Domestic policies strongly supported by the industry have long been criticized by many for wildly distorting the market and artificially inflating the price of sugar (on average 3X the world price) at a cost to the American economy according to some estimates of almost $2 billion per year.

Michael Froman, the chief trade official for the United States, has been a vocal champion of widespread trade liberalization and more open world markets. In his role as Ambassador to the WTO and leader of Washington’s push to negotiate two massive free-trade deals, he has not been shy about lecturing other countries about the need to abandon their protectionist trade policies and even at times scolding them for not doing enough to cut domestic subsidies or eliminate trade barriers that restrict market access. Froman’s advocacy in this respect certainly can’t be helped much however by policies and actions of his own administration that effectively makes a mockery of his free trade rhetoric.