In a mandated report delivered to Congress at the end of July, the Trump administration vows to aggressively combat what it calls “distortions” to the world economy created by China’s economic system, especially in international markets for steel and aluminum.
Outlining its enforcement priorities to the Senate Finance and House Ways and Means committees, the Office of the U.S. Trade Representative said its primary goal is “defending the ability of the Commerce Department to apply appropriate antidumping and countervailing duties to combat distortions caused by China’s non-market economy system and government subsidies that are injuring U.S. workers and industries.”
USTR contends that the key to ensuring Commerce maintains full trade remedy capabilities is to staunchly defend challenges against the use of them by the United States at the World Trade Organization.
Absent effective AD and CVD tools the U.S. will be unable to defend its workers and industry from aluminum and steel oversupply “due in large part to production from excessive and uneconomic capacity in China,” USTR states in the report. “This oversupply has caused severe market distortions, including the suppression of U.S. and global prices, and the displacement of U.S. exports in foreign markets.”
The report notes that out of the 31 challenges brought against the United States at the WTO over the past eight years, 19 have concerned AD and CVD actions, adding that increasingly, “foreign governments are also challenging U.S. laws and practices in addition to specific trade remedies orders related to specific products and countries.”
“Therefore, USTR will continue to aggressively defend all WTO challenges to U.S. trade remedy actions, including in the context of numerous ongoing disputes,” the report states.
In its report, USTR lists a slew of ongoing WTO disputes as potentially threatening Commerce’s ability to fully employ trade remedies, chief among them the cases China has filed recently against the United States and the European Union over their continued treatment of China as a non-market economy for the purposes of antidumping cases.
Designating China a “non-market economy” enables the U.S. and other trading partners to impose higher duties in retaliation for dumping goods at artificially low prices and unfairly subsidizing Chinese firms. Unsurprisingly, Beijing strenuously objects to this position and for the last two years has been pushing hard for China to be recognized as a market economy. (An informative explainer on this issue can be found here.)
The Trump administration’s tough stance on trade enforcement against China follows a deadlock at the bilateral Comprehensive Economic Dialogue in Washington last month, where negotiations by senior officials regarding a number of contentious trade issues only served to highlight seemingly irreconcilable differences between the two sides, particularly concerning Chinese steel exports and the massive U.S. trade deficit with China.
Although the Commerce Department has been investigating whether steel and aluminum imports represent a threat to national security, President Trump recently suggested that a decision to block steel imports on those grounds isn’t imminent because “we don’t want to do it at this moment” and then last week, Commerce Secretary Wilbur Ross told Congress that the review process had gotten bogged down in “complexity,” with no clear deadline for completion.