Trade Remedy Legislation: Applying Countervailing Action to Nonmarket Economy Countries Page: 2 of 25
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Trade Remedy Legislation
Summary
Concern regarding the mounting U.S. trade deficit with China (which is designated a nonmarket
economy country according to U.S. trade laws), combined with China's refusal to allow its
exchange rate to float, has led some in Congress to introduce legislation proposing to make
countervailing duty laws applicable to China and other nonmarket economy countries. This
legislation seeks to provide for the assessment of additional duties on imports whose production
and/or importation are found to be subsidized by a public entity in their country of origin and are
injurious to a U.S. producer of similar merchandise. Antidumping, another kind of trade remedy
action, addresses products sold in the United States at less than their fair value (as defined by law)
in a similar manner. Although antidumping (AD) and countervailing duty (CVD) laws and
procedures generally parallel each other, CVD laws contain no specific provisions for
investigations on imports from nonmarket economy (NME) countries, while the AD statute does
provide such guidelines.
Initial administrative attempts in 1983 to apply countervailing remedies to allegedly subsidized
imports from several NME countries led to determinations by the International Trade
Administration (ITA) of the Department of Commerce (the U.S. agency charged with determining
the existence and extent of subsidies) that subsidies within the meaning of the countervailing law,
cannot be found in nonmarket economies. These ITA determinations were challenged in the U.S.
Court of International Trade (CIT), which held that they were "not in accordance with the law,"
reversed them, and remanded the cases to the ITA. On appeal, the U.S. Court of Appeals for the
Federal Circuit reversed, and reinstated the ITA's original determinations-thus affirming that the
ITA has the discretion not to apply the CVD law to NME countries.
The ITA has reevaluated this decision, at least with regard to China, arguably in response to
pressure from Congress. In a countervailing investigation on coated free sheet (CFS) paper, the
ITA partially reversed its position with regard to China, and on October 18, 2007 made a final
affirmative determination of subsidies, finding net countervailable subsidies ranging from 7.40 to
44.25 percent. Although the International Trade Commission made a negative determination of
injury in the investigation, since the ITA found in the course of its investigation that it was able to
identify subsidies in China, other industries are expected to pursue this course of action. As of this
writing, there are seven other active CVD investigations on products from China.
Legislation seeking to apply countervailing action to NME countries has been introduced in the
110th Congress. This legislation includes S. 364 (Rockefeller); H.R. 571 (Tancredo), H.R. 708
(English); H.R. 782 (Ryan/Hunter) H.R. 2942 (Ryan/Hunter) and related bill S. 796
(Bunning/Stabenow); H.R. 1229 (Davis/English) and related bills S. 974 (Collins/Bayh) and S.
1919 (Baucus, introduced August 1, 2007). The Bush Administration has also taken some recent
steps to address the issue.Congressional Research Service
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Jones, Vivian C. Trade Remedy Legislation: Applying Countervailing Action to Nonmarket Economy Countries, report, January 31, 2008; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc811533/m1/2/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.