January 19th, 2017
(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: firstname.lastname@example.org
Mark Wu argues, correctly, that the WTO accession agreement provided a set of provisions that were designed to help manage the risks associated with China’s integration: the “non-market economy” provision, which made it easier for U.S. firms to bring dumping cases against China; and the “special safeguards” provision, which lowered the standard required for imposing temporary tariffs against a surge in imports from China for the twelve years after China’s WTO accession.
The non-market economy provision was certainly used, notably by the steel industry.
The special safeguards provision (section 421) wasn’t used much at all.
In no small part, this is because U.S. and European firms benefited from making use of Chinese production to meet global demand. The interests of U.S. firms and U.S. labor were not always aligned.
But 421 safeguards also were not used because the remedy if a function of discretionary decisions made by the executive branch, and the Bush 43 administration made it clear it wasn’t going to hand out safeguards easily. Robert Lighthizer, back in 2010:
“Between 2002 and 2005, the U.S. International Trade Commission (“ITC”) heard four cases in which it determined that the requirements for a China-specific safeguard had been met. In every case, however, the Bush Administration exercised its discretion to deny relief – effectively rendering Section 421 a dead letter. Indeed, after 2005 U.S. companies stopped even applying for safeguard measures from the Bush Administration. Thus, for much of the time that Section 421 was supposed to be available to U.S. companies, the U.S. government refused to provide any relief”
With the benefit of hindsight, I think it was a mistake not to make greater use of the 421 safeguard provision in the years following China’s WTO entry.** There were surges of imports left and right from 2002 to 2007 (and additional surges in imports of machinery in particular from 2010 to 2014). These surges had a material impact on many manufacturing dependent communities, especially in the American Midwest and Southeast (and in some smaller towns on the west coast that were part of the U.S. tech manufacturing sector). The threat of injury should not have been hard to show.
I also think there was a “421” based option—and an option that was within the agreed accession rules—that could have been used to respond to the initial China shock more effectively. The U.S. could have signaled that so long as China was intervening heavily to hold its currency down, it would be open to a ton of 421 safeguards cases—and hand out real sanctions in response.*** This would not have required Congressional action, nor would it have created a broader precedent that might be used against other countries that intervene to hold their currency down—unlike the various incarnations of the Schumer legislation. Some say that China would never have responded to public pressure on its currency, but I suspect that it would have found a way to shift its policy in the face of real sanctions that hindered China’s ability to export. And politically, the U.S. government would have put itself squarely on the side of those adversely affected by China’s policy of supporting its exports while hindering others’ exports into China.****