Trade ‘rout’: CVD act passed by US Congress fuels rivalry with China

08. March 2012 | Industry & Suppliers, Markets & Trends, Trade cases | By:  Cheryl Kaften

Capitalism prevailed over party politics this week, as the U.S. Congress moved swiftly to pass legislation that would enable the Department of Commerce to continue applying countervailing duty (CVD) law to non-market economies (NMEs), such as China and Vietnam.

The next stop for the Countervailing Duty Act is the Oval Office, where President Barack Obama is certain to sign it into law

The bill also would free the Commerce Department to go forward with its 120-day investigation of the supposedly sleazy trade practices of Chinese manufacturers of crystalline silicon photovoltaic cells. In a four-volume petition submitted in October 2011, SolarWorld Industries America, a subsidiary of Bonn-based SolarWorld AG, and its allies on the Coalition for American Solar Manufacturing accused the Chinese solar industry of receiving "a large number of subsidies and preferential treatment," and of "inundating the U.S. market with solar cells and panels at dumped prices to systematically secure a higher market share."

The Commerce Department finding in the Chinese solar CVD case is expected to be announced on March 20; the target date for resolution of the related anti-dumping petition remains March 28.

The next stop for the Countervailing Duty Act is the Oval Office, where President Barack Obama is certain to sign it into law, sooner rather than later. U.S. Trade Representative Ron Kirk said that the Obama administration had helped to craft the measure.

The Senate version, which passed on Monday, was sponsored by Senator Max Baucus (D-Montana), who leads the Finance Committee; and John Thune of South Dakota, the senior Republication on the Subcommittee on International Trade. "China doesn’t get a free pass to violate the rules at the expense of American jobs," Baucus commented.

In the House – where H.R. 4105 was passed on Tuesday by a vote of 370 to 39 – the bipartisan bandwagon was driven by Representatives Dave Camp  (R-Michigan), chairman of the House Ways and Means Committee, and Kevin Brady (R-Texas); as well as Sander Levin (D-Michigan) and Jim McDermott(D-Washington).

"If you don’t believe the American government should pick winners and losers in the marketplace, then you certainly don’t support allowing the Chinese government to do the same," said Brady.

The legislation was urgently required in order to change an unofficial government policy into U.S. law. Since 2007, during the administration of former President George W. Bush (2001–2009), the United States has imposed duties on the undervalued imports of about two dozen Chinese products. During the past five years, the relatively informal policy has helped to protect an estimated 80,000 American jobs, Baucus and Thune said in a statement.

However, in a unanimous decision on December 19 in the case, GPX v. United States, the U.S. Court of Appeals for the Federal Circuit found that the Commerce Department needed action by Congress to set tariffs on subsidized goods from "non-market" economies – nations in which government intervention is important in allocating goods and resources, and determining prices.

The new legislation also was needed to address a problematic World Trade Organization (WTO) finding, in 2011,  that there may be "double remedies" in situations where countervailing duties are applied to NME exports at the same time that antidumping duties are levied. 

Both domestically and abroad, reaction following the passage of the bill was passionate and predictable. China’s Minister of Commerce Chen Deming told reporters that the "United States has been pointing fingers," and that the action of the Congress is inconsistent with American law, as well as in violation of WTO rules.

China’s central government has "no prohibited subsidies provided to economic entities," Chen said on Wednesday in Beijing at a press briefing during the annual meeting of the National People’s Congress, according to a live English translation broadcast on China Central Television. He said China is a big country and there might be "problematic" subsidies at regional levels.

Secretary John Bryson, Department of Commerce, disagreed. "The action taken by Congress today is a significant win for American businesses and workers," he said, adding, "The passage of this legislation will prevent more than 80 companies, both large and small, from across 38 states and employing tens of thousands of manufacturing workers, from being harmed by unfair trade subsidies. I truly appreciate the leadership in both the House and the Senate for working with us to ensure that the Commerce Department maintains this critical tool to protect American businesses from subsidized imports, so that they can build things here and sell them everywhere."


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