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Commerce Department refuses to investigate Chinese currency manipulations
Howard Richman, 9/5/2010

In February (Bipartisan group of fifteen senators call upon Commerce Department to investigate China's currency manipulations), fifteen senators wrote a letter to the Secretary of Commerce, asking him to investigate China's currency manipulations. This week they got their answer, "No."

Here's a selection from the Senators' February letter:

Our review of the 11 Commerce Department determinations not to investigate petitioners' allegations concerning China's currency manipulation suggests that the Department has prejudged the outcome of a subsidy investigation it has yet to do, rather than assessed the sufficiency of the allegation on the basis of "information reasonably available" to petitioners to determine whether to launch an investigation. This is troubling and suggests that the Department is treating allegations involving China's actions on currency differently than it has treated other allegations, including other currency-related allegations involving other countries.

Here's the reply they got, as reported by the China People's Daily:

U.S. Commerce Department announced on Tuesday its decision not to initiate investigation on allegations that China's currency practices constitute an unfair subsidy.

The currency allegations under review were made in the context of countervailing duties (CVD) investigations of two Chinese products -- aluminum extrusions and coated paper.

"Two allegations before it that China's currency practices constitute an unfair subsidy under U.S. countervailing duty law failed to meet the requirements for the initiation of an investigation," the Commerce Department said in a statement....

In the meantime, the Commerce Department threw the Senators two crumbs. People's Daily reports:

However, in a preliminary determination, the Commerce Department ruled that 514 million dollars of aluminum products imported from China in 2009 were unfairly subsidized. As a result, importers of Chinese aluminum extrusions will be required to post cash deposits or bonds at rates determined by the department... The Commerce Department is currently scheduled to make its final determination in this case in November.

The move came days after the Commerce Department announced a package of 14 proposals to strengthen trade remedy measures. These steps aim to support President Barrack Obama's National Export Initiative (NEI), which aims to double exports in the next five years and support the creation of several million new jobs.

Here are the most important of the fourteen measures announced by the Commerce Department in an August 26 press release. They are designed to strengthen its Anti-Dumping and Counter-Vailing Duty investigations:

  • Currently, individual companies from a foreign country were excused from AD/CVD duties by demonstrating that they were not dumping or receiving subsidies for a certain period of time. The new proposal would allow for companies to be removed from the process only upon the normal country-wide expiration of those duties.
  • Starting as early as when Commerce makes a preliminary determination on an AD/CVD investigation, a new proposed measure will require importers to post cash deposits rather than bonds to facilitate entry of their goods and services into the United States. Currently, once an initial affirmative determination is made in an AD/CVD case, importers are able to post a bond in the amount of the estimated duties owed. However, experience has shown that in certain circumstances, the amount of the bond proved inadequate to cover the ultimate AD/CVD liability.  Under this proposal, Commerce will ensure that importers will bear full responsibility for any future duties.
  • Additionally, to address a range of methodological issues unique to antidumping (AD) proceedings involving non-market economy countries, Commerce is proposing updates to its practice that will more closely capture the realities of how entities function in a non-market economy.  In this context, Commerce is proposing to adjust its antidumping calculation to account for export taxes or value added taxes included in the U.S. price that are not rebated upon export, just as in cases involving market economy countries.  Where such taxes are present, this proposed change would result in an increase in antidumping margins. 

The effects of these Commerce Department measures will be negligle. They will help those politically-powerful industries who are able to mount Commerce suits to get some relief, but will do little to help the trade deficit. If these Senators want to do something that would end mercantilism, save the blue-collar middle class, and jump-start the U.S. economy, they could pass the scaled tariff and then override the President's veto.

Note. The Senators who signed the letter were: Charles E. Schumer (D-NY), Lindsey Graham (R-SC), Robert Byrd (D-WV), Carl Levin (D-MI), Barbara Mikulski (D-MD), Russ Feingold (D-WI), Susan Collins (R-ME), Olympia Snowe (R-ME), Sam Brownback (R-KS), Jim Bunning (R-KY), Debbie Stabenow (D-MI), Ben Cardin (D-MD), Sherrod Brown (D-OH), Bob Casey (D-PA) and Arlen Specter (D-PA).

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