A federal appellate court has ruled that the United States cannot place anti-dumping and countervailing duties on Chinese goods that benefit from export subsidies. The ruling is based on the fact that the United States has considered China a “nonmarket” economy in some cases, and it is considered impossible to determine the damage from export subsidies in a nonmarket economy because subsidies are so rampant. This ruling will hurt U.S. businesses, and has resulted in renewed calls for Congress to pass legislation to counter illegal Chinese practices.

The case was brought in U.S. courts over the use of the U.S. anti-subsidy law against Chinese-made off-road and agricultural tires. In some cases, the United States chooses to recognize China as a market economy, under which it would be legal to apply anti-dumping and countervailing duties, because market economies cannot legally subsidize their industries under international trade law. But because the United States sometimes treats China as a nonmarket economy, the court ruled that using the anti-subsidy law against Chinese imports is illegal in all cases.

Groups such as the United Steelworkers have criticized the ruling, saying that it “undermines the integrity of our trade laws and the ability to address Chinese unfair and predatory trade practices. “ The ruling has also caused Senator Sherrod Brown (D-OH) to call for Congress to pass legislation to address China’s actions that hurt American businesses.

One of the two bills that would do this is the Currency Exchange and Oversight Reform Act, which passed the Senate with bipartisan support earlier this year. The bill has since stalled in the House after the Republican leadership refused to bring it to a vote. The bill would allow the U.S. to treat Chinese currency manipulation as an illegal subsidy and take appropriate action to counter it.

Brown also plans to introduce a bill that will directly address this week’s court ruling.  The bill will allow the U.S. to place tariffs and duties on products from any country that uses export subsidies, regardless of their status as market or nonmarket economies.

The U.S. has allowed China to take advantage of our lack of trade barriers for too long. The U.S. has largely played by the WTO’s rules while China has continued to subsidize its industries. This latest ruling is a blow to our ability to protect our industries, and Congress should take action to remedy the situation.

Print PDF