Fair Trade or Protectionism? Trade Enforcement Measures Taken by the United States

Container ship © Fotolia/pitrs

Container ship © Fotolia/pitrs

That the United States – like many other countries – uses trade defense instruments to counter unfair competition is nothing new. But what is alarming right now is not only the rapid increase in the use of such instruments but also the justification for deploying them. This reflects the Trump administration’s deep skepticism towards free trade and multilateral institutions.

Over the past two decades, the United States has been the second largest initiator of trade defense instruments in the world after India. These include anti-dumping and countervailing measures to offset unfair competition and safeguard measures. The latter allow temporary import restrictions to give sectors a reprieve in international competition and allow structural adjustments. The fact that the United States uses trade defense measures is nothing new – even under President Barack Obama they were an important component of U.S. trade policy. Under President Trump, however, they are used even more frequently.

The Trump administration conducted 194 trade policy investigations against 37 countries, including 125 anti-dumping and 69 countervailing investigations (as of February 2020). In 155 cases, or 80 percent, trade policy measures were taken on the basis of these investigations.

China at the Forefront

Of the 37 countries that were subject to investigation (antidumping and countervailing), China came under suspicion most frequently – with 61 investigations. One of these 61 investigations was initiated by the government itself, the first time since 1985. Normally, investigations are conducted at the request of companies. 20 investigations were directed against India, 15 against South Korea. In addition, there were ten investigations against Canada, eight against Taiwan, and seven against Thailand. The steel sector was the most affected, with 76 investigations. Other investigations concerned fossil fuels, metals, resin, polyester, and silicon.

In addition, the Trump administration has so far initiated three safeguard investigations: one on washing machines, one on solar cells and modules, and one on crystalline silicon photovoltaic cells. These investigations are based on Section 201 of the Trade Act of 1974, which allows the United States to temporarily restrict imports if, due to unforeseen developments or as a result of obligations under the WTO GATT agreement, imports increase to such an extent that they cause or threaten to cause serious damage to domestic industry. In all three cases, measures in the form of safeguard measures were imposed.

Cases Against Germany

Imports from Germany were suspected in two cases: cold-drawn tubes and stainless-steel kegs. In the case of cold-drawn tubes, the Department of Commerce (DOC) ruled in April 2018 that German products were dumped (margin of 3.11 to 209.06 percent) on the U.S. market and thus imposed anti-dumping measures on these imports. In October 2019, the DOC concluded that German stainless-steel kegs were also dumped on the U.S. market (margin of 7.47 percent). Imported stainless steel kegs from Germany were thus also subject to anti-dumping measures. These measures are taken to offset the price advantage gained from dumping and to protect the domestic industry.

At Odds with Multilateral Trade Law?

Trade defense instruments are compatible with the WTO if used either to counteract unfair competition or to grant an industry a breathing space in which to undertake structural reform. Tariffs can also be imposed if national security, the environment, or the health of the general public is at risk. However, there is one important condition: the measures taken must be in accordance to WTO regulations. The numerous dispute settlement cases at the WTO delineate that this is not always the case. Donald Trump’s trade policy is threatening to undermine the rules-based multilateral trading system. To counter this threat, every effort must be made to strengthen the multilateral trading regime and convince the Trump administration of the importance of adhering to the principles of global free trade.