November 15, 2000

November 15, 2000 | Commentary on Foreign Aid and Development

Tilting the Field on Trade

Thanks to Sen. Robert Byrd, America is inviting a trade war with Canada, Japan and other major U.S. trading partners-and putting U.S. jobs at risk.

The West Virginia lawmaker would no doubt bristle at the suggestion. After all, he merely added an amendment to an agriculture-spending bill recently signed by President Clinton. But the devil's in the details, and Byrd's amendment is already upsetting our foreign trading partners and casting a pall over the future of free trade.

The amendment changes America's "anti-dumping" laws, which use tariffs to protect U.S. industries from foreign competition that "dump" massive amounts of their products into the U.S. market, depress prices and push American industries out of business. Specifically, it would transfer the money raised through these tariffs from the U.S. Treasury to the businesses that requested the protection.

Byrd says he sponsored the amendment because "U.S. trade law is not intended to raise revenue for the general treasury." That may be true. But how can he miss the pro-tariff incentive he's dangling in front of American industries?

In practice, this legislation will simply encourage U.S. businesses to seek relief from foreign competition through higher tariffs. They already have an incentive to seek protection via U.S. anti-dumping laws because a favorable ruling makes imported goods and services less competitive. This windfall in revenues-amounting to approximately $200 million each year-will increase the protectionist tendencies of many U.S. businesses.

Byrd's action won't go unnoticed. When the United States indulges in protectionism, foreign countries respond in kind. The Rushford Report, a monthly business newsletter, notes that more than 130 U.S. companies have been investigated by foreign countries in recent years for alleged anti-dumping practices, and no doubt some of these investigations were lodged in retaliation for U.S. anti-dumping investigations.

And who ends up paying the price? Consumers and workers. Applying tariffs on raw materials like steel or wood drives up the price of imported materials and makes exporters less competitive on the world market. The less competitive exporters are, the more they need to fire workers to stay afloat.

Byrd's amendment also shows favoritism for the steel industry, a key business in his home state. Since the 1998 Asian financial crisis, which saw steel imports to the United States increase, the steel industry (which employs about 200,000 Americans) has aggressively petitioned for relief under American anti-dumping laws.

But what about the 8 million Americans who work in steel-using industries, from transportation to construction? According to trade expert Brink Lindsey, they outnumber steel-makers 40 to 1. Does this mean that for every one American who benefits from the law, 40 others must suffer? And let's not forget how U.S. consumers-who benefit from the lower prices that free trade brings to such products as automobiles, houses and major household appliances-would be affected.

Federal lawmakers may be ignorant of the bill's ramifications, but our trading partners aren't. (Indeed, it was largely the failure of U.S. policymakers to address anti-dumping laws that caused the Seattle trade talks to collapse last year.) The 11 countries that make up the European Union (EU), along with Japan and Canada, asked President Clinton to veto this bill, and they have been threatening to take action against America because of it.

The United States and the EU are already locked in a number of trade disputes over such issues as genetically modified livestock and export subsidies to U.S. firms. The Byrd amendment can only further harm trade relations with many of America's largest trading partners.

Worse, it shows the United States is willing to sacrifice the interests of consumers and exporters-and risk a trade war-to keep a few protected industries insulated from the rigors of competition. The price is too steep.

Aaron Schavey is a trade policy analyst at The Heritage Foundation, a Washington-based public policy institute.

About the Author

Aaron Schavey Policy Analyst
Finance and Accounting

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