June 13, 2005
By Edwin J. Feulner, Ph.D.
Have you heard? There's a war on.
No, not the war against terror. Everyone's heard of that. But we're
also in the midst of a trade war -- and chances are it's affecting
Last month, Canada slapped a 15 percent tariff on several American
exports, including farm products and cigarettes. The European Union
has applied tariffs on our exported paper products and some
machinery. These foreign-imposed mark-ups make it tougher for
American companies to sell their goods and remain in
Unfortunately, it's our own fault. Our trading partners didn't fire
the first shot in this war. They're simply responding to an obscure
provision of our trade law known as the Byrd Amendment.
Enacted in 2000, the Byrd Amendment (named for Sen. Robert Byrd,
D-W.Va.) supposedly is designed to prevent other countries from
"dumping" -- that is, deliberately selling their products below
cost in an effort to run American companies out of business. But
the law actually sets up a perverse incentive: If a company claims
it is being harmed by foreign competitors, it can ask the Commerce
Department for relief. So, instead of encouraging free trade, this
measure does just the opposite.
That's because, if the government decides dumping has occurred, it
collects damages and pays them to the affected companies. In other
words, our federal government does the legal work and companies
collect the cash.
And if the government can't prove that dumping has occurred, it
sends a survey to the companies in the "injured" industry asking if
they think there's been dumping. If they do, tariffs are levied and
corporate payouts begin. On each survey is a box each firm may
check if it wants to be included on the payout list. In short,
because of the Byrd Amendment, the U.S. government is inviting
collusion among firms to "prove" dumping has occurred.
The payouts can be huge. All told, the government collected $284
million last year and sent it on to various companies. One steel
company took in $44.4 million in payments. About 40 companies
pocketed more than $1 million each. And, not surprisingly, the
number of cases filed is skyrocketing. There were only 14
anti-dumping cases in 1995. In the last two years, 72 new cases
have been filed.
Of course, the rest of the world has taken note of our unfair
trade practices. Eleven countries, including important trade
partners such as the E.U., Australia, Japan and South Korea, have
filed complaints with the World Trade Organization. And they won
The WTO first ruled against the Byrd Amendment in January 2003,
finding that it provided an unfair subsidy to American
manufacturers. Then-U.S. Trade Representative Robert Zoellick
promised to comply with the WTO's decision, but in the more than
two years since, the United States has not done so. So our allies
are using sanctions, in an attempt to make us play by the rules we
A trade war is always bad news. In the years after World War II,
the United States became the most powerful economy in history by
encouraging free trade. Instead of using our government's power to
keep imports out, we allowed them in. As economic freedom swept the
globe, it helped dozens of countries become wealthy, and no country
reaped bigger benefits than we did.
Now, we're on the wrong side, attempting to sabotage free trade
rather than encourage it. Ironically, while the law was supposedly
designed to protect domestic interests, American consumers are the
real losers in all this. We pay twice for the Byrd Amendment: Once
when government lawyers prosecute dumping cases and again when the
prices we pay for goods go up.
It's time to end this trade war. Congress should repeal the Byrd
Feulner is president of the Heritage
Have you heard? There's a war on. No, not the war against terror. Everyone's heard of that.
Edwin J. Feulner, Ph.D.
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