The most important point is that the US China Trade War is expanding and has now become a universal trade war. - Bill Perry, US/China Trade War
I’ve been reading Thucydides’ The History of the Peloponnesian War (431 B.C.E.) and researching the U.S./China debate topic. Thucydides mentions trade issues between Greek city-states, along with escalating passions following political and military disputes.
Graham Allison’s article “The Thucydides Trap: Are the U.S. and China Headed for War?” (The Atlantic, September 24, 2015) features an ominous subtitle: “In 12 of 16 past cases in which a rising power has confronted a ruling power, the result has been bloodshed.” Allison argues:
The defining question about global order for this generation is whether China and the United States can escape Thucydides’s Trap. The Greek historian’s metaphor reminds us of the attendant dangers when a rising power rivals a ruling power—as Athens challenged Sparta in ancient Greece, or as Germany did Britain a century ago. Most such contests have ended badly, often for both nations, a team of mine at the Harvard Belfer Center for Science and International Affairs has concluded after analyzing the historical record. In 12 of 16 cases over the past 500 years, the result was war. When the parties avoided war, it required huge, painful adjustments in attitudes and actions on the part not just of the challenger but also the challenged.
In “Thucydides’s trap has been sprung in the Pacific” (Financial Times, August 21, 2012), Graham Allison made a similar claim:
The defining question about global order in the decades ahead will be: can China and the US escape Thucydides’s trap? The historian’s metaphor reminds us of the dangers two parties face when a rising power rivals a ruling power – as Athens did in 5th century BC and Germany did at the end of the 19th century. Most such challenges have ended in war. Peaceful cases required huge adjustments in the attitudes and actions of the governments and the societies of both countries involved.
Classical Athens was the centre of civilisation. Philosophy, history, drama, architecture, democracy – all beyond anything previously imagined. This dramatic rise shocked Sparta, the established land power on the Peloponnese. Fear compelled its leaders to respond. Threat and counter-threat produced competition, then confrontation and finally conflict. At the end of 30 years of war, both states had been destroyed.
In “Superpower and Upstart: Sometimes It Ends Well,” (New York Times, January 22, 2011), David Sanger compares the U.K. to U.S. global power transition (peaceful) to the predicted U.S./ China power transition in the Pacific:
Just ask the British, who a century ago were struggling to come to terms with the erosion of their status as the world’s No. 1 empire. It didn’t help that they were being upstaged by a former colony that had turned into an upstart sea-power…
Or ask Thucydides… “What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta.”…
Both Mr. Hu and President Obama seemed desperate to avoid what Graham Allison of Harvard University has labeled “the Thucydides Trap” – that deadly combination of calculation and emotion that, over the years, can turn healthy rivalry into antagonism or worse.
After discussing events surrounding Chinese President Hu Jintao’s meetings during a 2011 visit to the U.S., Sanger concludes:
Meanwhile, Thucydides might be appalled at the nationalistic talk that resounds in both countries. In Chinese newspapers these days, it’s hard to avoid accounts of “American decline.” Meanwhile, some new members of Congress talk lightly of cutting off Chinese access to the American market — as if that could happen in today’s global economy.
In both languages, that’s fear talking.
Mostly open markets, trade, and international investment explains why America’s rise to global economic power in the 19th Century helped rather than endangered UK and European companies, investors, or consumers. British and other European firms and investors earned profits from supplying capital for expanding U.S. railroads, manufacturing, nature resource extraction, and agriculture (for example, see this history of Balfour-Guthrie: “A British Firm on the American West Coast, 1869-1914* The Business History Review, Vol. 37, No. 4 (Winter, 1963), pp. 392-415)
Through the primaries and Presidential campaign, anti-China claims and threats seem everywhere. Yet the reality, as previous posts have noted, shows U.S. manufacturing is robust, with output expanding 40% over the last 20 years, the period of the North American Free Trade Agreement (NAFTA) and China joining the World Trade Organization (WTO). (See also: Globalization isn’t killing factory jobs. Trade is actually why manufacturing is up 40%)
Automation is the major reason the number of U.S. manufacturing jobs dropped over this period. And far from challenging the U.S., manufacturers and workers in China have been integrated into complex and cost-effective supply-chain networks, benefiting U.S., other Asian, and European manufacturers as well as consumers.
Still, not everyone benefits from rising global trade and investment. Some labor unions and domestic firms and industries have declined, and blame China. With the slow recovery since the 2008-2009 “great recession” some manufacturers and trade associations have pushed their governments for domestic subsidies and restrictions on imports.
For an overview of recent trade U.S./China trade disputes see Bill Perry’s “UNIVERSAL TRADE WAR, TPP IN LAME DUCK, SPOTTING POTENTIAL AD CASES, CUSTOMS, FALSE CLAIMS ACT, VITAMIN C ANTITRUST, IP AND 337″ (US/China Trade War, October 7, 2016), which spells out the downward spiral:
The most important point is that the US China Trade War is expanding and has now become a universal trade war. Although the US continues to bring numerous antidumping (AD) and countervailing duty (CVD) cases against China, the Chinese government is now bringing and will bring numerous AD and CVD cases against the US.
In the recent Chinese antidumping case against Distiller Grains from the US, the Chinese government has levied a 33% rate against $1.6 billion in US exports to China. There are rumors that the Chinese government may soon bring AD and CVD cases targeting $15 billion in US exports of soybeans to China.
Meanwhile numerous countries have adopted their own AD and CVD laws modeled on the US and EU and are bringing cases not only against China, but also against the US.
The only recent trade developments that would break the retaliation cycle are the Trans Pacific Partnership (TPP) and the TTIP deal with Europe and both trade agreements are in serious trouble.
Debaters should be familiar with arguments for increasing as well as reducing trade restrictions with China. Economist Don Boudreaux explains the case for more open trade in this April 20 2015 Mercatus Center post “The Benefits of Free Trade: Addressing Key Myths.”
Economist Peter Navarro (an advisor to Donald Trump), advocates increased trade barriers with China. See “Trump Economic Advisers Denounce Trade Deals in Theory, Practice,” (Bloomberg, August 3, 2016).
“Spend a few hours every week studying American history, human nature, and economic theory. Start with “Economics in One Lesson.” Then try Keynes. Then Hayek. Then Marx. Then Hegel. Develop a worldview that you can articulate as well as defend. Test your theory with people who disagree with you. Debate. Argue. Adjust your philosophy as necessary. Then, when the next election comes around, cast a vote for the candidate whose worldview seems most in line with your own.”
Henry Hazlitt’s Economics in One Lesson, long popular in high school debate classes, is online here from the Foundation for Economic Education.
Henry Hazlitt, probably this century’s greatest journalistic expositor of the economic way of thinking wrote: “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
He went on to say that nine-tenths of the economic fallacies that work harm in the world today are the result of ignoring this lesson. While Hazlitt’s Lesson is not exactly a separate economic principle, it is a form of mental discipline that must be exercised when constructing or analyzing policy…. protective tariffs and quotas harm American consumers and workers… In each case the counter-intuitive result is found by consistent application of Hazlitt’s Lesson: look not just to the immediate effects on one group, but the long run effects on all groups.
So, lots for debaters to ponder. — Greg Rehmke, Debate Central
Chinese firms marketing goods and services in the United States focus on customers and the cities they live in, rather than Congress, the President, or the Department of Commerce.
Both Americans and foreign businesses benefit from known and predictable legal institutions protecting property rights and contracts. Both the Chinese and U.S. central governments disrupt and distort trade relations between U.S. and Chinese firms and consumers.
U.S. firms investing in and marketing goods and services in China work with provincial and cities leaders and with local businesses. If local government officials have a reputation for corruption or incompetence, international businesses invest instead in other regions with better governance.
Similarly, economic growth is strongest in those U.S. cities and states with less corrupt and heavy-handed government.
Though many politicians and pundits blame China for America’s slow recovery since the 2008-2009 “Great Recession,” Texas and other states with lower taxes and lighter regulation have flourished. It is the high-tax states where the recovery has been unusually slow.
Texas, Florida, and other states across the south have seen steady economic growth, seemingly unhampered by imports from China. (This April 29, 2015 Brookings Institution article and paper looks at recent research on the influence of tax policy and state-level economic growth.)
In “The Texas Miracle Isn’t All About Oil” (The Federalist, June 9, 2016), Vance Ginn writes:
Since the last national recession started in December 2007, Texas has created 36 percent of all civilian jobs added nationwide in a state with less than 10 percent of the country’s population.
Just as Dallas/Ft. Worth, Houston, Austin, and San Antonio lead the robust Texas economy (see “Fastest growing U.S. cities: Texas is king“), so in China it is dynamic major cities, not the central government, that are engaging the world economy.
In “China’s Key Cities: From Local Places to Global Players” (December 1, 2015), Xiangming Chen notes Shanghai (population estimate: 24 million!) is “the country’s financial and trade centre, largest port… and gateway to China’s huge domestic market.” Xiangming continues:
Besides Shanghai, a variety of other cities have become more important for China, and the world economy, for that matter. A number of these cities are well known for their significant historic and contemporary economic and cultural roles such as Guangzhou and Xi’an. Other cities have risen from unknown origins to prominent economic centres like Shenzhen.
In “Globalization Goes National,” (BloombergView, September 15, 2016) economist Tyler Cowen writes:
The Chinese economy has had a tendency to cluster around megacities, such as the Beijing-Tianjen-Hebei, Shanghai-Nanjing, or Guangzhou/Shenzhen/Hong Kong clusters. In the past, a Chinese port might have had better trade connections to Korea or California than to many parts of the Chinese interior. But these days the story in China is the rise and extension of national brands. The internet is bringing the whole country’s economy together through Alibaba, WeChat, and other services that ease the online purchase, shipping, and advertising of goods at the national level.
Cowen argues that as Chinese brands improve, Chinese consumers purchase more locally and this may register as a decrease in globalization:
The more economically integrated China becomes, the more it may retreat from some kinds of global trade. If a Chinese customer can buy a smartphone or pharmaceutical from the domestic market, she may stop looking for foreign imports. That will register statistically as a decline in globalization, but actually it is an increase in efficient economic integration. Some parts of the Chinese economy were prematurely hyper-globalized at the same time domestic economic integration lagged, and now that state of affairs is being remedied.
As people in China continue to prosper, demand for name-brand U.S. goods and services will also continue to grow. Americans might not think of McDonald’s or Pizza Hut as high-end dining, for hundreds of millions of Chinese just joining middle income levels, these American restaurants will long be popular.
By 2022, our research suggests, more than 75 percent of China’s urban consumers will earn 60,000 to 229,000 renminbi ($9,000 to $34,000) a year.
In purchasing-power-parity terms, that range is between the average income of Brazil and Italy. Just 4 percent of urban Chinese households were within it in 2000—but 68 percent were in 2012.
China’s middle class is already bigger than the U.S. middle class (“China has a bigger middle class than America,” (CNN Money, October 14, 2015)
Still, China has a long way to go, and is still both a developed and developing economy. “Here’s What China’s Middle Classes Really Earn — and Spend,” (Bloomberg, March 9, 2016), reports:
China’s average annual wage was 56,360 yuan ($8,655) in 2014, and Goldman Sachs estimates that 387 million rural workers — half the working population — earn about $2,000 a year.
The average Chinese consumer spends $7 a day, according to Goldman Sachs. Food and clothing make up nearly half of all personal spending, with 9.2 percent allocated to recreational activities like travel, dining out, sports and video games. The average American spends $97 a day, 17.3 percent of it on recreation.
Though U.S. politicians often blame Chinese firms for U.S. job losses and income stagnation, and paint China as an opponent of the U.S., Chinese consumers with fast-growing disposable income mean surging sales of international goods and services.
New trade barriers on Chinese goods would not only disrupt global supply chains key to U.S. manufacturing, but would also disrupt demand of U.S. goods and services in China.
Christopher Lingle’s article in the South China Post, “China must stop its destructive market interventions while it can,” (September 27 2016), highlights the damage caused by the Chinese government’s continuing interventions in renminbi exchange markets. Lingle says:
China’s authorities can promote the health of its own economy by abandoning an exchange-rate obsession over the value of the renminbi against the dollar and intervening less, not more. It turns out the primary villain in the tale is China’s dependence on export-led development that is the basis for continuing controls over exchange rates and capital flows.
Lingle disagrees with the claim that government interventions in industry, banking and exchange rates contribute to China’s economic development:
It turns out that China’s self-proclaimed “market socialism” is in fact a poisonous cocktail of neo-mercantilism (that is, export-led growth) and Keynesian stimulus policies. Alas, the resulting hangover is set to bring a painful end to the “Beijing consensus” as well as President Xi Jinping’s (習近平) “Chinese Dream”.
For a background on International Finance, floating exchange rates, and China’s currency manipulation, both Khan Academy and Marginal Revolution University offer a series of video lectures.
Khan Academy’s Review of China US Currency Situation is here.
Marginal Revolution University’s Chinese Currency Manipulation video is here.
MRU’s Tyler Cowen has a separate recent video, The Rise and Fall of the Chinese Economy, here. Text on page with video notes:
A turning point for the Chinese economy came in 2009. With the recession affecting many other countries, China’s government took steps to avoid the recession and keep the economy afloat, but at a cost. Debt skyrocketed during the period, which is proving less sustainable as China’s rate of growth declines.
Who cares whether the United States federal government substantially increases its economic and/or diplomatic engagement with the People’s Republic of China? Well, NSDA policy debaters do, or will, as they research and debate proposed policy reforms. But most people are less interested. People have limited time and lots to do, and realize time spent researching trade policy likely won’t be rewarded. Most people have little influence on public policy, and without reforms they will be stuck under whatever trade regulations are in the status quo
The people and organizations who do care enough to be active are those who benefit from current trade regulations, or expect to benefit from new regulations. So U.S. Furniture manufacturers lobby for and file “dumping” charges with the Commerce Department against Chinese furniture companies. U.S. shrimpers lobby to restrictions on frozen shrimp imported from China (and Chinese shrimp industry fights back). U.S. Steel companies care, and lobby to restrict steel imports from China (though higher steel prices raise costs for most U.S. manufacturers, whose products become competitive on world markets).
Jeff Henderson, president of the Aluminum Extruders Council cared enough to charter a plane to investigate transshipped aluminum stockpiles in Mexico (see September 9, 2016 front page WSJ story).
Union leadership lobbies for trade barriers they believe will protect union jobs here. Environmental groups concerned about CO2 emissions from China’s heavy use of coal in manufacturing look for ways to add a carbon-tax to imports from China.
Each trade barrier increases the prices U.S. consumers pay for imported goods. These price increases are rarely enough for most consumers to notice, much less spur them to protest. But the gains from protectionism to U.S. producers can be substantial, and through trade associations they invest millions of dollars to advocate new and protect existing trade restrictions.
The benefits of trade restrictions are concentrated to a handful of producers, but the costs are diffused across thousands of companies and consumers. (Over half of goods imported from China are in supply chains and integrated into U.S. manufactured goods, often for export. Raw and extruded steel and aluminum parts, for example.)
NSDA (and NCFCA) debaters will stand almost alone as motivated enough to research, sort through, and speak out on the various claims, regulations, trade agreements, and protectionist arguments.
Brink Lindsey’s Low-Hanging Fruit Guarded by Dragons: Reforming Regressive Regulation to Boost U.S. Economic Growth makes the case for first repealing “regressive regulations” in the U.S.
However, Lindsey’ Low-Hanging Fruit study focuses on domestic regulations rather than U.S./China engagement.
This October 2013 article in The Diplomat, American Protectionism Threatens US-China Trade looks at current “bilateral” U.S./China protectionist policies.
The United States and China have one of the largest trading relationships in the world, at over $550 billion per year. U.S. policymakers are right to cry foul when the Chinese government distorts that trade to protect domestic interests. Unfortunately, U.S. policymakers do the same thing and, in the process, harm the U.S.-China relationship.
One example is Washington’s continued use of so-called “non-market economy methodology” when deciding whether Chinese goods are being “dumped” into the U.S. market at unfairly low prices. The designation is a holdover from the Cold War that exists today only because its mystical formula enables U.S. officials to impose higher punitive tariffs to protect inefficient domestic industries.
The practice is actually illegal under World Trade Organization rules. But when China joined the organization in 2001, the United States insisted that an exception be created, allowing it to continue discriminating against Chinese imports for 15 years. Time has passed, and unless the United States government changes its practice by the end of 2016, it will be in flagrant violation of U.S. trade obligations.
A key inherency point for debaters looking at “non-market economy methodology”:
Unfortunately, the United States is almost certainly not going to comply. There is a shameful history of law-breaking by U.S. trade officials abusing the non-market economy methodology. Both U.S. law and international trade rules have been consistently stretched or outright ignored for decades, and there is little indication that this trend will change.
Commerce, enterprise and voluntary exchange help make the world a more peaceful and prosperous place. Trade and trade policy are at the center of economic theory and political economy. As consumers we benefit from exchange, from trade. As producers we benefit when people in other places purchase the goods and services we produce. But local producers don’t benefit at first from foreign producers offering competitive goods and services here.
Foreign competition can stimulate local producers to innovate and improve their offerings, drawing from better knowledge of local markets and opportunities. Background article by Alan Blinder on “Free Trade.”
On international trade policy, Douglas Irwin writes (from EconLib article A Brief History of International Trade Policy):
The theory of international trade and commercial policy is one of the oldest branches of economic thought. From the ancient Greeks to the present, government officials, intellectuals, and economists have pondered the determinants of trade between countries, have asked whether trade bring benefits or harms the nation, and, more importantly, have tried to determine what trade policy is best for any particular country.
On Amazon.com debaters can “Look Inside” Douglas Irwin’s 2015 book Free Trade Under Fire.
America’s founders tried to limit Congressional and Executive power to intervene in the economy. Modest tariffs on imported goods were for decades the federal government’s major source of revenue, along with land sales. America’s founders believed economic interventions would excite factions, that is, special interest groups who gain from economic legislation. Trade policy through American history has been just that. Domestic producers, from farmers to manufacturers, lobby each generation for new or continued restrictions on imported agricultural and manufactured goods.
An earlier Debate Central post, China Trade: Hollowing Out or Filling In the U.S. Economy? discussed this ongoing free trade /managed trade/protectionism debate over U.S. China policy, linking to various recent studies and articles.
Current U.S. trade regulations include antidumping and countervailing duty regulations that are abused by special interests. These arbitrary and bureaucratic processes disrupt trade and sometimes cost U.S. importers millions of dollars in retroactive fines.
U.S. federal government engagement with the People’s Republic of China (PRC) mostly involves trade and investment. People and firms in the U.S. contract with people and firms in China to import or export goods and services, or to invest in the production of goods and services. The U.S. Department of Commerce makes rules and regulations regarding commerce between Chinese and U.S. firms.
Trade agreements restrict as well as promote trade and investment in various ways, and are influenced by special interests to advance the agendas of businesses, unions, and environmental groups.
Current and proposed bilateral and multilateral trade and investment agreements are complex and confusing and critics claim the interests of both China and the U.S. would be advanced by reforming or abolishing U.S.Antidumping and Countervailing Duty regulations.
Bill Perry, a Seattle-based trade lawyer explains problems with antidumping and countervailing duty regulations in a August 13, 2016 US/China Trade War post. The Department of Commerce treats China as a NME (nonmarket economy):
Under US Antidumping, Countervailing Duty and Customs laws, the Importer of Record must exercise reasonable care in importing products and in filling out Customs forms. The Importer of Record must correctly state the products’ country of origin and also whether Antidumping and Countervailing duties apply to the imported products. A knowingly false statement on a Customs form constitutes criminal fraud.
If AD or CVD rates go up in a subsequent review investigation, the Importer of Record is retroactively liable for the difference, plus interest. Retroactive liability for AD and CVD cases is a particular problem involving goods imported from China, because the Commerce Department treats China as a nonmarket economy (“NME”) country. Dumping is generally defined as selling products in the United States below their normal value, which generally means selling products in the United States below their prices in the home market or below the fully allocated cost of production.
Since China is a NME, Commerce refuses to use actual China prices and costs to determine whether a company is dumping. It instead uses complicated consumption factors for raw materials and other inputs and multiplies the factors by surrogate values from five to ten constantly changing countries to calculate a cost of production for the Chinese company. All this makes it impossible for the Chinese manufacturer/exporter to know whether it is dumping, never mind the US importer.
Perry then looks at two AD/CVD cases, one involving wooden furniture imported from China and the other involving Chinese mushrooms (along with Columbian straw and cow manure!):
In the Mushrooms from China antidumping case, from the time the antidumping order was issued in 1999 through numerous subsequent yearly review investigations, many antidumping rates were in the single digits because Commerce used India as the surrogate country. But when in 2012 Commerce switched from India to Columbia as the surrogate country, the Antidumping rates went from less than 10% to more than 200% because of surrogate values for straw and cow manure in Columbian import statistics. The Importers of Record then became liable for the difference in the duty rates, plus interest.
The furniture case is similarly bizarre (AD is “Anti-Dumping”):
In the Wooden Bedroom Furniture from China initial investigation… In the initial investigation, the Chinese furniture company received an AD rate of 16%. In the first review investigation, however, Commerce determined that the questionnaire data did not verify and issued the Chinese furniture company an AD rate of 216%.
The US company estimated that the Chinese producer exported $100 million, which created $200 million in retroactive liability for US importers. The Chinese company then decided not to do the second review investigation creating another $200 million in retroactive liability for a total of $400 million in retroactive liability created by just one Chinese company.
Perry notes that Anti-Dumping and Countervailing Duty cases even more financially dangerous when the “False Claim Act” is added to the trade policy mix:
The real hammer against evasion of US AD and CVD orders, however, is the False Claims Act (“FCA”). The FCA ( 31 U.S.C. § 3729) allows people or companies, designated a “Relator”, to file what are termed “qui tam” lawsuits against individuals or companies that directly or indirectly defrauded the Federal government. Through qui tam lawsuits, the informants or “whistleblowers” may recover triple damages on the government’s behalf. Anyone who knows of the fraud, including a competitor company, may file a qui tam lawsuit, and they do.
The most likely to file these lawsuits are your foreign competitors, Chinese competitor, U.S. competitors, U.S. importers, your employee at your Chinese exporting company, your employee at your U.S. importing company. But sometimes they are brought by someone who simply learned of what you are doing. Because the person or company that brings such an action can be awarded millions and even tens of millions of dollars, the incentive to file is huge. If you want to get a better idea of just how lucrative these lawsuits can be, do a Google search for lawyers looking to take on qui tam lawsuits. There are hundreds, if not thousands of lawyers, willing and eager to take such suits. Reportedly the most lucrative Google keyword search is “qui tam”.
In a separate August 12, 2016 post, Bill Perry reports the Department of Commerce seems to rubber-stamp nearly all Anti-Dumping charges:
Commerce finds dumping in 95% of the cases, and the ITC extends antidumping and countervailing duty orders for 20 to 30 years to protect one company US industries. Those policies dramatically increase the perception of international trade victimhood—we US companies cannot compete because all imports are unfairly traded, a perception that is simply false.
The final article in my next blog post will be about the only trade program that works and saves the companies and the jobs that go with them—The Trade Adjustment Assistance for Firms/Companies program. The Article will describe the attempts by both Congress and the Obama Administration to kill the program, which may, in fact, have resulted in the sharp rise in protectionism in the US.
Congress must again restore the trade safety net so that Congress can again vote for free trade agreements and the United States can return to its leadership in the Free Trade area. The Congress has to fix the trade situation now before the US and the World return to the Smoot Hawley protectionism of the 1930s.
Alden Abbott’s Heritage Foundation Backgrounder #3030 on Trade, U.S. Antidumping Law Needs a Dose of Free-Market Competition (July 17, 2015) explains:
Perhaps the best-known category of special tariff is an “antidumping duty,” assessed to counteract export prices that allegedly are set at “unfairly lower” rates than the prices for the same products sold in their domestic market. Thus, for example, dumping of steel bars would occur if Korean steel producers set “unfairly lower” prices for their steel bar exports to the U.S. than they did for steel bars sold in Korea, and an antidumping duty would be assessed on each imported steel bar to raise the import sales prices and counteract the alleged unfairness.
Economists define dumping as international “price discrimination”—the charging of lower prices (net of selling expenses and transportation) in a foreign market than in a domestic market for the same product. Despite its bad-sounding label, price discrimination, whether foreign or domestic, is typically a perfectly legitimate profitable business practice that benefits many consumers.
The fear is of foreign firms that might try to drive U.S. competitors out of business with low prices, then later raise prices dramatically to make up for their earlier losses. Abbott explains:
In reality, harmful “predatory” dumping occurs seldom if ever. In the words of one leading commentator, although “U.S. antidumping law is ostensibly concerned with the kind of international price discrimination that stems from” predation, “one would be hard-pressed to find any real-world example of dumping causing competitive markets to become monopolistic.” Despite this fact, however, antidumping law is a widely invoked staple of U.S. trade policy because it is based on legal standards that have nothing to do with true economic predation. Rather, dumping reflects a set of arcane rules, unmoored from free-market principles, that are designed to shield domestic producers from competitive forces at the expense of American consumers rather than promote competition on the merits.
Antidumping is in fact a form of special-interest cronyism that imposes high costs on Americans and thwarts beneficial competition.
Appendix I of the Backgrounder provides a helpful “Summary of U.S. Antidumping Procedures.”
Mark J. Perry, in his May 25, 2011 post Do Anti-Dumping Tariffs on Furniture from China Create U.S. Jobs? Only for Washington Lawyers, notes that U.S. anti-dumping charges against Chinese furniture companies let many to relocate operations to Vietnam.
In Why Antidumping Duties On Chinese Furniture Don’t Save U.S. Jobs in Forbes (May 15, 2011), Cato Institute’s Dan Ikenson provides some background to the expansion of Chinese furniture manufacturing
At the time this case was initiated, the same U.S. furniture producers who were petitioning for relief from imports from China were investing in furniture operations in other countries. There’s nothing illegal or objectionable about investing in foreign production, but the assertions of the petitioning U.S. producers that their aim was to restore U.S. production and U.S. jobs were clearly false. It is testament to the laughably modest standards for finding a domestic industry injured by reason of dumped imports that duties were ever imposed in the furniture case.
Of course nowhere in all the regulation of furniture imports and concern over U.S. furniture jobs and companies is there recognition that the great majority of Americans are consumers rather than producers of furniture. Lower cost furniture means, for millions of Americans, that they can purchase new rather than used furniture, and can afford high quality and enjoy wider choices.