Prepared Testimony of
Under Secretary of Commerce for International Trade
Grant D. Aldonas
Before the House Committee on Appropriations
Subcommittee on
Commerce, Justice, State, the Judiciary, and Related
Agencies
Thank you
Chairman Wolf, Congressman Serrano, and Members of the Subcommittee for
inviting me to discuss the International Trade Administration’s (ITA) efforts
to ensure an equitable trading relationship between the
Mr. Chairman, I would like to begin
by impressing on the Subcommittee that while this Administration is intent on
fostering free trade, we recognize that trade must also be based on rules
followed by all and it must be non-discriminatory. The productivity of American workers is
unrivaled, yet their competitiveness can be compromised by unnatural – and government imposed – restraints on free
and open markets. That is why President
George W. Bush has consistently declared that free
trade cannot be a one way street, saying “Every time I have a
conversation with world leaders when it comes to trade, I remind them that we
expect there to be a level playing field.”
The President has mandated that this be the standard with all our
trading partners, including
The U.S. Department of Commerce is committed to strong enforcement of our
trade laws, and will do everything within the parameters prescribed by Congress
to ensure our domestic industries obtain effective relief from dumped and
subsidized imports. Our trade remedy laws
are designed expressly to protect
We offer pre-petition counseling to all
If the companies petition the Department to initiate an investigation,
ITA advises companies on what our law requires to initiate an
investigation. We require sufficient
evidence of dumping, including supporting documentation regarding the foreign
producers’ pricing practices and
evidence that the imports in question are a cause of material injury, or threat
of material injury, to the domestic industry. IA has developed “fill-in-the-blank” sample
dumping and countervailing duty petitions to help guide potential petitioners
as to what types of information will be required. We also make available the Antidumping and
Countervailing Duty Handbook, which presents the
Once the petitioner has drafted a petition, IA will evaluate its merits
and provide comments designed to bring the petition into compliance with
statutory initiation standards prior to its official submission. Maintaining confidentiality is a critical
part of the entire process and the technical assistance we provide. Commerce staff members are prohibited by law
from disclosing information with regard to any draft petition submitted for
review and comment before it is filed.
Although the
Relief
under the antidumping law takes the form of a duty collected by Customs and
Border Protection (CBP) equal to the amount of dumping. Antidumping duties can be imposed only after
affirmative determinations of dumping and injury by the Commerce Department and
U.S. International Trade Commission, respectively. I would like to explain briefly how the
antidumping law is administered in the case of
As you know, dumping is defined in law as the
difference between the “fair value” of the merchandise and the exporter’s price
for the merchandise in the
In
determining whether to designate a country as a non-market economy, the
Department must consider six factors under section 771(18)(B)
of the Tariff Act of 1930, as amended.
Specifically, we must consider the extent to which: (i) the currency is
convertible; (ii) wages are market-based; (iii) the foreign government permits
foreign investment; (iv) the government owns or
controls the means of production; (v) government controls prices and the
allocation of resources; and, (vi) other appropriate factors.
Once the determination has been made that a country is a non-market economy, an alternative methodology must be used to calculate a meaningful estimate of fair value that is free from the state planning-related distortions inherent in non-market economies. Under this methodology, the producer/exporter submits information on its production inputs, including labor, material, and energy inputs. These amounts are the actual quantities used to produce one unit of the product, not the price or monetary cost of each material, labor, and energy input.
To value the quantity of each
input, the Department bases prices for those inputs on prices from a surrogate
market economy country that is at a comparable level of economic development
and is a significant producer of similar merchandise. For example, in the case of labor and iron
ore, only the number of hours of labor and tons of iron ore needed to produce
one unit of the product are supplied by the non-market economy respondent. The wage rate and iron ore price needed to estimate
labor and iron ore costs come from a market economy country, which serves as a
surrogate for valuation purposes. The
Department adds these derived costs to costs incurred for factory overhead,
profits, and sales, general, and administrative expenses from the surrogate
market economy country. Thus, the
Department’s estimate of fair value for the product in question is based on a
methodology that captures all elements of production and distribution, but is
not based in any way on non-market economy prices or financial data.
To verify that information submitted to the Department is complete and accurate, Department personnel – usually a team of two people – visit the premises of the foreign respondent and check the submitted information against the actual books and records of the company. The verification teams thoroughly probe samples of information – samples of our choosing – to determine whether various company records support and corroborate that information. For example, sales prices are checked against documentation such as invoices, sales ledgers, and payment records. Detailed records are further tied to the company’s financial statements. Although we provide a general outline of the verification to the company in advance, the Department can and does select much of the information it examines without any advance notice. Thus, any information submitted to the Department may be scrutinized. While we cannot conduct true audits of companies’ books, verifications are effective and often uncover inaccurate or unreported information. In addition, the verification often includes an inspection of production facilities and the interview of company personnel.
In
In
general, dumping margins in
Year |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 YTD |
All Dumping Rates |
85% |
43% |
45% |
147% |
47% |
46% |
92% |
42% |
83% |
Individual Company Rates |
18% |
30% |
30% |
145% |
30% |
36% |
55% |
25% |
73% |
As trade
between the
While
some concerns raised by domestic producers reflect differences with the
Department over interpretations of law or fact, in which case the producers can
make use of judicial review, ITA has agreed with many domestic producers. We have taken appropriate actions as a result
to ensure that antidumping laws continue to be effectively enforced. For example,
To
address these issues, on April 7, I sent a letter to CBP Commissioner Robert
Bonner suggesting that we establish an interagency task force for investigating
such fraudulent activities. I also asked
that we expand some of the activities that CBP is currently undertaking to stem
the duty-evasion issue. For example,
with respect to the anti-dumping (AD) order on imports of garlic from
Although CBP data on individual shipments is
typically proprietary, CBP has recently indicated that they will provide us
with information which we can place on our record to assist us in conducting
reviews of subject merchandise that originates in
The Department has instituted a new process related
to “new shippers,” and I would like to briefly explain what we are doing in
that regard. In market-economy cases,
any exporter that has not been previously assigned its own tariff rate as a
result of an investigation or review is subject to the “all-others” rate, which
is the average of the margins determined for the investigated companies. In non-market economy cases, any exporter
that has not been previously assigned its own rate is subject to a countrywide
rate, which often is based on “adverse facts available.” Adverse facts available are often those
alleged by domestic petitioners in the case.
However, in the Uruguay Round Agreement Act, Congress established a
procedure by which “new shippers” can obtain their own individual antidumping
duty rate on an expedited basis. A
new shipper is an exporter or producer that did not export subject merchandise
to the
The statute provides that if a company meets the requirements for a new shipper review, (1) a bond or security will be allowed, at the option of the importer, in lieu of a cash deposit on imports from that company while the review is being conducted; (2) the review will be accelerated; and (3) an individual dumping margin or countervailing duty rate will be established at the completion of the review. As with regular administrative reviews, the results of new shipper reviews serve as the basis for assessment of final antidumping duties for merchandise entered during the review period and for a prospective cash deposit rate.
IA has
heard some concern, particularly in cases on products from
To
address these issues, IA is issuing explicit instruction to CBP to require
single-entry bonding on all entries, which will discourage the “hit and run”
tactics of some importers. IA also
recently issued a policy bulletin outlining a change in practice regarding new
shipper reviews. The policy bulletin
limits the bonding option and post-review cash deposit rate to subject merchandise
produced and exported by the particular producer/exporter combination that
qualified for the review. In addition,
an IA working group is modifying the new shipper questionnaire to address
whether the sale or sales made by a new shipper company is a bona fide
legitimate transaction.
The CBP and ITA have a longstanding relationship,
as ITA relies on CBP to collect duties and tariffs. However, we are grateful that CBP has proved
a willing and excellent partner in all our efforts to directly confront
attempts to circumvent our trade laws.
In fact, we are working with CBP to discuss issues that have come up
regarding the antidumping duty order on fresh garlic from
Further, we are looking into how the two agencies can share information in an effort to ensure compliance with each agency’s regulations. We are researching how best to alert CBP to apparent discrepancies between CBP data and data the Department receives from respondents. We are also discussing, in relation to a “new shipper” review, the difficulties in implementing cash-deposit instructions, invoicing activity, and the eligibility of certain Chinese garlic exporters.
While the
focus of this hearing is on imports from
ITA aggressively pursues
Since the
fall of 2002, ITA and USTR have worked to prevent
We are
continuing to actively work on 15 cases (8 compliance, 3 market access, and 4
information requests) and are monitoring another 12 cases. These cases have been opened based on inquiries from
Because of the importance of China’s market to many
U.S. industries, ITA also dedicates resources to helping U.S. companies gain
market access and ensure that China is living up to its WTO commitments. Through out Trade Development unit, we have
experts who provide specialized, industry-focused policy support that helps
create new market opportunities and enables industry to capitalize on those
opportunities. Our industry experts
accomplish this through formal bilateral dialogues with several Chinese
agencies, particularly those covering key industry sectors that show promise
for
In addition, the Commerce
Department has demonstrated expertise in assisting other countries to develop
their commercial legal systems. Through
our Commercial Law Development Program (CLDP), we have trained lawyers, judges,
and government officials throughout
Effective programs
can help
Mr. Chairman, I believe this topic
plays into a broader concern that both you and the Bush Administration
share: fostering trade and access to
foreign markets as a means to promote growth, prosperity, rule of law, and
freedom. The President has expanded our
trade operations in countries throughout the world, particularly in
On the
mainland of
In March
2002, the Department of Commerce established a Trade Facilitation Office in
We also have
augmented our staff working on
As you can tell, ITA has dedicated an increasing share of our resources
to ensuring
•
US&FCS recently launched a region-wide program
called “Asia Now” designed to attract more
•
The Embassy Commercial section has initiated a
“Breakfast with
•
Commercial officers and other ITA staff conduct
extensive outreach via speaking engagements organized by the USEACs. During a 30-day period in October-November
2002, the Senior Commercial Officer for
•
This month, the China Office has organized a similar
number of seminars on changes in
•
The China Office and Trade Information Center (TIC) are
coordinating a pilot seminar called “Doing Business in
•
The US&FCS has recorded a web cast for
•
In conjunction with the ITA Olympic task force,
US&FCS distributes a newsletter to more than 3,000 firms providing
information on commercial opportunities associated with
As a result of these numerous and
significant outreach efforts, the ITA staff in
Additionally, ITA’s
The
The
Helping
Mr.
Chairman, on the topic of export promotion, I would like to discuss this within
the framework of the manufacturing sector, which you specifically mentioned in
your official announcement of this hearing.
The manufacturing sector
in
Nonetheless, American manufacturing is facing one of the most significant competitive challenges in the history of this nation. Manufacturing has experienced a recession since 1997. At that time, the value of the dollar began to appreciate and that continued over the next five years, resulting in a total appreciation of 40 percent. As a result, demand for products in many of the strongest growing markets for American manufactured goods fell significantly, and the manufacturing industry has yet to recover from this recession.
The President and this entire
Administration is equally troubled by the loss of a
significant number of manufacturing jobs.
While any loss of jobs is troublesome, the loss of manufacturing jobs
represents a loss of engineering talent and experience. Our nation’s manufacturers employ some of the best and brightest
scientific minds, and their work has contributed to our national prosperity and
economic growth.
Yet despite these significant
challenges, I keep coming back to one fundamental question: does the fact that our manufacturing sector
faces those challenges mean that this important sector of the economy is unable
to compete in world markets? In my view,
the World Economic Forum=s 2002 Global Competitiveness
Report answers that question directly.
The report named the
Each and every one of the factors
cited by the World Economic Forum’s
report underscores the basic strength of our manufacturing sector. Throughout our history, the manufacturing
sector has seized opportunity and pursued the latest science. In fact, manufacturing accounts for
approximately two-thirds of private research and development expenditures. This has resulted in sustained technological
innovations and tremendous productivity gains, which in turn have fueled higher
wages, living standards, and economic growth.
Given
this, the Bush Administration
has implemented an aggressive agenda that will cement the role of
manufacturing as a driving force in increasing productivity, economic growth,
and living standards. Earlier this year, Secretary Evans announced a comprehensive
effort to thoroughly explore and address the long-term challenges facing our
manufacturing industry. We are
working to promote a robust manufacturing base across all
I am heading up this aggressive examination of the challenges and
opportunities facing American manufacturing, and I have conducted several
hearings with our nation’s manufacturers on these issues. During the hearings, we have examined any and
all policies that are limiting the competitiveness of our manufacturers and
those that will promote it. For
instance, the hearings have touched on rising health care costs and the need
for increased intellectual property protection, as well as the proper
entrepreneurial business climate, the President’s economic plan, and the
Administration’s trade liberalization agenda.
I am committed to conducting more of these hearings in the coming
months. I intend to focus on these
issues to ensure that the government is doing all it can to encourage
competitiveness and promote a level playing field so that our manufacturers can
win in the global marketplace, whether that is in China, Czechoslovakia, or
Chile.
Connecting Trade, Human Rights, and Rule of Law in
Finally, Mr. Chairman, I want to discuss a topic
that I know is of particular concern to you.
I would also like to recognize all of you, and particularly the
Chairman, for your attention to this issue: human rights issues in
President
George W. Bush and his entire Administration share your concerns that these
rights are infringed upon by the government of the People’s Republic of
I am
proud to serve President Bush and this nation in a position from which I have
the opportunity to work to make this vision a reality. Herbert Hoover, who served as the
first Secretary of Commerce before being elected President, once said, “Free
speech does not live many hours after free industry and free commerce
die.” The inverse is equally true. With free commerce comes free expression, and
with free expression comes pressure on governments to protect the freedoms we
enjoy. I believe that trade is firmly
embedded in the foundation of a democratic and free nation, and we are working
to plant the seeds for both by expanding trade and the opportunities it
represents for citizens throughout the world.
At its root, trade is about human freedom – the freedom to interact, innovate, and exchange goods and services without interference from the state. Amartya Sen, a Nobel Laureate in economics, concluded in Development as Freedom that the basis for all economic development is human freedom, including the freedom from any limitation on human potential. The expression of human freedom through trade gives workers limitless possibilities for sharing the product of their toil with the outside world. It allows companies to expand, increase employment, and innovate, providing people greater economic security, stability and opportunity.
Furthermore, commerce is one of the primary means by which members of a society build the bonds of common trust and faith, which in turn allows a society to function and create the institutions and framework that sustain freedom and basic human rights. Nations that seek to fully realize the benefits of trade must ensure that their domestic infrastructure sufficiently supports free commerce. As a result, they work to enact a strong rule of law, democratic institutions, independent judiciaries, reliable regulatory agencies, dependable law enforcement, and efficient banking and social services. These improvements, in turn, encourage transparent regulatory bodies, a sound tax and pensions base, fiscal responsibility, privatization, competition, and improvements in education and health care.
I want to assure you that we are making a strong
effort to promote rule of law, freedom, democracy, corporate stewardship, and
human rights through trade with
Developing a Human Rights,
Stewardship, and Rule of Law Training Program
Mr. Chairman, in
response to your leadership, we have been
working with outside experts to develop a human rights, corporate social
responsibility, and rule of law training program. I am pleased to announce that we launched
this program last week, during the U.S. Commercial Service Worldwide Managers’
Conference (with more than 200 Commercial Service managers in attendance). During this worldwide gathering of our senior managers, we raised these important
issues with our managers and presented a “big picture” overview on their
importance; the next step will be to take the training to the field.
The May 15 program included
a discussion by expert NGOs and private sector panelists on the impact that
human rights, corporate stewardship, and rule of law have on international
business. Among the NGOs and private
sector panelists were Transparency International, the U.S. Chamber’s
Mr. Chairman, I know you
participated in the first day of the conference, and I want to thank you for
your contribution and for providing additional context for this new training
program. I also want to thank you for
supporting an appropriation of $500,000 for this important program.
Mr. Chairman, recent events have reaffirmed our belief that we still have much work to do to instill liberty and freedom in the hearts of some nations. But we recognize that every nation must trade, and trade can make a significant contribution by encouraging greater openness and greater freedom as steps toward greater democracy.
I hope that my testimony today has
conveyed the Bush Administration’s commitment and efforts to enforce the laws
Congress has enacted, as well as our commitment to promote not only a fair and
equitable trading relationship, but also increased levels of openness, freedom,
hope, and opportunity in
I look forward to your questions.