COMMITTEE ON WAYS AND MEANS CHARLES B.  RANGEL, New York, Chairman
FORTNEY PETE STARK, California SANDER M. LEVIN, Michigan JIM MCDERMOTT, Washington JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts MICHAEL R. MCNULTY, New York JOHN S. TANNER, Tennessee XAVIER BECERRA, California LLOYD DOGGETT, Texas EARL POMEROY, North Dakota STEPHANIE TUBBS JONES, Ohio MIKE THOMPSON, California JOHN B. LARSON, Connecticut RAHM EMANUEL, Illinois EARL BLUMENAUER, Oregon RON KIND, Wisconsin BILL PASCRELL JR., New Jersey SHELLEY BERKLEY, Nevada JOSEPH CROWLEY, New York CHRIS VAN HOLLEN, Maryland KENDRICK MEEK, Florida ALLYSON Y. SCHWARTZ, Pennsylvania ARTUR DAVIS, Alabama	JIM MCCRERY, Louisiana WALLY HERGER, California DAVE CAMP, Michigan JIM RAMSTAD, Minnesota SAM JOHNSON, Texas PHIL ENGLISH, Pennsylvania JERRY WELLER, Illinois KENNY HULSHOF, Missouri RON LEWIS, Kentucky KEVIN BRADY, Texas THOMAS M. REYNOLDS, New York PAUL RYAN, Wisconsin ERIC CANTOR, Virginia JOHN LINDER, Georgia DEVIN NUNES, California PAT TIBERI, Ohio JON PORTER, Nevada
Janice Mays, Chief Counsel and Staff Director Brett Loper, Minority Staff Director SUBCOMMITTEE ON TRADE SANDER M. LEVIN, Michigan, Chairman
JOHN S.  TANNER, Tennessee JOHN B.  LARSON, Connecticut EARL BLUMENAUER, Oregon BILL PASCRELL JR., New Jersey SHELLEY BERKLEY, Nevada JOSEPH CROWLEY, New York CHRIS VAN HOLLEN, Maryland KENDRICK MEEK, Florida	WALLY HERGER, California JERRY WELLER, Illinois RON LEWIS, Kentucky KEVIN BRADY, Texas THOMAS M.  REYNOLDS, New York KENNY HULSHOF, Missouri
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also, published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.

Advisory of March 7, 2007, announcing the hearing

WITNESSES

The Honorable Pete Visclosky, Representative in Congress from the State of Indiana and Chairman of the Congressional Steel Caucus

The Honorable David M. Spooner, Assistant Secretary for Import Administration, International Trade Administration, Department of Commerce

John Comrie, Q.C., Director of Trade Policy, Government Affairs, and Communications, IPSCO Steel and IPSCO Tubulars, Lisle, Illinois

David Phelps, President, American Institute for International Steel, on behalf of Consuming Industries Trade Action Coalition

Usha C. V. Haley, Ph.D., Professor of International Business and Director of the Global Business Center, University of New Haven, New Haven, Connecticut

Daniel L. Porter, Partner, International Trade Group, Vinson and Elkins LLP

James C. Hecht, Partner, International Trade Practice, Skadden, Arps, Slate, Meagher and Flom LLP

SUBMISSIONS FOR THE RECORD

Columbia Forest Products, statement

Erik O. Autor, letter

Nucor Corporation, letter

Retail Industry Leaders Association, statement

Society of the Plastics Industry, letter

Southern Shrimp Alliance, Inc., letter

Zygmunt Jablonski, statement

HEARING ON H.R. 1229, THE NONMARKET ECONOMY TRADE REMEDY ACT OF 2007

Thursday, March 15, 2007

U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, D.C.

The Subcommittee met, pursuant to notice, at 1:03 p.m., in room 1100, Longworth House Office Building, Hon. Sander M. Levin (Chairman of the Subcommittee) presiding.

[The advisory announcing the hearing follows:]

Chairman LEVIN.  Mr. Herger and I understand there may be votes in about 10, 15 minutes, so let's try to do this.

We'll give our opening statements and then see.  If possible, our distinguished colleague from Indiana can get his statement in, and then we'll recess and come back.

I want to make a few opening remarks, because I do think it's important that there be some background to this hearing on why I think, and why many others do, that action is long overdue.

The first point I would make, it's there, it's unassailable, relates to the trading relationship with China and our relationship, how unbalanced it is, and I think unsustainable.

One only has to look at the trade deficit figures.

In 2006, our trade deficit in goods was more than $232 billion, a 177 percent increase since 2000, and just look at the trade surplus figures China has worldwide.  The first two months, the last two months, 39.7 billion.

So, I think that's point number one.

I think secondly that the legislation that has been introduced by Mr. Davis and Mr. English is one of the steps that can help bring about a more balanced trade relationship and more balanced rules of competition.

Thirdly, about the application of countervailing duty (CVD) law to nonmarket economies.

The Department of Commerce hasn't applied this for more than 20 years, and I know there's been a difference of opinion as to its application, and actually, I remember somewhat vaguely that we in Congress tried to change that on several occasions during the last 20 years.

Now, the Department of Commerce is saying that it will look into this issue, and yet the application of CVD is being challenged in the courts by China.

So, it seems to me this point is that Congress really needs to make it clear.

The next point I would make, I think it's unassailable, the extent of the subsidies of China:  textile industry, steel industry, petrochemical industry, high-tech industry, forestry, machinery, copper, non-ferrous metals--on and on.

This list might be even longer if China had complied with its World Trade Organization (WTO) obligations.

It committed when it acceded to the WTO, and we debated that issue very much right here.  It agreed to provide a subsidies report to the WTO in 2002 and it failed to do so 2003, 2004, 2005, and then finally in April of 2006, it provided a report, incomplete.

The next point I want to make, we should remember when we crafted Permanent Normal Trade Relations (PNTR), we asked for an annual review of China's obligations of its meeting its commitments within the WTO, and really, it failed to make that a meaningful annual review, and I do fault the Administration for failing to press China to do so.

The next point.  When China acceded to the WTO, it agreed to eliminate all of its prohibited subsidies--those are export subsidies and import substitution subsidies--and yet the failure of China to submit its reports doesn't explain the inaction for all these years by the Administration to use these WTO mechanisms.

So, a case has been brought, I think it's long overdue.

So, we're going to hear from Mr. Visclosky, I think talking mostly about the steel industry.

Also, I think we're going to need to consider the semiconductor industry.

I have in my statement, which I think you may have a copy of, an example of how China has been subsidizing in that case the semiconductor industry of its country.

[The information follows: PENDING]

Chairman LEVIN.  So, this bill really merits our Subcommittee's serious attention, and I appreciate, Mr. Davis and Mr. English, your introducing it, and your hard work on it.

This bill doesn't seek to, in quotes, "bash" a trading partner, but really, to try to make sure that the same rules apply to them as they do to everybody else, some balanced rules that provide for effective competition, and I emphasize that, balanced rules that bring about effective competition.

We'll perhaps discuss today or later on the provision in the bill for the role of Congress, and I simply urge there be serious consideration of it.  It's not an effort to micromanage, it's an effort to make sure that Congress in this vital and other vital areas has a role.

So, I look forward with my colleagues to the testimony, and now I yield to the Ranking Member, Mr. Herger, for his opening remarks.

Mr. HERGER.  Thank you, Chairman Levin.

Before remarking on H.R. 1229 specifically, let me first recall a hearing this Subcommittee held on China last month.

Witnesses and Members at that meeting, me among them, stressed the importance of U.S. trade with China.  Specifically, I urged that we look at our economy as a whole and balancing interests of import-sensitive industries with the interests of U.S. industries that need imports to stay competitive.

At the same time, I noted my great displeasure with China's slow pace of reform with respect to ending unfair subsidies.

I urged the USTR to increase pressure and I was delighted to learn earlier this week that China has agreed to terminate a Central Bank subsidy program that gave large Chinese exporters discounted loans.

This was one of the subsidies captured in the WTO dispute settlement, preceding USTR has recently begun, but we can still do more, and that is why we are here today.

The bill we are discussing this afternoon, H.R. 1229, would apply countervailing duties to nonmarket economies.  The prospect of countervailing duties will further increase pressure on all nonmarket economies, including China, to cease providing unfair subsidies to their domestic industries.

For this reason, I very much want to support this bill.

At the same time, however, we must also pay attention to what I referred to earlier as the balance.  We cannot lose sight of the legitimate needs of U.S. manufacturers here on our own soil, a community that depends on foreign imports of inputs to compete with foreign firms and to keep the prices of consumer products down, which in turn increases our purchasing power and results in real income for American workers and families.

Further, our response to nonmarket economy subsidies must be in accordance with the U.S. law and our international obligations, particularly if we expect our trading partners to do the same.

Maintaining free and fair trade with nonmarket economies requires painting in small, deliberate strokes, not broad brushes.

There are three aspects of H.R. 1229 that, in my view, may be too broad.

First, the proposed legislation makes no mention of the possibility that domestic subsidies may be double counted when nonmarket economy countervailing duty cases are brought in conjunction with anti-dumping cases.

As the General Accounting Office has concluded, we need to provide the Department of Commerce with the authority to identify and correct instances of such double counting so that imports are not unfairly taxed.  Without such explicit authority, Commerce has no means to address a known inequity in the process.

Second, Commerce uses data from within the subsidizing country to measure the benefit of unfair subsidies using third country data only if data from the subsidizing country is unreliable.

Contrary to these rules, H.R. 1229 creates an irrefutable presumption that data from within China is unreliable and inappropriately requires Commerce to use benchmarks from outside of China.

We don't want to hand China an easy opportunity to sue us in the WTO.

Third, H.R. 1229 requires that Congress consider a privileged approval resolution before Commerce is able to graduate a country from nonmarket to market economy status.

While I agree that congressional consultation during the graduation process is important, the procedure that H.R. 1229 proposes is cumbersome and unusual, given Commerce's technical expertise in this complicated field.

I look forward to discussion on these issues this afternoon, and am eager to work together to ensure that H.R. 1229 accomplishes the goal of free and fair trade with nonmarket economies,

As we move forward, though, it is critical that we maintain our focus on the U.S. economy as a whole and balance the interests of U.S. industries that compete against imports with the interests of those that need them to remain competitive.

Thank you.

Chairman LEVIN.  Thank you very much.

Mr. Davis and Mr. English, if you would just briefly comment, if you like, and then Mr. Visclosky, and I think we can wrap this up and leave with.  We've timed it three minutes to vote when there's sunshine outside.

Mr. Davis.

Mr. DAVIS.  Thank you, Mr. Chairman.

I will be brief, given Mr. Visclosky's time and the fact that we have a vote on.

I'll simply make two quick observations.

The first one, we're having an ongoing conversation and debate about how we build a consensus around trade in this economy, and Mr. Levin has been such a thoughtful, eloquent part of that debate.

It strikes me that it is impossible to build any consensus around trade unless we have a strong commitment to enforcement.  That is what our consumers expect, it's what our producers expect, and frankly, it's what this institution expects.

That's all the core of this bill tries to do, to strengthen our commitment to enforcement to say that if rules apply to one set of countries, they need apply to another, and it leads to the second point that I want to make, and the last point that I want to make.

Every now and then, I'll pick up my editorial page and I'll read the Wall Street Journal or some other entity, and they will say that this kind of bill or this kind of measure is protectionist, and they'll say that all the steel industry wants is extra protections.

Let me just briefly describe protectionism to you:

It's $1.67 billion worth of State financing for renovations at paper mills.

It is $22.5 million worth of grants going to industries for capacity expansions.

$7.25 billion going to fund bargain rate subsidized loans to State-owned steel enterprises.

The practitioners of what I've just described--not the United States Government, but the Chinese government.  That's protectionism.  All we're trying to do is to give us a reasonable, simple tool to address it and to stop it.

I'll yield back, Mr. Chairman.

Chairman LEVIN.  Thank you for your eloquence.

Mr. English.

Mr. ENGLISH.  Mr. Chairman, I would like to first of all thank Mr. Davis for leading on this legislation this year, and I would like to thank you for your prompt response in moving forward.

My hope, and I hope this dovetails into what Mr. Davis just said, which I fully support, that we can examine this issue objectively without any attempt to put it into political context, that we need to get into the details and recognize why this is good trade policy, to strengthen our trade laws, why it's broadly beneficial to the consensus we need to build on trade policy, and why it's helpful not just to specific industries, but to the overall performance of our economy.

I would simply say that last year, in the last Congress, because of what was going on on trade policy, our attempt to move similar legislation was not successful, but this year, on the details, I think we have an opportunity to go in with a clean slate and to consider the merits of this issue and see if we can give domestic producers and the Administration the tool that they need to confront some of the trade practices that have been eroding our manufacturing base.

I want to salute you particularly, Mr. Chairman, for being willing to be a leader on this, and I thank you for the opportunity to participate.

Chairman LEVIN.  Thank you very much, Mr. English.

Mr. Visclosky, we welcome you as a distinguished activist colleague, and as chair of the caucus, of the Steel Caucus, and we have your bipartisan letter signed by 32 Members.  So, take over.

Mr. VISCLOSKY.  Mr. Chairman, thank you very much.

As I understand, my entire testimony will also be entered into the record?

Chairman LEVIN.  It will be.

STATEMENT OF HON. PETER J. VISCLOSKY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF INDIANA

Mr. VISCLOSKY.  Over and above the bipartisan letter signed by 32 members of the Steel Caucus, of which Mr. English is vice chair, we would ask that two additional addenda be added for the record, and that's two sheets detailing the 45 steel companies that entered into bankruptcy between the years 1997 and 2004.

Chairman LEVIN.  It's so ordered.  Thank you.

[The information follows: PENDING]

Mr. VISCLOSKY.  I would thank you, Mr. Mr. Herger, and the Members of the Subcommittee for, one, holding a hearing on this very important issue, and secondly, for allowing me to testify, to express my strong support for H.R. 1229, the Nonmarket Economy Trade Remedy Act of 2007, and to thank my colleague, Mr. Davis, for his leadership, as well as Mr. English, as the lead co-sponsor.

I firmly believe that while H.R. 1229 will provide U.S. manufacturers with a crucial line of defense against illegally subsidized imports, I am also here to encourage your Subcommittee to look beyond countervailing duties, to the issue, among others, of foreign currency manipulation, in order to address fully the problems we face today.

Since 2000, the year China was granted permanent normal trade relations, the good-paying jobs of over 3 million American industrial workers have disappeared.

Over that same period of time, 23 percent of the domestic steel employment has been eliminated.

Since 1997, at the beginning of China's production explosion of the last ten years, 45 steel companies have gone into bankruptcy.

These are statistics.  On the front page of the business section of the Washington Post today, there are details about foreclosures in those areas hardest hit.

I would note that the States of Michigan, Ohio, and Indiana are highlighted as areas with the greatest rate of sub prime loan foreclosures.  They also suffer from the high unemployment rates.  This is a human tragedy that has been allowed to occur.

From my perspective, as our jobs are being shipped overseas to China, the Chinese have enchanted this Administration with dialogue, just as the sirens tempted Ulysses with their song.  We are defenseless as long as we are under their spell.

What I would like to emphasize is the word dialogue.

Mr. Herger alluded to the hearing that was held last month by your Subcommittee on February 17th.

That day, Timothy P. Stafford, assistant U.S. trade representative for China, testified.  I am going to just read two sentences of his testimony, but listen carefully:

"While we have filed this WTO case, we continue to engage in dialogue with the Chinese on their use of subsidies.

These discussions are happening both at the sector specific level--for example, a recently created steel dialogue under the Joint Commission on Commerce and Trade (JCCT) is enabling a conversation among governments and industries of both sides as well as inc connection with our broader economic dialogues, including the strategic economic dialogue."

The guy mentioned dialogue four times in two sentences, alluded to a conversation and discussion.

In the meantime, I reference Members' attention to the chart that I have provided.

I am concerned about the abject lack of urgency the Administration attaches to this problem.

Mr. English was current and present and chairing the Steel Caucus last June when we had a hearing, and Mr. Jaime Estrada, deputy assistant secretary for manufacturing for the United States Department of Commerce, testified.

When Mr. English, I, and others were complaining about the lack of enforcement and protection for steel, Mr. Estrada had the audacity to say, "Well, we have countervailing duties," and when asked by the caucus, do they apply China, and this was a China steel specific hearing, he said, "Well, no."  Who is the fool here?

Look at the chart.  On March 24, 2005, the Administration launched their steel dialogue.

Steel exports by metric tons in January of 2006 were 312,000 tons.  By March, we had our first steel dialogue.

By June of 2006, we had the caucus hearing and the dialogue was referenced again.

In July of 2006, when imports went up from 371,000 tons to 526,000 tons, perhaps the Administration talked to China.  Perhaps when exports went up again to the United States in September of 2006, the Administration chatted with China.

We did have a second dialogue with China in October of last year, and imports again increased to the United States.  They've gone up 65 percent in the last 12 months.

Fortunately, from my perspective, no further dialogues are scheduled.  As we meet today, they're killing us, these dialogues, but there was a consultation on February 12th.

I would implore the Committee to give careful consideration to the legislation that has been introduced by Mr. Davis and Mr. English and also ask that you seriously consider other options so that we can ensure it is a fair, level playing field for American workers.

[The prepared statement of Mr. Visclosky follows:]

Chairman LEVIN.  Thank you, very, very much, Mr. Visclosky, for your dedicated efforts.

We stand in recess.

How many votes do we have?  Two?  Two votes.

Well, two votes means 15 minutes, hopefully not more.

Mr. VISCLOSKY.  Mr. Chairman, thank you very much.

Chairman LEVIN.  Thank you very much.

[Recess.]

Chairman LEVIN.  My apology.  It was an unexpected series of events.

The Appropriations Committee was trying to finish the supplemental, and so we held open the vote for, it must have been 30 minutes, because they needed to finish and get the bill out today so it could be brought up next week.  As you know, it has some important provisions in it.

I think ordinarily, we would not have waited for the Appropriations Committee to finish, but it was decided to do so.

So, my apology.  I said semi-humorously I wasn't sure if it would be 15 or 20 minutes, and it was an hour.

Let me just check.

[Pause.]

Chairman LEVIN.  All right.  Let's begin.

Again, we'll make sure that all of the information, all the testimony is well distributed.

Let me say, some have asked is there a scheduled date for markup on this bill, and the answer is there isn't, except there's a strong desire to move it.

So, there will be further opportunity for the full Committee to consider this, and I urge everybody to make sure that there's the fullest interchange between yourselves and Members of this Committee, because I do think that it's likely that there will be action in the foreseeable future.

All right.

Kevin, welcome.

So, we'll continue with David Spooner, who is assistant secretary for import administration, International Trade Administration (ITA), Department of Commerce.

Again, my apology to you, as well as to the others.

Proceed, if you would.

Mr. BRADY.  Mr. Chairman, if I may interrupt for just one moment.

Chairman LEVIN.  Absolutely.

Mr. BRADY.  I apologize.  The delay in those last votes has caused me to head to the airport.

Could I have unanimous consent to introduce into the record a letter from General Motors dealing with the countervailing duty law in our Committee's review of this legislation?

Chairman LEVIN.  Absolutely.

Mr. BRADY.  Thank you.

Chairman LEVIN.  It's so entered.

[The information follows:]

Chairman LEVIN.  Mr. Spooner.

STATEMENT OF HON. DAVID M. SPOONER, ASSISTANT SECRETARY FOR IMPORT ADMINISTRATION, INTERNATIONAL TRADE ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE

Mr. SPOONER.  Thank you, Chairman Levin and Congressman Brady and other Members of the Subcommittee, for inviting me to discuss the Nonmarket Economy Trade Remedy Act of 2007 introduced by Representatives Davis and English.

I appreciate the opportunity to share with you the Department of Commerce's views on this bill, particularly as it relates to the application of the countervailing duty law to China and other nonmarket economy countries.

China's remarkable economic growth in recent years makes it one of the most important engines of the world economy outside of the United States.  In trade terms, China represents one of the fastest-growing markets for U.S. goods and services.

Our exports to China, which for the most part are high-value-added products, totaled $55 billion in 2006, growing at a rate of 32 percent from the pervious year.  That makes China our fourth largest export market.

To help ensure continued and increased growth of U.S. exports to China, the United States is working proactively to identify and seek the removal of barriers to U.S. exports.

Unfair subsidies inside China distort trade conditions for U.S. producers and exporters.  The Chinese press is rife with examples of subsidies given to various sectors.

China clearly employs subsidies.  The question is, what domestic and international strictures we can use to discipline them.

At the Commerce Department, we are charged with the enforcement of U.S. trade remedy laws, including our domestic anti-subsidy law, the countervailing duty law.

Let's make no mistake about it, subsidies exist in China and are distorting the playing field.  There is no legal bar to Commerce's application of the CVD law to nonmarket economies, including China, and we will do so if presented with the appropriate facts.

As you know, countervailing a nonmarket economy poses unique challenges, such as calculating benchmarks for subsidy programs.

Moreover, applying U.S. CVD law to countries like China that are classified as nonmarket economies for anti-dumping purposes raises complex issues of policy and methodology which could have implications for other aspects of Commerce's trade remedies practice.

Nevertheless, current law allows us to countervail China.  Indeed, as you know, Mr. Chairman, we are now conducting a countervailing duty investigation of coded free sheet paper, glossy paper, from China, that dates from last fall.

The petition in that investigation was filed by NewPage Corporation, which testified before I believe this Subcommittee in February.

We will be announcing our preliminary determination in the glossy paper investigation by April 2nd, so it would be inappropriate for me to comment upon the specific merits of that investigation at this time.

For more than 20 years, indeed throughout four Administrations, Commerce has maintained a policy of not applying our CVD law to countries that we have classified as nonmarket economies for anti-dumping purposes.

The basis for this policy was the 1984 Georgetown Steel decision in which the court affirmed that Commerce has the discretion to decide whether or not to apply the CVD law to nonmarket economies (NME).

Since then, Commerce has had a practice of not applying the CVD law to NME countries, including China, and the anti-dumping law has been a commonly used instrument to address unfair trade practices on the part of Chinese producers and exporters.

Our decision to conduct the CVD investigation in the glossy paper case in no way reverses our decision, reaffirmed just last August, to treat China as a nonmarket economy under the anti-dumping law.

The glossy paper investigation represents the first CVD petition for China received by Commerce since 1991.  The present investigation, therefore, provides us with an opportunity to review our longstanding policy of not applying the anti-subsidy law to nonmarket economies.

Given the complex legal and policy issues involved in our upcoming decision on December 15th, we requested public comment on the issue.  We received over 50 responses, including comments from Senators, House Members, National Association of Manufacturers (NAM), and other industry groups.

The majority of the commenters cited concerns about the growing problem of Chinese government subsidies and the adverse impact that they have on U.S. producers and workers.

As such, the majority of commenters encourage Commerce to apply the CVD law to imports from China.

We are in the process of carefully reviewing all these submissions and other relevant information on the record before making our preliminary determination in the glossy paper case.

We are committed to identifying and addressing unfair subsidies in all countries, including China.  That is a top priority for us.

We will not hesitate to use the tools at our disposal to discipline China's use of unfair subsidies.

Make no mistake about it.  If we can formulate a methodology for countervailing nonmarket economies, we will not give any country a free pass when it comes to illegal and distortive subsidies.

Commerce has always maintained, and we believe the courts have agreed with us, that we have the authority to apply the CVD law to NME countries.  However, if Congress would like to affirm Commerce's authority, as the House did in 2005, and as H.R. 1229 does, we would welcome this opportunity to work with you, Mr. Chairman, and other Members of the Committee.

Thank you for giving me this opportunity to testify before you on this topic today.

[The prepared statement of Mr. Spooner follows:]

Chairman LEVIN.  Thank you very much.

Let's proceed in this order.

I know Mr. Davis has another markup, so why don't you go first instead of me, and then, Mr. Herger, you'll go next, and then I'll come after you.

Mr. Davis.

Mr. DAVIS.  Thank you, Mr. Chairman.

Mr. Secretary, I apologize to you.  I have a markup, literally in another Committee, so I'm trying to squeeze out some time before I have to go cast a few votes.

Let me, and I don't suspect I'll take the full 5 minutes, but let me focus on one aspect of your testimony.

You mentioned that one of the reasons that the Administration has not been so keen on applying countervailing duties is that there are remedies available on the dumping front.  I think you said that in your testimony.

I wanted to challenge that premise.

Obviously, dumping is a problem in its own right, and there are remedies available to deal with dumping, but if I understand it correctly, subsidies are a different kind of problem, a different species of problem.

Among other things, subsidies violate the WTO standards.  I don't think there's any dispute about that.

In addition to that, subsidies obviously cause market-distorting effects which are perhaps, in kind, they may play out in the same way that dumping does, but they are different.

So, explain to me again why it would be injurious to have this extra set of tools to use.

Mr. SPOONER.  Thank you, Congressman Davis.

I actually agree, I think.  I hope I didn't imply, I certainly didn't mean to imply that applying the CVD law to China would be unnecessary.

While it's true that we've been aggressive about applying the anti-dumping law to China--I think 25 percent of all cases now are on Chinese imports--you're right, the CVD law addresses an entirely different type of unfair trade practice.

The reason it has been, frankly, until now, when we have this ongoing investigation in the glossy paper case that we've--the reason it's taken until now to launch an investigation has, frankly, to a certain degree, been simply because we haven't had a petition until last fall.

Mr. DAVIS.  Would countervailing duties or the possibility of applying countervailing duties itself be a bargaining chip for the United States in our dealings with China?

Mr. SPOONER.  That's a good question, Congressman.

I hope I put this well.

We have to use all the tools in the toolbox.  I mean, Congressman, Chairman Levin in his--I'm sorry, it was Mr. Visclosky, in his something, was essentially saying, I think, although I hesitate to paraphrase a Member, that we shouldn't only have dialogue, that we should enforce, as well.

Frankly, I agree with that.  We should have ongoing dialogue, ongoing diplomacy with the Chinese, such as we do in the steel dialogue, but if we show a willingness to enforce our law as we should, I think that complements our dialogue.

Mr. DAVIS.  Have you reviewed--I assume that you've reviewed the bill that Mr. English and I have introduced?

Mr. SPOONER.  Yes, sir.

Mr. DAVIS.  Do you agree with me that there's nothing in that bill that speaks to the currency devaluation issue?

Mr. SPOONER.  Yes, sir.

Mr. DAVIS.  Mr. Chairman, I will yield back.

Chairman LEVIN.  Thank you so much for your hard work and your coming, and don't miss votes.  That's why we held open the last vote for 45 minutes.

Mr. Herger, our Ranking Member.

Mr. HERGER.  Thank you, Mr. Chairman.

Mr. Spooner, I believe that Commerce, that Commerce should consult with Congress prior to revoking a country's nonmarket economy status, but I believe that requiring an Act of Congress first is unprecedented.

Do you have plans to revoke China's nonmarket economy status in the next year, or even within the next five years; and what changes will you need to see in China in order to entertain doing so?

Mr. SPOONER.  I can assure you, Congressman Herger, that I don't.

Indeed as you know, just last August, Commerce reaffirmed China's status as a nonmarket economy, and when we did so, we issued, I think it was an 84-page memorandum describing the reasons for our decision, and the memo is rife with ways in which China has yet to jump over the hurdle, so to speak, including the free flow of labor within China, distortions within China's banking sector, problems with the rule of law in China.

All those things, among others, would have to be rectified before we were to consider graduating China to market economy status.

Mr. HERGER.  Thank you.

You mentioned in your testimony that it's important for any bill applying the CVD law to China to be crafted with appropriate precision, not only to ensure consistency with our international obligations, but also to avoid unintended consequences for existing provisions of U.S. CVD law.

Could you elaborate?

Mr. SPOONER.  Thank you, Congressman Herger.

I think briefly, at least with respect to our domestic law, it's more USTR than Commerce that evaluates our WTO consistency, but I had two, perhaps, specific drafting questions, at least.

One was the way in which the portion of the bill which would require a congressional motion of approval or disapproval with market economy decisions.

Under law, we have to decide our cases under very certain rigid timelines and it's unclear from the bill whether or not that disapproval motion would make us miss our deadlines, so to speak.

I think another question we had was whether that provision amounts to--represents a desire on behalf of the drafters to take a second look at Commerce's analysis in market economy decisions or whether--I hope I put this well--it represents a desire to sort of put aside what Commerce is supposed to look at when we do market economy evaluations and have Congress consider other factors which aren't--which Commerce isn't supposed to look at.

Mr. HERGER.  Could you please tell us the criteria that you use in determining whether to use information from a nonmarket economy in an anti-dumping investigation?

Do you routinely exercise your discretion to disregard such information and use surrogate data if that information is not adequate?

Mr. SPOONER.  We do routinely do so, yes, sir.

Indeed, when we designate an economy to be a nonmarket economy, as we do with China, in every dumping case, we go outside of China and use surrogate country values.

Mr. HERGER.  Thank you.

Thank you, Mr. Chairman.

Chairman LEVIN.  Thank you very much, Mr. Herger, for your questions.

I want to really focus on where we go from here, but I must say, when you say in your testimony, you repeated it, Mr. Spooner, that the reason there hasn't been any action by Commerce is because no petition was filed, it's hard to expect that a petition be filed when there's a policy that the petition will be discarded.

So, I don't really think that is a convincing rationale.  I think instead, there has been a policy decision, because it could be reversed without the need for a petition.

I think as the nonmarket economies grew in this world of ours, in this economic world, there was a need to revise the policy when you had the power.  This is somewhat before your time.

So, I want to focus on the future, but I think it isn't wise to use what I think is kind of an irrational excuse for what I think was an increasingly irrational policy.

Secondly, let me just mention, on the--and we're going to work together on this, so I say that somewhat gently, but there's a lot of feeling about this, especially as China began to be a major, major competitor.

Let me just say a word about the congressional disapproval provision.

I hope we'll work with you on it.  You answered Mr. Herger's salient question that--I don't know if you wanted to commit yourself for five years; I don't think anybody can do that.I think if one looks back at the history of how we handled the Soviet Union's position, I don't know that--and I haven't gone back over the papers, but my guess is that there were fairly elaborate documents talking about the hurdles that had to be jumped by the Soviet Union, or maybe that's not the correct terminology, the practices that had to be remedied before we could take that action, and yet the action was taken.

I would hope we could focus on the role of Congress on decisions of importance like this.

It does reflect, I think, a strong feeling that there has to be a major change in the role of Congress not to negotiate but to be sure that we are active, meaningful partners.

Let me just ask you then one last thing.

It relates to an issue that has been raised here, and the so-called double counting issue.

So, let me ask you whether you think that this is an issue regarding the application of CVDs and anti-dumping duties to a nonmarket economy and its methodology; do you see this as an issue?

Mr. SPOONER.  Thank you, Mr. Chairman.

Frankly, as you know, the Government Accountability Office (GAO) report did a--I'm sorry--the GAO did a report two years ago on difficulties that Commerce might encounter in applying the CVD law, and they identified this double counting issue as something that might be an issue for Commerce.  Frankly, I wouldn't go so far.

Whether or not we face double counting should we apply the CVD to China will be a very fact-intensive, case by case thing, and frankly, I think we will just have to see in the context of a specific case whether or not we face double counting, and then go to the next step of if so, how do we address it.

Of course, we would work closely with you to figure out how to do so.

Chairman LEVIN.  Are you saying that there isn't any overall basic issue of double counting?

Mr. SPOONER.  We just haven't seen it yet.  We haven't--

Mr. SPOONER.  As you've worked on these issues, you haven't seen it?

Mr. SPOONER.  Yes, sir.

Chairman LEVIN.  Okay, thank you.

Mr. SPOONER.  Sure.  I should say, sir, as we do our market economy decisions, I can promise you--I should have conveyed this to Congressman Herger--that we would consult closely with Congress, and particularly Members of this Committee.

Chairman LEVIN.  All right.

So, as you leave, as I understand it, you say case by case, so do I correctly assume that you don't see a need for a specific provision in this bill on double counting?

Mr. SPOONER.  We--Commerce I believe would prefer to wait until we had some hands-on experience should we apply the CVD law to China before we crafted the legislative fix, should we need one.

Chairman LEVIN.  So, I think your answer is no?

Mr. SPOONER.  Yes, sir.

Chairman LEVIN.  Thank you.  There's no need for such a provision.

All right.  Mr. English, welcome.  Glad you were able to rejoin us, after that long, long hiatus on the floor.

Mr. ENGLISH.  I unfortunately did.

Mr. Spooner, thank you for your testimony.

I think I'm on the same wavelength as the Chairman on the issue of double counting.

If I could just revisit this, on the next panel, my understanding is that we're going to hear from a member of the Washington Trade Bar that cites a 2005 GAO report stating that Department of Commerce doesn't currently have the legal authority to devise a methodology for applying countervailing duty law to nonmarket economies, which takes into account the theoretical practice of double counting.

Is that an accurate characterization of the GAO and is it fair to say that is not Commerce's position?

Mr. SPOONER.  Yes, sir, it's fair to say that that is not Commerce's position.

The GAO report, if I remember it correctly, stated that Commerce does not have the explicit statutory authority to apply the CVD to China, and it's been our longstanding claim that we have the implicit statutory authority to do so.

Indeed, the key portion of the statute, which is amended in Section 1(a) of H.R. 1229, refers to all countries, not just market economy countries.

Mr. ENGLISH.  I guess that's probably, given the fact that you are pursuing the coated paper case now, probably about as far as we need to go on that, although do you feel that the language of the bill, as we've tried to craft it, gives you adequate authority to go forward with the coated paper case without interruption, bearing in mind, and I understand this may have been brought up while I was on the floor, but Mr. Davis was very careful, I think, to draft this legislation to not disrupt the current Commerce activities, and in fact, the retroactivity provision, which I understand is also criticized in some later testimony in the next panel, is intended simply to provide for continuity.

Is that your appreciation of the language?

Mr. SPOONER.  For the most part, Congressman English, I think that's the case.

There's one provision of H.R. 1229 which may impact our practice, and I can't comment as to whether it would impact our glossy paper analysis.

Should we decide to countervail China, rather nonmarket economies, under current law, we can--our job is basically to figure out, to do the math, as--would be to do the math as best we can, and that might involve looking at benchmarks within China under appropriate circumstances, or it could involve looking outside China.

There's one portion of H.R. 1229 which would require Commerce to look outside China under all circumstances that we might want to work with the Committee on.

Otherwise, I think it would affirm our authority.

Mr. ENGLISH.  Let me just say, Mr. Spooner, I'm delighted that you're here to testify.

I also want to express, since the Administration has been criticized at this hearing, in that there are some deep policy differences on the question of China trade, I for one am grateful that the Administration is pursuing the coated paper case.

I think this is an important, groundbreaking initiative, and essential, if we are to get China to operate within the rules-based framework that we had always understood was the intent of bringing them into the WTO.

I'm--with that, Mr. Chairman, I'm grateful for the opportunity to have asked these questions, and I'll yield back my time.

Chairman LEVIN.  Thank you.  Thank you for your salient questions.

Mr. Meek, do you wish to interrogate, or catch your breath?

Mr. MEEK.  Are we talking about--you said interrogate.  Are we--

Chairman LEVIN.  Mr. Spooner.

Mr. MEEK.  Are we in China or are we in the United States?  No?  Okay.  All right.  Great.

Mr. Spooner, I--actually, I walked in from the vote, and I left my folder, but I know you may be familiar with the bill that Representative Ryan is sponsoring, and there's a lot of discussion about what China does with its dollar that works against U.S. companies.

You probably addressed this a little earlier, and I apologize, Mr. Chairman, for coming in a little delayed.

This is a major, major concern that I think overall, hurting trade, and hurting the outlook on trade that so many Americans met with some level of enthusiasm, thinking that it would be good for U.S. business and it would be good for small businesses, and now finding, U.S. businesses are finding that, as relates to competition, that they're at a disadvantage because they keep moving, changing the rules in China as relates to the dollar and subsidizing companies there.

I say all of that in a global sense, to say that being on the Subcommittee on Trade, being from South Florida, where we have hopefully, if we can resurrect a free trade agreement (FTA) experience down there, and also being the financial center for the Americas and the music capital and music capital, what have you, it's like a doormat for trade.

Now we're having political problems.  So, many Members of Congress have been elected, especially in the last cycle, running against China, running against trade agreements.

I came to talk in a very detailed way about the China bill, but--that Mr. Ryan has, and is also sponsored in the Senate, but I wanted to hear some of your feelings on what can be done.

Mr. SPOONER.  Thank you, Congressman.

I suppose what's commonly referred to as the Ryan bill, or the Hunter-Ryan bill would, if I remember correctly, stipulate that China's currency practices are--fit the definition of a subsidy that would be countervailable [sic] under our domestic law.

I frankly can't comment on whether or not the Administration supports the bill.  We sort of prepped today for H.R. 1229.

I can tell you that, should Commerce be presented with a set of facts or a petition in which the alleged activity meets the definitions of a subsidy under our domestic law, that it be a government policy that provides a specific benefit to an industry, that harms U.S. producers, we would do what we could to countervail it.

Mr. MEEK.  Well, I--that bill is almost the embodiment of what--especially being--if you're from Ohio or South Carolina or any of these States that have been heavily affected by trade, then you would be for this, be for the Ryan bill.

I think that it would be good if you all can continue to have good dialogue on where you can come together, because I think something is going to happen in the 110th Congress.  The will and the desire is there to make it happen.

Mr. Chairman, I just wanted to come because I know that that legislation may very well be coming before either our Subcommittee or our Committee if we decide to take it on, and it's something that is, in my opinion, technical, because I've read the bill and, as you know, Congressman Ryan and I work very closely together.

He reminds me every day that he's an appropriator and he's more important than I am.  So, I--

Chairman LEVIN.  Don't buy that.

Mr. MEEK.  I don't buy it.  I just told him on the Appropriations Committee he has maybe 80-something Members.  I said, "I know all of the Members on my Committee.  Do you?"

So, we just leave it like that.

It's such a--putting all jokes aside, it's such a technical and serious piece of legislation, so many lives have been affected by it, I just wanted to come to ask you today, and your staff, to hopefully work with us on something that can hopefully level the playing field.

Thank you, Mr. Chairman.

Chairman LEVIN.  Thank you for raising it.  It isn't the subject matter today, but it is very much related, Mr. Meek.

Our Subcommittee has been talking to the Financial Services, the appropriate Subcommittee, and we may well hold a joint hearing between our two Committees.

So, I think you're right, the currency issue is inescapably before us.

Mr. MEEK.  We're just trying to build the will and desire here in the halls of Congress to deal with it and deal with it in a very appropriate way that won't hurt out efforts in China, but won't continue to hurt U.S. companies here.

Thank you.

Chairman LEVIN.  All right.  Well, I think that's it, Mr. Spooner.  Thank you very, very much, and again, thank you for your patience.

Mr. SPOONER.  Thank you.

Chairman LEVIN.  All right.  The next and last panel will come forth.

I'll introduce the panel as you're being seated.

I think we'll take them in this order:

John Comrie, who is director of trade policy, government affairs, and communications for IPSCO Steel in Illinois.

David Phelps, who is president of the American Institute for International Steel.

Usha Haley, who is an assistant professor of management and director of the Global Business Center, University of New Haven, New Haven, Connecticut.

Daniel Porter, who is a partner in the International Trade Group, Vinson & Elkins.

James Hecht, who is a partner, international trade practice, at the firm of Skadden Arps.

Let me, as you begin, and if you would, in that order, thank you for providing the testimony as the rules provide but are not always implemented, and that is, you were able to submit them, I think, in each case yesterday, and that gave us a chance last night and this morning to read them over.

My guess is that many of the Members, if not all, having had this material, were able to take a look at it, and surely their staffs were, before this hearing.

So, thank you very much for coming.  Thank you very much for your patience.

We now await eagerly your testimony.

Mr. Comrie.

STATEMENT OF JOHN COMRIE, QC, DIRECTOR OF TRADE POLICY, GOVERNMENT AFFAIRS AND COMMUNICATIONS, IPSCO STEEL AND IPSCO TUBULARS, LISLE, ILLINOIS

Mr. COMRIE.  Thank you very much, Mr. Chairman.

It's my pleasure to be here this afternoon.

Mr. Chairman, and Members of the Committee on Ways and Means Subcommittee on Trade, my name is John Comrie and I am the director of trade policy and communications at IPSCO.

I appreciate the opportunity to testify in support of H.R. 1229, the Nonmarket Economy Trade Remedy Act of 2007, as introduced by Representative Arthur Davis and Phil English.

I am testifying today on behalf of IPSCO, but I believe that my views are shared by the U.S. steel pipe and tube manufacturing industry, the Greater U.S. steel industry, and the many employees that are affected by unfairly traded imports from nonmarket economy countries, particularly the People's Republic of China.

I am here as a member of a company and a member of an industry that competes successfully against any in the world, as long as all producers are playing by the same rules.

As one of North America's leading steel plate and pipe producers, IPSCO is uniquely positioned within the marketplace for long-term sustainable growth.

Despite being a well-managed and highly efficient global competitor, more and more IPSCO finds itself being undercut by Chinese-produced oil country tubular goods (OCTG) pipe products that are crucial for oil and gas exploration.

Neither the Chinese steel nor the pipe industry has natural resource advantages over anything in the U.S. industry, and in fact, has to overcome several such disadvantages.

China's government subsidies have been central to the building of the Chinese steel industry.

The combination of pervasive State ownership, direct and indirect subsidies, other government support, and a longstanding development policy based on targeted exports allows Chinese OCTG pipe products to be produced and sold below their actual value.

As my testimony today only can provide a brief summary of China's government subsidies to its steel industry, I would like to direct you to my written testimony for a more complete statement.

In 2006, China produced 423 million metric tons of steel which was more than the United States, the European Union, and Japan combined.

In recent years, capacity expansion efforts have increasingly been directed toward higher value-added steel products, such as corrosion resistant steel and OCTG.

The extraordinary and unprecedented expansion of China's steelmaking capacity is a function of decisions by government planners coupled with the mobilization of massive resources to carry them out.

In 1990, China's steel industry was technologically lagging, inefficient, and incapable of satisfying the country's rapidly growing demand for steel.

Therefore, in the mid-1990s, the Chinese government decided to promote the steel industry as a national priority.

The steel enterprises, implementing the government's expansion plans, were overwhelmingly government owned.  Many were poorly suited to be self-sustaining steel producers.  Financing of these enterprises was mainly derived from government investments and loans.

Thus, it was not surprising that, by the end of the 1990s, many Chinese steel mills had fallen into dire financial straits.

In the United States, such a situation would have resulted in bankruptcy, liquidation, or at least mill closures.

In China, however, failing enterprises continued to expand capacity based on government write-offs of bad debt and additional injections of State-sponsored capital.

The Chinese government's financial support to the steel industry has countless more aspects, all of which are detailed in my written testimony.

The enactment of H.R. 1229 is essential to ensuring free and fair trade.  The legislation would ensure that our nation's fair trade laws are uniformly applied to all prohibited trade subsidies, regardless of the country of origin.

The bill would make clear that the countervailing duty laws shall be applied to nonmarket economies.

It would recognize the importance of congressional consideration of whether a country's nonmarket economy status should be revoked without unduly burdening Commerce's ability to administer our nation's trade laws.

Finally, it would require the International Trade Commission (ITC) to undertake a comprehensive study of China's use of unfair and injurious subsidies.

Finally, Mr. Chairman, I'd like to conclude my remarks based on a couple of my own personal experiences.

I have for some time, like many others, been trying to understand what is going on in China.  It's obviously a major force in the world.

I have been to Beijing, I've participated in the U.S.-China steel dialogue.

My company has hired a prominent Washington trade firm to make an investigation of subsidies in the steel and the OCTG industry, and we have made many efforts to try and understand what's going on in China.

This bill would provide the opportunity to bring cases which would lead to serious investigations by the Department of Commerce.

These investigations will gather information that only a Government agency can obtain.  Nothing in this bill prejudges the results of those investigations.

Finally, the bill provides for annual updates on that information.

All of those actions would help solve this issue of transparency.

It is the underlying feature of the bill, is that it would promote an openness of what's going on in China.  It would allow people around the world, and particularly in this country, to understand what's going on in China.

Thank you for providing me the opportunity to testify today.  I am happy to respond to any questions the Members of the Committee may have.

[The prepared statement of Mr. Comrie follows:]

Chairman LEVIN.  Thank you.

Mr. Phelps.

STATEMENT OF DAVID H. PHELPS, PRESIDENT, AMERICAN INSTITUTE FOR INTERNATIONAL STEEL (AIIS) AND MEMBER OF THE BOARD OF THE CONSUMING INDUSTRIES TRADE ACTION COALITION (CITAC)

Mr. PHELPS.  Good afternoon.

I'm Dave Phelps, president of the American Institute for International Steel and a member of the board of the Consuming Industries Trade Action Coalition, CITAC.

CITAC's membership includes American manufacturers and retailers in a wide variety of industrial and consumer goods, from auto parts to household items.

We do not condone trade-distorting subsidies, neither AIIS nor CITAC, but any legislation or policy choice that affects competitiveness should consider the impact on consuming industries.

CITAC strongly opposes putting consuming industries in the United States at risk with H.R. 1229.

The bill before you would put American businesses and workers in jeopardy for the following reasons:

First.  It is fundamentally unfair to U.S. consuming industries.  The bill offers no guidance to the Commerce Department in calculating subsidies in NMEs.

Since Commerce cannot fairly and accurately calculate subsidies in nonmarket economy situations, the Department has declined to calculate them in the past.

We are opposed to a sudden change in policy that would inevitably harm consuming industries in the United States

Two.  The WTO Subsidies Agreement prohibits double counting, but the bill fails to address double counting.  Indeed, as we read 1229, double counting is practically required.

Three.  H.R. 1229 would require congressional approval before the U.S. Government could declare that China's economy has graduated from NME status.

This requirement would turn what is now a technical and economic analysis done by the Department of Commerce into a political exercise.

Four.  The bill creates an irrefutable presumption that information within China is not reliable.

This is unacceptable, because we have no assurances that information external to China is any more reliable.

We urge the Subcommittee to insist on the use of reliable information internal to the country under investigation and to require accuracy above retribution.

Five.  Application of CVDs to nonmarket economies is probably WTO-illegal.

We believe that the WTO accession protocol with China does not permit the United States to impose CVDs on China while simultaneously treating that country as a nonmarket economy.

We, as well as China, must abide by our WTO commitments.

Six.  Our current trade remedy laws contain fundamental inequities that often cause more harm than benefit.  In our view, expanding existing trade remedy law is counterproductive until those inequities are taken care of.

For example, under current law, consuming industries and the public interest play no role whatsoever in determining whether ADs and CVDs are imposed.

The addition of countervailing duties to nonmarket economy cases, given the uncertainty of data and methodology for determining appropriate duties, will inevitably lead to excessive taxation of American industry.

This is a burden that our economy cannot afford in today's global marketplace.

We do not believe that American industry is under assault from deliberate dumping and subsidies.

In fact, the domestic steel industry posted all-time record profits in 2006, a year that posted record imports and record imports for companies in the domestic steel industry themselves.

Therefore, from the perspective of the consuming industries, we have a duty to all U.S. industries to calculate fairly and accurately these duties while determining equally carefully that the duties we decide to impose are in fact in the public interest.

We see significant reform in trade remedy laws needed, including:

One.  Industrial consumer standing.  That's H.R. 1127.

Adoption of prospective duty assessment so that importers know at the time of entry the amount of the definitive duty.

Abolition of the unfair practice and illegal WTO practice of zeroing in anti-dumping investigations and reviews.

Seven.  Finally, U.S. anti-dumping law already provides adequate remedies for U.S. producers who believe they are injured by imports from China.

The duties on steel products that are currently in place due to these nonmarket economy cases range on hot rolled coils from 65 to 90 percent, clearly high enough to knock them out, completely out of the market, and on plate, as high as 129, almost 129 percent.

In conclusion, we must make sure that trade remedy laws do not create more harm to the United States than benefit.

Given the inequities of our current trade remedy law and practice particularly with regard to U.S. consuming industries, the imposition of countervailing duties on China and Vietnam, the two major nonmarket economies with whom we trade extensively, would not be in the best interests of the U.S. economy.  I would be happy to answer any questions you may have.  Thank you very much, Mr. Chairman.

[The prepared statement of Mr. Phelps follows:]

Chairman LEVIN.  Thank you very much.

Dr. Haley, welcome.  Your turn.

STATEMENT OF USHA C. V. HALEY, PH.D., PROFESSOR OF INTERNATIONAL BUSINESS AND DIRECTOR, GLOBAL BUSINESS CENTER, UNIVERSITY OF NEW HAVEN, NEW HAVEN, CONNECTICUT

Dr. HALEY.  Thank you, Chairman Levin, Members of the Committee, for the opportunity to provide my testimony in support of the Nonmarket Economy Trade Remedy Act of 2007.

My statement specifically focuses on on-the-book and off-the-book subsidies undertaken by the Chinese government in violation of its WTO commitments, the abilities of these subsidies to distort free markets and to hamper U.S. companies, and the remedial application of countervailing duties.

Why China?

China is the largest nonmarket economy.  China is the nonmarket economy with the greatest commercial influence on the United States.

The U.S. trade deficit with China is the largest in trade history, and is growing.  Pervasive subsidies seep through China, distorting markets and resulting in the misallocation of resources.

The WTO requires annual notification from members on subsidies they maintain and encourages additional needed information on subsidies.

On April 13, 2006, China submitted an overdue subsidies notification to the WTO in which it identified 78 subsidy programs from 2001 to 2004.

Table 1 in my written testimony specifically identifies the breakdown.  However, for this presentation I have identified a top ten list of the beneficiaries of these subsidies in China's 2006 notification.

Foreign invested enterprises and foreign equity joint ventures, and agriculture and animal husbandry top the list.  There are also several industry specific subsidies, including those aimed at integrated circuits, tea, copper refining, casting, forging, dies, and machine tools, specifically.

China's notification of its subsidy programs is incomplete.  Generally, it concentrates on foreign invested enterprises and ignores local producers.

It also concentrates on the central government's programs and ignores provincial and municipal governments' programs.

It ignores most of the export and import substitution subsidies that I list in my testimony, and it provides no data or statistics on the amounts of subsidies or the effects on trade.

My research over the last eight years has shown that the Chinese government uses at least 15 types of different subsidies, and in my written testimony I identify a list of them, ranging from free to low-cost loans to the undervalued currency, and I can just go over a few examples here.

Free to low-cost loans is one subsidy.  Half of all bank loans go to State-Owned Enterprise (SOEs).  Most of these loans will never be repaid.

If the borrowers cannot pay back the subsidized loans, the banks convert the debt into equity in the SOEs or domestic companies.

Asset injections is another example.  The SOE's parent companies, usually municipal governments or ministries, provide them with opportunities to acquire State-run businesses such as toll bridges at highly preferential terms.

Labor controls provide yet another example.  The government exercises various methods to control employees, including the "dang'an" or employment dossier, and to reduce labor costs through injection of part-time and migrant workers.

The government also provides exemptions from mandatory worker benefits contributions to companies that satisfy certain export performance requirements.

On and on.

Lack of transparency reduces our ability to gauge the effects of subsidies.

It also reduces our abilities to gauge the true efficiency and productivity of Chinese labor.

It reduces the ability of U.S. manufacturers to prove dumping.

It magnifies the weaknesses of China's statistical system.

It reduces the credibility of the SOE's books, some of which have at least four different sets of books.

Lack of transparency specifically affects China's gross domestic product (GDP) figures; statistics generated by the National Statistics Board (NSB); sensitive data, such as those dealing with debt or foreign direct investment (FDI); statistics in private and service sectors; some economic and industrial data that the Chinese government classifies as state secrets; unemployment statistics; and statistics on non-performing loans (NPLs).

The 11th Five-Year Plan that has been revealed indicates that subsidies will flow into integrated circuits and software; new-generation networks; advanced computing; biomedicine; civil airplanes; satellite applications; high-performance and new materials, subsidies will also go into controversial sectors such as stem cells, gene therapy, and genetically modified crops; traditional U.S.-dominated industries, including software, semi-conductors, and space exploration; and renewable energy sources, such as solar, hydro, and wind power.

Subsidies are very difficult to understand and unravel, primarily because they are politically motivated--rather than economically motivated--and so they promote exports of inefficient domestic industries.

They're also guided by the need to control SOEs more effectively rather than to increase their profits.

They stem from long and mid-range plans as well as from mistakes.  Though very difficult to unravel, they are clearest for global champions, such as PetroChina, and they are different at central, State, and local levels.

One example of the market distortion effects of subsidies is evident in the profits of foreign companies operating there.

Our research has shown that only one-third of the foreign invested enterprises in China have ever made a profit there.

United States companies operating in China had lower profit margins than in their global operations.

In 2004, total China earning for U.S. foreign affiliates, including all sources of profits, was $8.2 billion.

In 2004, U.S. foreign affiliates earned $7.1 billion in Australia, $8.9 billion in Taiwan and South Korea, and $14.3 billion in Mexico, with much smaller economies.

Five U.S. companies accounted for a third of the equity profits, showing that they're highly concentrated.

Comparisons can be made between subsidized and market- determined prices.  Despite China's opacity, benchmarks, physical activity indices, and independent surveys can provide independent estimates of some subsidies.

Several corporations engage in these activities.

WTO provisions require that China divulge more information on the magnitude and effects of its subsidies.

What will countervailing duties do in China, and with China?

Countervailing duties will probably underestimate the amounts required to offset China's pervasive subsidies.  However, small and medium-sized enterprises will find countervailing duties less onerous and more accessible than anti-dumping measures.

Countervailing duties will also give U.S. companies an explicit import relief measure that targets unfair government subsidies.

Countervailing duties therefore provide a credible and cost-effective way to offset some of China's subsidies and to level the competitive playing field.  Half a loaf is better than no bread.

Thank you.

[The prepared statement of Ms. Haley follows:]

Chairman LEVIN.  Thank you very much.

Mr. Porter.

STATEMENT OF DANIEL L. PORTER, PARTNER, INTERNATIONAL TRADE GROUP, VINSON & ELKINS LLP

Mr. PORTER.  Good afternoon.

My name is Daniel Porter.  I'm a partner in the law firm of Vinson & Elkins, specializing in international trade.

I appear today solely in my personal capacity.  I am not appearing on behalf of the Chinese government or any other client.

Rather, I am here in response to a request from the Subcommittee to share my personal thoughts about the bill, H.R. 1229.

Mr. Chairman, I appreciate this invitation and the opportunity to discuss these issues with you.

My remarks today will be a brief summary of my written statement that was provided to the Committee yesterday.

At the outset, I note that it is not my position that the U.S. Congress should not pass legislation authorizing the application of the U.S. countervailing duty law to nonmarket economies such as China.

I fully recognize the ability and right of the United States to make amendments to its trade remedy laws to ensure that imports are fairly traded.

That stated, I also believe that any changes to the U.S. trade remedy laws should be fair and not impose unreasonable or unwarranted restrictions on imported products.

Like others, I see a few problems with the bill as currently drafted.

The first problem is that the bill requires congressional approval before a country can graduate from nonmarket economy status to market economy status.

If enacted, such legislation would represent the only instance in which Congress would become involved in the day-to-day application of the Antidumping Duty (AD) and CVD laws.  With all due respect, this is not the role of Congress.

Rather, like other aspects of the AD and CVD laws, Congress should establish the criteria it wants to be applied and then instruct the responsible agency to implement that criteria.

This is particularly true in the anti-dumping world, given that anti-dumping duties are assessed on a retrospective basis and all interested parties are permitted to appeal a Commerce Department final determination to the Court of International Trade.

I respectfully submit that Congress should not be involved in the day-to-day application of trade remedy laws to individual cases.

The second problem is that the current draft of the bill requires the Commerce Department to calculate the amount of benefit of the CVD rate by utilizing benchmarks outside China.

With all due respect, such provision is not needed, not fair, and contrary to the provisions of China's WTO accession protocol.

Mr. Chairman, such provision is not needed.

The underlying premise of this provision, that the alleged control of the economy by the Chinese government makes it impossible ever to utilize appropriate benchmarks from within China to calculate the subsidy benefit is simply at odds with the numerous factual findings concerning the real world of China today.

Over the past couple of years, there have been many studies demonstrating that the Chinese government has undertaken significant reforms to promote the introduction of market forces in the economy.

Such factual conclusions indicate that there are sectors in the economy that operate under market principles, and therefore could provide suitable benchmarks for measuring the extent of the subsidy benefit.

As importantly, requiring the Commerce Department to adopt such a presumption would be contrary to the provisions of China's WTO accession protocol.

The language of Article 15(b) makes clear that before utilizing surrogate benchmarks and CVD cases against China, the United States must first make a specific factual finding that there are special difficulties with utilizing benchmarks in China

A requirement to find special difficulties necessarily implies that such finding be made on a case by case basis.

The reason is that every case is different.  Different products have different producers and different industries operating in different sectors of the economy.

I submit that by not allowing the Commerce Department to make this finding on a case by case basis, the bill does not honor the United States' agreement made in China's WTO protocol.

The third problem with the current draft of the legislation is that it does not prevent double counting of duties--that is, imposing two sets of duties to compensate for the same unfair trade practice in those situations in which the same exporters face both an anti-dumping and somebody case.

The double counting problem stems from the special anti-dumping rules that are applied to nonmarket economies.  Very simply, the special anti-dumping rules that are applied to nonmarket economies such as China already offset much subsidization.

Let me give you a quick example.

Assume that because of subsidies a Chinese steel producer is able to purchase iron ore more cheaply.  Rather than having to pay the market price of $100 of iron ore the subsidies allow him to incur only an $80 cost.

However, the special anti-dumping rules that are applied to nonmarket economies take this into account.

Under existing law, when calculating anti-dumping margins for this company, the Commerce Department is required to use the $100 iron ore cost, not the producer's actual cost of $80.  The use of the higher cost results in a higher anti-dumping margin.

To impose CVD duties on top of those AD duties would result in double counting.

The final problem of the bill is the effective date.  H.R. 1229 states that the changes to the law shall apply to CVD petitions filed on or after October 1, 2006.

Use of such a date is an obvious attempt to make legal the ongoing CVD case on coated free sheet paper that was filed on October 31, 2006.

Mr. Chairman, such retroactive application of changes to the trade remedy laws is not fair to the Chinese government and Chinese exporters participating in the ongoing CVD case.

To apply H.R. 1229 retroactively is equivalent to punishing them for acts that were legal at the time they were committed.

It is for these reasons that retroactive legislation has always been looked upon with disfavor.

Mr. Chairman, in conclusion, I want to say there is a simple fix to all the problems that I have identified with H.R. 1229.

Change H.R. 1229 to reflect the language of Section 3 of H.R. 3283, the bill that authorized the application of the CVD law to nonmarket economies that was passed by the House in the 109th Congress.

H.R. 3283 accomplishes the overall objective of ensuring that there can be CVD cases against NME countries but does so in a manner that is fair and that honors the U.S. obligations in how it will apply the AD and CVD laws.

Mr. Chairman, that concludes my testimony.  I appreciate the attention of the Committee, and would be happy to respond to any questions.

[The prepared statement of Mr. Porter follows:]

Chairman LEVIN.  Thank you very much.

Mr. Hecht.

STATEMENT OF JAMES C. HECHT, PARTNER, INTERNATIONAL TRADE PRACTICE, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

Dr. HECHT.  Thank you.  Good afternoon.

I am Jim Hecht, and I practice in the international trade area at the law firm of Skadden, Arps, Slate, Meagher & Flom.

The views I will provide today are my own and not necessarily those of the firm.

I appreciate the opportunity to provide a few comments on H.R. 1229 and would of course be happy to answer any questions you might have.

The issue of subsidies in nonmarket economy countries, and in particular China, has become a major focus in the trade policy area for some time now.

In the past, debate on application of CVD law to NMEs has focused on whether subsidies can be meaningfully isolated in such economies.  Recent events would appear to resolve that issue.

In this regard, the Administration has repeatedly expressed strong concern at the evidence of significant subsidization in China impacting a range of industries.

In acceding to the WTO, China specifically committed itself to abide by WTO subsidy disciplines and to eliminate prohibited subsidies.

As part of its WTO obligations, China has identified and notified scores of subsidy program that continue to provide benefits to Chinese industries.

The United States has recently requested consultations under the WTO dispute settlement system, with regard to nine prohibited subsidy programs in China.

In light of these facts, there can be little doubt that subsidies in nonmarket economies can be and have been specifically isolated and identified, as shown by the recent actions of both the United States and Chinese governments, and as such, there would appear to be no valid legal or policy reason why U.S. trade disciplines in the subsidy area should not apply to nonmarket economies just as they do with respect to market economies.

In fact, there are already clear grounds under existing law to apply U.S. countervailing duty provisions to nonmarket economies, and in this regard, the Administration is currently considering whether to modify its longstanding policy of not applying CVD rules to such economies.

Notwithstanding the possibility of a change in the regulatory practice, however, there are good reasons for legislative action to clarify the issue.

Legislation such as H.R. 1229 would remove legal uncertainty in the area, would obviate the possibility of future regulatory changes of policy, and would allow Congress to address the manner in which CVD law will be applied to nonmarket economies.

One methodological issue that has been raised is the relationship between the CVD law and the nonmarket economy methodology used in anti-dumping cases, and specifically whether additional legislative action may be necessary to prevent a double assessment of duties for so-called domestic subsidies.

In prior comments on the topic, the Administration has taken the position that requiring such an adjustment is neither warranted nor appropriate.  In my view, that position is correct.

Even aside from the obvious administrative difficulties in trying to undertake an additional analysis in this area, the theoretical concern that has been expressed with regard to double counting is not well founded.

Specifically, it is not correct to say that the nonmarket economy dumping methodology corrects for domestic subsidies.

Rather, it corrects for price distortions that result in both artificially high and artificially low input prices in a nonmarket economy.

As such, there is no basis to conclude that domestic subsidies will be remedied through the NME dumping methodology.

H.R. 1229 would also make a change in current law to require that Congress approve any graduation of a country from nonmarket to market economy status.

Nonmarket economy treatment can be critical to the operation of U.S. trade laws, particularly where the lack of reliable price and cost data in a nonmarket economy makes application of traditional market economy rules inadequate.

Under current law, graduation decisions are made unilaterally by the Administration.

Given the importance of NME graduation decisions to U.S. industries and to the U.S. economy, as well as the concerns that have been expressed in the past by Members of Congress with respect to such decisions, allowing Congress to weigh in before the fact would make a great deal of sense.

Again, I appreciate the opportunity to be here and would be happy to answer questions.

[The prepared statement of Mr. Hecht follows:]

Chairman LEVIN.  Thank you very much, and to all of you.

Mr. Herger.

Mr. HERGER.  Thank you, Mr. Chairman.

I believe just about everyone recognizes that we have a major problem with China.

We have a major problem in that we're dealing with this huge nation that's growing so rapidly, and is coming from a point where it did not have a free enterprise system, and we have problems there.

My concern is that when we do what we do in correcting these problems, we not do it in a way that we lose when we get into a settlement fight with them in the WTO and end up penalizing even more some of our U.S. companies.

So, with that in mind, Mr. Phelps, in your testimony, you say that the H.R. 1229 will make industries in other countries more competitive rather than the American industry.

Could you elaborate on how other countries would benefit?

Mr. PHELPS.  Thank you, Congressman.

Yes.

CITAC's general view is, particularly in the United States, where we must, and steel industry people can debate this endlessly, we must import 20 percent, 25 percent, whatever the number is, of our steel every year, because the industry simply doesn't make enough steel, or you could say the consuming sector is so vibrant in the United States that we need more steel than is made.

It is absolutely crucial for those companies, whether they're a small metal bender, a parts manufacturing operation, integrated with one of the big three auto companies, that they have to be able to get their material at prices that are internationally competitive.

Without that, they are themselves put at risk for imports of their products.

Our concern is, when the U.S. prices are artificially posted higher, that the metal benders and the parts makers and the people who are supplying fenders to GM, Ford, and Chrysler and others, simply are going to lose their business to offshore suppliers of those products.

Mr. HERGER.  This is my concern, that we meet this balance, because we have many industries that you're referring to, that you represent, that need these products from China, but we want them at the fair price, not at too high a price, not at a subsidized lower price, but what is the price.  I mean, that's what this hearing is about.

Again, Mr. Phelps, China's accession protocol says, quote:

"If there are special difficulties in that application, the importing WTO member may then use methodologies for identifying and measuring the subsidy benefit which take into account the possibility that prevailing terms and conditions in China may not always be available as appropriate benchmarks.

In applying such methodologies, where practicable, the importing WTO member should adjust such prevailing terms and conditions before considering the use of terms and conditions prevailing outside China."

Close quote.

However, H.R. 1229 changes this test to add, quote:

When the administering authority has determined that China is a nonmarket economy country, the administering authority shall presume that special difficulties exist in calculating the amount of a benefit involving China and that it is not practicable to take into account and adjust terms and conditions prevailing in China, and the administering authority shall use terms and conditions prevailing outside of China."

Close quote.

Mr. Phelps, how can this irrefutable presumption be anything but a per se violation of the WTO accession protocol?

Mr. PHELPS.  It's hard for me to see how it wouldn't be an illegal, or against the protocol with the WTO accession in China.  It's hard for me to see that.  I would agree with you.

Mr. HERGER.  Again, we're trying to strike this balance.  We really want what is right.  We want what is fair.

We have many industries that depend on a competitive product from China.  We just don't want it to be the other--we don't want it to be too competitive, where they're being subsidized, (a), and (b), we don't want to be put into a position where we go and we're found through a settlement dispute that we're penalized even more.

Can you comment?

Mr. PHELPS.  I would agree with that.

The fastest-growing export market for the United States right now is China.

Obviously, it is in our interest--I think it went up 34 percent, exports to China went up 34 percent.  It is obviously in our interest to open Chinese markets even further.

If we lose a WTO case, the very first thing they do, countries who win, if they retaliate, is they look at those export industries, and we have a lot of--we're the largest exporting country in the world, and they hit them with duties.

So, I would agree, we really don't want to create more trouble with the WTO for U.S. exporters.

Mr. HERGER.  Exactly.  Thank you, Mr. Phelps.  Thank you, Mr. Chairman.

Chairman LEVIN.  Mr. English.

Mr. ENGLISH.  Thank you so much, Mr. Chairman.  I have a couple of quick questions.

First, Mr. Porter, I'd like to briefly explore a portion of your testimony with you to see if I can clarify your remarks on the so-called pretty much theoretical practice of double counting.

In your testimony, you assert that H.R. 1229 is flawed because it contains no specific provision to, as you say, avoid double counting.  You further cite a 2005 GAO study that claims Commerce has no authority under existing law to avoid double counting.

You heard, I presume, Assistant Secretary Spooner testifying earlier that Commerce indeed does, in their view, have the authority to create a methodology for applying countervailing duty laws to nonmarket economies which would take into account the so-called practice of double counting.

In the study that you cite, I believe it also contains a letter from Commerce to the GAO on the report.

Commerce clearly identifies that the best way to address any potential methodology or implementation issues is not through legislation, but rather, quote, "in the context of future cases," unquote, because determining the best methodology would, quote, "hinge in part on the particular facts of any proceeding."

Now, I understand the argument that you've made here is that the Department of Commerce has to evaluate the case for third party--I'm sorry--third country data on a case by case basis.  Yet you think Commerce shouldn't be able to make the call on double counting on a case by case basis.

With that, why is it necessary for Congress to tie the hands of Commerce in its implementation of what is, after all, highly complex and difficult administration of this proposal?

Mr. PORTER.  Thank you, Congressman.

I apologize if my statement was confusing.

I do not think that Congress should tie the Commerce Department's hands on double counting.

I think there is a, if you will, legitimate disagreement on the interpretation of existing U.S. law on whether, in an individual case, the Commerce Department can make adjustments to account for double counting when the subsidy at issue is a domestic subsidy and not an export subsidy.

There is a specific provision in U.S. law that says you shall not--you shall take into account export subsidies because export subsidies have a direct effect on export price and, at least in theory, it is taken into account with respect to dumping.

Since that provision just says export subsidies, if you will, there is a disagreement on whether Commerce in fact has the authority to take into account, make adjustments for any domestic subsidies that are double counted with respect to dumping.

Congressman--

Mr. ENGLISH.  I understand your argument.

Mr. PORTER.  I'm sorry, Congressman.  What I would suggest is the language used in Section 3 of the prior bill simply says, "Commerce, ensure there's no double counting."

Mr. ENGLISH.  I'm sorry, which prior bill?

Mr. PORTER.  The one that passed the House, I think it was 3283--

Mr. ENGLISH.  Oh, the one I wrote.  Okay.  I remember that one.

Mr. PORTER.  Okay.  So, I think that provision simply says, "Commerce ensure there's no double counting.  You have the authority to ensure it.  We'll leave it to you to decide how to do that."

Mr. ENGLISH.  I just question whether that's necessary.

Mr. Hecht, if you would comment on that, and also, you make the comment in your testimony, "Requiring a double counting adjustment, e.g., by always assuming the surrogate values fully account for NME subsidies, could easily place an NME producer in a better position than a similarly situated market economy producer and result in lower assessed unfair trade duties."  You attach a chart.

That, of course, would make Mr. Phelps happy, but do you want to comment on that?

Dr. HECHT.  Sure, I'd be happy to.

I think that is the case.  In a situation where Chinese costs happen to be higher than the surrogate values are, you're absolutely going to be in a situation where China would benefit from the use of a nonmarket economy dumping methodology.

That really is the core insight into why this concern with regard to double counting is in my view misplaced.

The GAO raised what I think is a reasonable question to ask, which is when you're using a surrogate value for a given input, if the Chinese value is subsidized, won't that surrogate value be higher?

That's possible, but what they're not taking into account is you're using a whole lot of other in puts and China may have price distortions where their prices are much higher than the surrogate value.

Mr. ENGLISH.  Sure.

Dr. HECHT.  The GAO actually issued a study, a year after the one that's been referred to here today, where they looked at the nonmarket economy methodology and they specifically recognized in there that that could be the case, that we really don't know how it's going to cut.  It all depends on the facts of a given case.

Here it's easy enough to say that, give them authority to look at it, but the truth is, there is no reasonable basis to determine this, because Commerce does not collect nonmarket economy cost data when it does its analysis, and the whole reason you're using surrogate data is you don't have reliable cost data.

So, the difficulty is, if you require this to be taken into account, there's no way to do that, because you don't have access to the information you need to do it, so it could act to make the law essentially ineffective.  That's what the concern is.

Mr. ENGLISH.  Thank you, Mr. Chairman, for letting me inquire.

Chairman LEVIN.  Not at all, and I think your question highlighted the need to consider what's being said here, and to avoid an argument being raised, it essentially, if followed, would defeat the purpose of the bill.

I don't quite understand the argument that there's a requirement here.

Mr. Herger read from this section, from Section 2.  What it does is create a presumption.

I don't know how, within anybody's--well, let me put it this way.

I don't see how you turn a presumption into a requirement, or even into a presumption that cannot be rebutted.  I don't read the language that way.

So, I think, Mr. Herger, we need to take another look at it, because what I fear is that balance can become an argument for inaction.

Mr. Phelps, I mean, I hear you, and we hear these arguments often.

If you simply look at the impact on the consumer, essentially it makes irrelevant where goods are produced or under what circumstances.

You referred to artificially posted higher prices.  The problem is that the imbalance leads to artificially posted higher prices by those who have an unfair advantage over our producers.

I simply want to say to you, and to those you represent, that there is a need, and this is I think what's motivating us very much, to look at the impact of imbalances.

You talk about China as a market for our exports, but--and we went through this with the ambassador who was here, the USTR ambassador.  You have to look at what comes in here as well as what goes out.

We have this major imbalance in trade with China, and so does the rest of the world, and it has all kinds of imbalances and all kinds of ramifications, including the ability of entities to use the profits from their sheltered markets to shelter them further.

Dr. HALEY.  Can I make a comment?

Chairman LEVIN.  Yes.

Dr. HALEY.  What I was trying to say was that the subsidies were motivated more by political considerations than by economic ones.  So, we do benefit, consumers do benefit, in the short term.

However, the focus of these subsidies will change over the next five to ten years, as they become that of technology acquisition, and they will pose a more strategic threat to the United States, especially in industries in which we are cutting edge.

So, the effects on consumers is just a very minor concern.  We have to look at subsidies in a longer term perspective.

Chairman LEVIN.  I think well said.

Well, maybe we could carry on this discussion, I won't call it a dialogue--

[Laughter.]

Chairman LEVIN.--but why don't we do this?  If you have any further comments, send them to us.  Okay?

We're going to be discussing, and I hope acting on this legislation, in the near future, because all the testimony, virtually all of it, I think Mr. Herger would agree, is that there is a major problem relating to the subsidization by China.

Yes, sir.

Mr. COMRIE.  Mr. Chairman, may I make one further comment--

Chairman LEVIN.  Please.

Mr. COMRIE.--related to this topic?

I think any consideration of this bill would be a mistake if it doesn't consider some aspects of the history of the steel industry.

The steel industry, as I think you well know, from 1950 to 1980, ended up with an industry that was something like 40 percent government owned and ended up in a worldwide glut of steel with major ramifications to customers, major ramifications in this country to the steel industry.

By the mid-1980s, many of those countries that had government-owned steel industries realized this was a terrible mistake, and they went about trying to correct it, and we've gone a long ways in correcting that.

Many of those countries are market economies, but those countries have sort of seen the light and most of them have been privatized.

So, here we are looking at China, who looks like they're going through exactly the same cycle again, only this time many times magnified, much worse, with much worse consequences coming down the road, and we can all see what's almost certain to happen.

So, for anyone to sort of sit here and look at this bill and say that in some way or another the countervailing duty law shouldn't be used to protect the U.S. economy against this cycle that we've already seen happen once just doesn't make any sense.

Chairman LEVIN.  All right.  We could discuss that.  I happen to very much agree with it.

Why don't we do this?  We'll recess, not adjourn, so you can further comment.

We really thank you.  This, I think, is a vital prelude to what I think will be responsible action in this Congress.

So, thank you very much, and the hearing is now adjourned.

[Whereupon, at 3:45 p.m., the hearing was adjourned.]
[Submissions for the Record follow:]

Columbia Forest Products, statement

Erik O. Autor, letter

Nucor Corporation, letter

Retail Industry Leaders Association, statement

Society of the Plastics Industry, letter

Southern Shrimp Alliance, Inc., letter

Zygmunt Jablonski, statement