18 July 1994 U.S. Import Policy "Threatens" Free Trade

American policy on imported goods poses a threat to world free trade, according to a research report published by Lincoln University's Agribusiness and Economics Research Unit.

Written by U.S. economist David Stallings, the report says that should current American import policy be implemented in other countries, New Zealand exporters would be penalised every time the Kiwi dollar depreciated.

Stallings examined administered protection in the United States during the 1980s and points out that the widespread use of non-tariff import restrictions in American trade policy is linked with a complex bureaucratic system. Import restrictions favour domestic producers, exclude consumers and public opinion from decisions, and open the way for election grandstanding by politicians, he says.

New Zealand exporters urgently need to be aware of this threat to their products, as do trade negotiators involved in GATT talks, says the report.

Domestic producers see government protection as quick, widely available, easy to use and almost impossible to fight. There is no incentive to change the status quo, except to improve the possibility of protection.

With countervail statutes defending U.S. producers from predatory exporters to the U.S., the question is why more foreign goods are "dumped" or "subsidised" more frequently as the U.S. dollar appreciates, or as members of congress seek votes.

The report states that when pricing procedures have become unfair by definition, the process of capitalism becomes threatened and the concept of "free trade" becomes impossible.

Within the U.S., use of countervail and anti-dumping legislation is encouraged because it provides various benefits to producers -

• Countervail and anti-dumping give relief quickly. Usually within four to six months of a petition.
• Duties are prohibitive, three to six times the average U.S. tariff.
• Duties are applied immediately, to warehoused goods and also retrospectively to all goods sold in the last ninety days.
• Success rates for the petitioner are high, over seventy percent.

Even without duties there are costs associated with defending petitions. These costs are estimated to range between U.S. $100,000 to U.S. $4.0 million. If an exporter fails to answer charges the duty requested by the petitioner will be granted.

• There is no effective domestic opposition. Neither the President, Secretary of State, consumers, retailers or manufacturers using imported goods provide input into the decision-making.
• Rules of evidence are easy. Anti-dumping duties are automatic whenever domestic price in the exporting country exceeds the U.S. market price.
• Petitioners seek anti-dumping for countervail duty because the highly technical nature of the process makes it unlikely that people will be interested in learning how duties are imposed.

Not only is there a high cost to defending a petition, a learning process exists in countervail cases, says Stallings. Once a country has been found guilty and information published, subsequent petition filings become easier against that country.

The total number of filed petitions is directly related to the state of the U.S. economy, a 1% appreciation in the dollar will lead to a 5.4% increase in total petitions. A 1% increase in real GNP will lower the number of petitions by 1.8%. An election year will see on average an increase of 88% in the number of petitions lodged. Election years are so significant that a depreciation of 16.3% is needed to counter the number of petitions filed in that year.

However, the report points out that increased demand for protection in the United States is not a direct result of appreciation of the dollar. Protection has occurred because import restrictions are easily accessible, easy to use, quick to implement and almost impossible to defend.

The threat to international trade comes from the copying of this system in other countries, says the report.

Bureaucrats and legislators gain from the promotion of unfair trade restrictions. Because of this there are no costs to them only rewards, indicating that anti­dumping and countervail statutes will continue to provide protection.

Anti-dumping legislation now included in GATT arrangements could further widen the use of such devices, warns Stallings.

The research report, No 211 in the ongoing series produced by Lincoln University's Agribusiness and Economics Research Unit, is entitled "Administered Protection in the U.S. during the 1980s" and copies are available by contacting AERU, PO Box 84, Lincoln University, Canterbury.

The research for this particular report was funded by the Agriculture and Market Research Development Trust (AGMARDT).

Bryan Reddish, Lincoln University, New Zealand.

Ian Collins, Journalist, Lincoln University, New Zealand.