Stopping Overseas Subsidies Act
Floor Speech
STOPPING OVERSEAS SUBSIDIES ACT -- (Senate - March 23, 2007)
Ms. COLLINS. Mr. President, our Nation's manufacturers and their employees can compete against the best in the world, but they cannot compete against nations that provide huge subsidies and other unfair advantages to their producers. Time and time again, I hear from manufacturers in my State whose efforts to compete successfully in the global economy simply cannot overcome the practices of illegal pricing and subsidies of nations such as China. The results of these unfair practices are lost jobs, shuttered factories, and decimated communities.
Consider this one example that affects my home State. The American residential wood furniture industry has experienced devastating losses due to surges of unfairly priced furniture imports from China. According to the U.S. Bureau of Labor Statistics, 146,600 jobs, or about 22 percent of the workforce, have been lost in the U.S. furniture industry since 2000. Unfairly priced imports from China are a leading cause in these job losses. China's wooden bedroom furniture exports to the U.S., which amounted to just $169 million in 1999, reached an estimated $1.8 billion in 2006. By subsidizing investments in furniture manufacturing facilities, China is exploiting the U.S. market to the benefit of its producers and putting our employees at an unfair advantage.
One fine furniture manufacturer in Maine, Moosehead Manufacturing, struggled for years to cope with the onslaught of unfair imports from China. Despite the company's quality products and attempts to survive through several rounds of layoffs and participation in the Federal Trade Adjustment for Firms program, Moosehead was not able to keep its doors open in the face of unfair Chinese imports. The company announced its closing on February 8, 2007. This is a tragic development--for this family-owned business, for its skilled employees, and for the community and State.
It is because of the experience of manufacturers such as Moosehead that I reintroduced the Stopping Overseas Subsidies Act. I am pleased to be joined by my friend and colleague from Indiana, Senator BAYH, who has worked closely with me on this legislation. The core provision of this bill revises current trade remedy laws to ensure that U.S. countervailing duty laws apply to imports from nonmarket economies, such as China.
Our Nation's trade remedy laws are intended to give American industries and their employees relief from the effects of illegal trade practices. Unfortunately, some countries in the world choose to cheat instead of compete fairly. In these cases, U.S. industries can file petitions under U.S. trade remedy laws for relief.
Up until recently, the practice of the Department of Commerce was to accept an antisubsidy petition against any market economy--such as Canada or Chile--but not against a nonmarket economy such as China. As a result, nonmarket countries that subsidize their industries the most heavily and cause the most injury to U.S. industries and workers, such as China, were exempt from the reach of American countervailing duty laws.
The countervailing duty statute on its face in no way limits the application of the law to any country. There is nothing in the countervailing duty provisions per se, or anywhere else in the statute, that limits the broad language applying countervailing duty remedies to every ``country.'' Unfortunately, the Department's interpretation of this statute for the last two decades has been that it does not apply to nonmarket economies, and this policy was upheld by a 1986 Federal court decision that maintained that Congress needs to clarify the statute on this issue.
The good news is that, on November 22, 2007, the Department of Commerce finally accepted the first countervailing duty petition against a nonmarket economy since the 1986 court decision. The case was filed against China by New Page Corporation, a coated free sheet paper company with operations in Maine, Ohio, and Maryland. Despite its efficient, state-of-the-art mills, skilled and dedicated employees, strong relationships with customers,
strategically located mills and distribution facilities and growing markets for its products, New Page had to shut down an entire paper line as a result of unfair foreign competition.
Jim Tyrone, senior vice president of New Page Corporation, testified before the Ways and Means Committee on February 15, 2007, regarding the illegal subsidies that China is providing to its paper industry. Starting in the late 1990s the Government of China targeted its domestic coated paper industry for rapid development. As part of this development plan, the Chinese Government provides low-cost policy loans through government-owned banks. It also provides grants for the development of new paper capacity, and tax breaks based on export performance and domestic equipment purchases. Moreover, Tyrone testified, government banks in China forgave at least $660 million in loans they had provided to China's largest paper producer, Asia Pulp & Paper, when that company declared bankruptcy in 2003.
The result is that in the United States, Chinese coated free sheet market share has increased by an average 75 percent annually over the past four years based on publicly available data, despite having to ship their products thousands of miles to reach the U.S. market. Ironically, and in contrast to U.S. paper producers, China has no natural advantage in the production of paper. It does not have an abundant supply of the requisite inputs, and must import much of the pulp that it uses to make paper. It is only because of illegal subsidization that China can compete in the paper products market in the U.S. and Europe.
According to a 2005 study by the American Forest and Paper Products Association, China is using an array of subsidies to promote the development of timber and pulp production in China. These include government loans and loan subsidies for technology renovation, promotion of foreign investment in state-owned enterprises, and protection of debt-ridden state-owned enterprises that maintain excess or idle production capacity through local government ``soft'' loans and loan forgiveness.
In its 2006 Report to Congress, the U.S.-China Economic and Security Review Commission, a bipartisan organization established by Congress in 2000 to provide recommendations to Congress on the relationship between the United States and China, noted:
China has a centralized industrial policy that employs a wide variety of tools to promote favored industries. In particular, China has used a range of subsidies to encourage the manufacture of goods meant for export over the manufacture of goods meant for domestic consumption, and to secure foreign investment in the manufacturing sector.
Similar conclusions are contained in the United States Trade Representative's 2006 Report to Congress, which concludes:
China continues to pursue problematic industrial policies that rely on trade-distorting measures such as local content requirements, import and export restrictions, discriminatory regulations and prohibited subsidies, all of which raise serious WTO concerns.
These practices run counter to China's obligations under its 2001 World Trade Organization accession agreement. In its accession protocol, China explicitly agreed that it would be subject to the subsidy disciplines of other
member countries. In fact, it agreed to specific provisions in article 15 of the protocol which permit WTO countries to use alternative benchmarks for measuring subsidies in China. Yet, unbelievably, the Government of China is arguing in the New Page case that the Department of Commerce is legally prohibited from applying countervailing duty laws to imports from China.
This is exactly why our legislation is still needed, despite the Department of Commerce's acceptance of New Page's case. If U.S. law is clear on the subject of whether anti-subsidy petitions can be filed against nonmarket economies, countries such as China cannot use U.S. courts to dispute that fact. In addition, the Department of Commerce will not be able to summarily reject future antisubsidy petitions against nonmarket economies due to a change in leadership in the department or for political reasons.
I want to point out that this bill also includes a number of new provisions that are designed to strengthen our government's ability to hold our trading partners accountable for their illegal trade practices. The bill makes clear that the United States can use information from third countries and alternative methodologies when calculating China's subsidies. This is consistent with what China itself agreed to in its WTO accession protocol. The bill provides that a determination by the Department of Commerce to revoke a country's status as a nonmarket economy under U.S. antidumping law must be approved by Congress. Finally, the bill requires the U.S. International Trade Commission to conduct a study regarding how the People's Republic of China uses government intervention to promote investment, employment, and exports.
Unfair market conditions cannot continue to cause our manufacturers to hemorrhage jobs. No State understands this more than my home State of Maine. According to the United States Department of Labor, 10,400 manufacturing jobs in Maine have been lost since 2001, a 14.8 percent decline. This is why organizations such as the Maine Forest Products Council and the Maine Wood Products Association have strongly endorsed our proposal to extend U.S. countervailing duty laws to nonmarket economies.
The stopping overseas subsidies bill is a bipartisan, bicameral bill that has a broad range of support across many industries and geographical areas. A companion bill has been introduced in the House by Representatives by ARTUR DAVIS of Alabama and PHIL ENGLISH of Pennsylvania.
U.S. industries don't want protection--they want fair competition. Illegal subsidies distort fair competition, regardless of the economic system in which they are used. Our legislation simply levels the playing field by allowing antisubsidy petitions to be brought against nonmarket economies in addition to market economies.
Some countries, such as China, want to have all the benefits of engaging in international trading institutions and systems yet continue to cheat on the system with no penalties. It is time these countries were held to the same standards as other countries around the world. I ask you to join me in supporting the SOS bill to ensure that all countries are held accountable for their trade practices.
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