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THE BYRD AMENDMENT: CORRECTION OR MISTAKE
For Trade And The Trading System

The following is a report of the proceedings or virtual transcript from the seventh in the series of trade policy colloquiums sponsored by the Global Business Dialogue, with support from Market News International. It was held in the Holeman Lounge at the National Press Club on Thursday, January 18, 2001. The program began at 9:30 a.m. and concluded at 11 a.m.

The moderator for this event was R. K. (“JUDGE”) MORRIS of the Global Business Dialogue. The speakers were TERENCE P. STEWART, amanaging partner in the law firm of Stewart and Stewart; BERT VAN BARLINGEN, Counselor and Head of the Trade Policy Section at the Delegation of the European Commission in Washington; LEWIS LEIBOWITZ, a partner in the law firm of Hogan and Hartson; and CHARLES BLUM, who is president of International Advisory Services, Ltd.

Those sections of the proceedings that have been taken from the tape have been edited slightly for readability. A copy of this report of the proceedings of the January 18, 2001, Colloquium was shared with each speaker in advance of its being posted on this GBD web page. The responsibility for the overall document and for the posting of it rests with the Global Business Dialogue.

Ellipses. Finally a note on the use of ellipses (…): Sometimes these are used to indicate a speaker’s voice trailing off, which is usually followed by a fresh beginning for the expression of a thought. This is common in oral presentations. At other times, ellipses are used to indicate missing words, that is, words or phrases that were spoken but which the tape and/or the auditor could not recapture.

MR. MORRIS: Good morning. My name is Judge Morris. On behalf of the Global Business Dialogue and Market News International, it is my pleasure to welcome you to this the seventh colloquium in our series on international trade and investment policy.

If I might begin with a brief commercial. The next GBD Colloquium will be held here on February 14. The subject for that discussion is likely to be tariffs. Ideally, we would like to look at how one or two sectors might be affected by further tariff reductions. I notice that there are a number of representatives from various embassies here today. If any of you have thoughts about this topics, we would welcome them. Similarly, the views of the any of the business groups in your countries that may have expressed an interest in tariff issues would also be welcome.

Today’s subject of course is the Byrd Amendment, which has to do with the antidumping and countervailing duty laws. I see a lot of familiar faces here. I think you are all in the right room.

With respect to the discussion that we are about to embark upon, it has its limits. We have an excellent panel, but it would be impossible to cover every facet of this issue in under 90 minutes. And it may be that some of the relevant viewpoints are not represented. Two pick two examples: I know there are some who do not support the Byrd Amendment because they think it does not go far enough, that is, that it does not do enough for petitioners. Separately, there are also some who are very concerned about the procedures that were involved in the enactment in this legislation. These ideas may be referenced by one speaker or another, but none of our guests this morning is necessarily a proponent of either of these views.

As for the Global Business Dialogue, it does not have a position on the Byrd Amendment. As many of you know this is still a very young organization with a relatively small – growing but still small – membership. We have not yet begun the process of formally adopting policy positions.

The Global Business Dialogue, though, does have a bias or a predilection. Our bias is in favor of trade and investment and in favor of the smooth functioning of the WTO system.

INTRODUCTION
Biographical notes on the speakers are in your packets. I shall therefore offer only the following brief introductory comments before inviting the panelist to give their presentations.

Terry Stewart, who will begin our discussion, is the Managing Partner at Stewart & Stewart. Terry earned his undergraduate degree from Holy Cross, an MBA from Harvard, and his law degree from Georgetown.

Bert van Barlingen is the Counselor and Head of the Trade Section at the EU Delegation here in Washington. After earning his undergraduate degree at the University of Leiden, Bert studied at the Kennedy School of Government at Harvard and at the University of Michigan Law School.

Bert is Dutch, and his presence here temps me to share an insight about the Dutch from a colleague of mine in Amsterdam. As you may know, there are aspects of Dutch society that would appear to be quite permissive. In this connection, one might mention Amsterdam’s famous red light district or the high official tolerance for the use of some drugs. One long-term expat in Holland, a fellow who is married to a Dutch woman, summed up the situation this way: “In the Netherlands, you can do anything you want … but you better not.”

Lew Liebowitz is a partner in the law firm of Hogan and Hartson. A graduate of the University of Maryland Law School, Lew, like Terry is an expert on antidumping.

Charles Blum is the president of International Advisory Services Ltd., a firm he founded in 1988. Charlie comes at this issue from the perspective of someone who worked on steel policy when he was in the US Government, primarily USTR, and who has continued that focus in his more recent, private sector life.

At this point, I would like to ask Terry Stewart to come to the podium so that we can begin this discussion in earnest.

Statement of
TERENCE P. STEWART,
Managing Partner, Stewart & Stewart
(From a prepared statement)

MR. STEWART: Good morning. I would like to thank Judge Morris and the Global Business Dialogue for organizing this morning's event. The Continued Dumping and Subsidy Offset Act of 2000 [Title X of P.L. 106-387] which became law on October 28, 2000 is important legislation for American businesses, workers, communities and consumers. Like all legislation enacted by Congress and signed by the President, it is the law of the land and will be implemented and enforced by the responsible government officials. That process is underway. Much has been written about the new legislation in the press, very little of it having any factual basis. I would encourage those debating the new law to eliminate the many erroneous claims that to date characterize the discussion.

1. The Continued Dumping and Subsidy Offset Act of 2000 had strong bipartisan support as can be seen from the cosponsor list of H.R. 842 and S.61 which had 68 and 26 cosponsors in addition to the sponsors (Cong. Regula and Sen. DeWine).

2. Nothing in the act modifies the antidumping and countervailing duty laws as to when a case can be brought, what must be shown, how dumping or subsidies will be calculated, whether material injury and causation are demonstrated, what liability importers will face or how long relief will be provided.

3. The best result for injured domestic industries is for dumping or subsidization to stop after the issuance of an order. When that happens -- i.e., cessation of the unfair trade practice -- US producers, workers and their communities get complete relief at the time of importation. In such situations, of course, no money is ever assessed and so nothing is distributed under the Continued Dumping or Subsidy Act of 2000. There is no known petitioning group that has ever sought anything other than the cessation of the unfair trade practice.

4. The Continued Dumping and Subsidy Offset Act of 2000 is not a steel bill although steel producers and their workers like others may face continued unfair trade practices. Supporters have come from a broad spectrum of industries that have experienced the problems that continued dumping and subsidization cause, whether from agriculture, chemicals, auto parts, metals, consumer goods, or other products. Indeed, the problem of continued dumping or subsidization has been broad-based in the United States:

In many trade cases, full relief is not obtained. That is a fact many petitioning industries can attest to.

That brings us to the new law, the Continued Dumping and Subsidy Offset Act of 2000.

This question is really in the hands of those against whom the cases are brought:

The new law is a positive step for those seeking conditions of fair trade. The law will not encourage cases as reviewed before. Nor will it harm consuming industries or consumers -- indeed, it will help these groups as well. Moneys are distributed for reinvesting in the companies and their workers. This means that the law will help maintain more suppliers/vendors who are more competitive than they might otherwise be. Since importers are not liable for any additional duties, there is no change to the posture of the importing community. Thus, purchasers and consumers benefit under the new law. Claims to the contrary are baseless.

Governments have historically chosen and continue to the present to use moneys collected through taxes, duties and otherwise for a wide range of purposes: encouraging investment, promoting research and development, handling economic emergencies in regions or sectors, for infrastructure, adjustment assistance, export promotion, social policies, national defense and so on. Indeed, the prior GATT Subsidies Code recognized that "subsidies are used by governments to promote important objectives of national policy" [Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and Trade]. That doesn't mean that all government expenditures are above review. As the US witnessed in the FSC dispute, government expenditures that qualify as prohibited subsidies under the WTO's Agreement on Subsidies and Countervailing Measures ["SCM Agreement"] are subject to challenge and will need to be modified even if there is a meritorious purpose in the program.

That said, not all government expenditures qualify as a subsidy (a large group of expenditures are not "specific" within the meaning of Article 2 of the SCM Agreement). No claims have been made that the new law constitutes a prohibited subsidy (indeed any such charge would be absurd based on the structure of the law). It is my view that the new law, while providing a financial benefit is not specific within the meaning of Article 2 of the SCM Agreement and hence is not actionable. However, even if actionable, governments concerned with the matter will have to demonstrate adverse consequences to their industries -- improbable at the present time and unlikely going forward. Thus, claims that there should be WTO concerns under the SCM Agreement are hard to understand.

The same is true for claims that somehow the new law violates the antidumping agreement. Someone concerned about unfair trade practices continues to have the existing US remedy -- bring an antidumping petition and see whether or not an order issues. Nothing in the new law changes that obligation or makes it easier to bring or win a case or change the calculus of liability. Nothing in either the antidumping agreement or SCM agreement says what a government can do with moneys finally forfeited to a member country. If a government chooses to distribute these funds for tax relief, R&D investments, health care cost reductions or other matters, it is hard to understand the logic that this act alone violates existing obligations.

Some claims -- e.g., the law will encourage "frivolous" actions, will affect standing determinations or constitutes a double relief -- exhibit an ignorance of how the new law works or for that matter how existing US antidumping and countervailing duty law work.

Finally, claims that the Antidumping Act 1916 is on all fours with the Continued Dumping and Subsidy Offset Act are not credible. The former gave private parties a cause of action with different standards and different liability for importers and foreign producers. The new law doesn't affect in anyway how or when cases are brought, and doesn't change liabilities. It simply has the government make expenditures from moneys assessed in accordance with international obligations according to a statutory structure. As the Supreme Court has stated in a countervailing duty case on whether language in one decision was controlling in another:

"'[i]t is a maxim, not to be disregarded, that general expressions, in every opinion, are to be taken in connection with the case in which those expressions are used.'"

Zenith Radio Corp. v. U.S., 437 US 443, 1 ITRD 1634 at 1642 (1978) quoting 562 F.2d at 1213 which was quoting Cohens v. Virginia, 6 Wheat. 264, 399 (1821).

There is no reason to believe that panels and the Appellate Body in the WTO are not able to similarly recognize different situations for what they are.

The Continued Dumping and Subsidy Offset Act of 2000 is an important development. Strong trade laws have been an important element in the support of trade liberalization for many decades. Those who need to use the laws have changed over time and have included large portions of the economy at different times -- from agriculture products to supercomputers -- even though the overall portion of trade covered by cases in the US or elsewhere is typically quite small -- typically 1 - 2 %. Distributing moneys finally assessed to help companies continue to invest in people, equipment and technology is a policy choice that moves toward restoring the balance envisioned by the law but not delivered in fact. Companies and their workers want fair trade conditions restored when injurious dumping or subsidization occur -- period. If no money is ever paid because the unfair trade practices stop, the industries and their workers will be happiest. The moneys are only a second best option, representing at most pennies on the dollar in relief promised but not delivered.

It is ironic that some of the very companies that believe FSC legislation -- found to be a prohibited subsidy -- is needed to maintain fairness in competition with the EC (and who have received as individual companies more money than is likely to be distributed to 300 industries under the new law) are so opposed to the new Continued Dumping and Subsidy Offset Act of 2000. Certainly the concept of fair play and a level playing field applies to more than just our export interests. Those promoting increased liberalization include those supporting strong trade laws and effective remedies. We very much want our exporters to face fair conditions abroad and equitable taxation. Domestic producers, their workers and communities need fair trade conditions at home as well. The incoming administration has signaled that there could be important trade legislation to be considered in the 107^th Congress. In the past, there has been a consensus on trade when our trade laws have been viewed as usable and effective. It is unrealistic to expect that there will be a consensus on trade legislation this Congress, if fair trade is not the objective for both our exporters and for our domestic producers competing within the US.

QUESTION – [Regarding the relationship between the provisions of the Byrd Amendment – The Continued Dumping And Subsidy Offset Act of 200 – and the European Union’s antidumping regime.]

MR. STEWART: The European system, as I understand it, … is that this type of system would be unlikely to be useful in the EU because the EU system as a general matter does not look for whether there is continued dumping. Monies are assessed going forward. While there is the opportunity for reviews as required by the WTO, the practice is that there are seldom reviews. So that, in the EU system, you never have the check-and-balance of whether or not dumping is continuing or subsidization is continuing. So, I can understand that from their point of view, this type of law does not make sense in their system. It obviously makes sense in our system.

Presentation Of
BERT VAN BARLINGEN
Delegation of the EU Commission
(Adapted from Taped Oral Remarks)

MR. MORRIS: Bert, I wonder if you would give a perspective on the case that you have filed and your views on this act.

MR. VAN BARLINGEN: It wasn’t me personally who filed. Thank you for your kind introduction on the Dutch. You said that in Holland you can do anything you want but you better not. That is a very correct analysis. But then you forgot to mention, afterwards, we do it anyway. This sometimes tends to be my attitude at press conferences, and it gets me into trouble.

I listened with interest to what Terry Stewart had to say. He, of course, is a formidable opponent in discussions such as this one. He has a fantastic track record, and he is a very good friend of the European Commission. But, of course, we all have to do our jobs. His job is to defend the interests that he represents, and my job is to give the EU perspective on these matters.

I did agree partially with some of the things he said, especially when he raised the FSC case. But in the end his argument on that point sounded to me like, “Looking at how much money those guys get [FSC beneficiaries], we want to get a somewhat smaller bag of money as well.”

Well, from our perspective, the FSC, including the FSC replacement legislation is a very bad idea. It continues to be a violation of the WTO. And the Byrd Amendment is similarly a very bad idea.

Let me try to explain. I basically wanted to make five points. One is on the WTO aspects of this case. One is on the question of CVDs [countervailing duties]. One is on the dumping aspect, one on procedure, and one final comment on the WTO dispute settlement system.

As I understand Terry’s argument, his main point was to say that the whole purpose of act is to counter continued dumping and subsidisation, to provide full relief in cases where the relief already granted by the AD/CVD laws has not been effective because, I think he said, either the subsidies continue or the dumping continues. Now, the first and, from our perspective, the most important remark to make about that is a very simple one. That is that the idea of using the monies so collected to be distributed to complainants is simply an idea that is incompatible with US WTO obligations. From our perspective, the issue is not so much whether the use of such money is a subsidy or not. It is really more fundamental than that.

The key legal points that we make… Well, I can’t go into all of them because this is sub judice. The main point is that this is a type of relief that is not in the antidumping and subsidies and countervailing measures agreements. In fact, those agreements provide for specific relief and no other specific action against dumping or subsidies is allowed.

The argument that additional relief is needed – apart from the question of whether that is, factually speaking a good argument or not – the simple legal fact is that relief is not foreseen and therefore not allowed.

So, for that reason, the European Union, together with eight other countries[1] – and I see that representatives of a number of them are in the room – requested WTO consultations against this recent legislation on the 21^st of December. This means that by the 20^th of February we will be in a position to ask for a panel.

By the way, the consultations still have to take place, but we don’t have high expectations for these. Consultations with the United States tend to be a pretty one-sided affair where we ask questions and the US refuses to reply. (Gap)

What is clear is that Congress still has some time to consider whether it is really a good idea to keep this piece of legislation on the books. It seems to us clear that it never would have passed had it been brought to the Floor. The provision was slipped into an appropriation bill without any kind of due consideration. I think it would be a very positive act and a very good signal to the rest of the world if Congress decided to repeal this legislation before it stands condemned before the WTO. … The US has now lost nine out of nine cases on its trade remedy laws. Do we want to add a tenth? We already have a full trade agenda. There are a lot of disputes.

To summarize, I think this is an unnecessary aggravation. I don’t want to overestimate the importance we attach to this case. The money involved is relatively small compared to what we have in the FSC case. But it is important because of the principle, the idea that countries can unilaterally adopt changes to their legislation that don’t comply with the antidumping and CVD agreements.

To enter a little bit into Terry’s argument, where he says … I have done dumping myself, I mean antidumping, and I understand the argument that there are cases where there are dumpers with very deep pockets and who might want to continue doing this, even though there are dumping duties.

But let me start with the CVD argument. This one I really don’t understand. If you impose CVD duties, they always are collected, and their collection restores the level playing field – money given to a company by a foreign company is taken away again upon importation into the US – so no reason whatsoever to give extra money to US industry. Only in the case where the subsidy is increased would you have a basis to say that the remedy has been ineffective. In that case, the correct answer would be a review of the CVD measure and for the countervailing duty to be increased. So, for CVDs, I fail to see his point.

Now, on dumping, let me at the outset say that the only relief that is permitted against dumping is antidumping duties, that they will normally be able to protect U.S. industries and that those industries will normally be able to recover. In those cases where the duties really are absorbed by the exporter or the related importer, I recognize that there is a real issue there. But I think the right approach is not to give a subsidy to the petitioner, because I think that is a rather indirect way of tackling the problem. When I was in school, I was taught that an important economic principle is that one should always try to tackle problems directly, not try to get at them in a kind of indirect manner. So the right approach, I think, in those kinds of cases, would be to counter this approach through some kind of anti-absorption action.

Now the questions was rightly raised about the EU system, and I agree with Terry that our system is different. When we have findings of dumping and injury, we impose duties. If you want to get your money back, you apply for a refund. And you will only get a refund if the dumping has stopped. The domestic industry can file a request for a review saying that the dumping still continues. In this review, the whole question of duty as a cost will be taken into account.

If the U.S. does not want to change its law or if it wants to changes the rules in the antidumping agreement, let us discuss that in the new round. I think it is appropriate to show you that the U.S. does stand to gain by a discussion of antidumping in the new round. But you cannot have your cake and eat it too. That is, you cannot on the one hand bluntly refuse to discuss antidumping and CVD in the new round and then on the other hand, adopt unilateral legislation that violates both of these agreements.

A point on procedure. Judge mentioned this issue before me. It is not for me, representing a foreign actor, to go into too much detail, but I would say that we are very pleased that the Senate has now restored the Byrd Rule. This says – and it is a very wise rule – that a House-Senate conference committee cannot accept amendments that are not part of the legislation passed by at least one of the houses. This in our view is the only way to prevent special interest protectionist legislation from creeping into legislation at the very last moment and without due consideration by the highly respected democratic institutions of this country. We only wish that Senator Byrd had complied with his own rule in the case of the Byrd Amendment.

Finally, let me conclude by making one general remark about the current state of WTO dispute settlement. It seems to us that the U.S. is having serious difficulty complying with the letter and spirit of some recent WTO rulings. On FSC, legislation was adopted that does not meet the requirements of the WTO. In the British Steel, or as you call it the Lead Bar Case, the U.S. has adopted a new privatization methodology that is even worse than the one that was in place.

Now, on the Byrd Amendment, you already hear proponents proclaim that if and when they lose the WTO case, they will not repeal but simply amend [it] and take their chances again in the WTO. I think these examples show that the U.S. has no reason to be self-righteous about its performance in complying with WTO rules. We should all do a better job.

Presentation of
LEWIS E. LEIBOWITZ
Hogan & Hartson, LLP
Counsel, Consuming Industries Trade Action Coalition
From Prepared Remarks:
The Byrd Amendment: The View from Downstream

Thank you for being here this morning. I am pleased to speak to you about the Byrd amendment to last year’s agriculture appropriations bill.

Before I get to the details of the Byrd amendment, I would like to acquaint you with CITAC, the Consuming Industries Trade Action Coalition. CITAC is a group of companies and trade associations that believes that the industries in this country that depend on imports are not considered adequately under the U.S. trade laws currently on the books. The antidumping, countervailing duty and Safeguard laws are principal trade remedy laws that currently do not consider consuming industries adequately.

The Byrd amendment provides a monetary benefit to companies that file or support antidumping and countervailing duty petitions. A cardinal rule of economic policy holds that if we subsidize conduct, we will get more of it. Therefore, in this case, it is clear that the Byrd amendment should be expected to lead to more antidumping and countervailing duty petitions being filed.

The “Byrd Amendment” provision (section 1003 of the agriculture appropriations bill, Public Law No. 106-387 (October 28, 2000) is essentially the same as a provision (S. 61) introduced by Sen. DeWine early in the 106^th Congress. This provision would take antidumping and countervailing duties collected by the U.S. Customs Service and give them to private companies that brought petitions in specific cases under those laws. This money under prior law was placed in the general revenue.

Contrary to the claims of supporters of the amendment, these laws were never intended to stop dumping or subsidies, but to offset them at the U.S. border with a compensating duty. Petitioners receive the market benefit from the imposition of duties, which will affect the decision of foreign producers and importers to sell in this market and for what price.

Adopting a rule that provides a subsidy for petitioners will encourage more cases. From the point of view of consuming industries in the United States, whose competitive position depends on access to components and raw materials from around the globe, more trade remedy actions are not necessarily a good thing. It is from that perspective I would like to share this analysis of the Byrd amendment with you today.

First, it should b repealed. It was a bad idea, ill-timed and violative of our international trade agreements. If any company receives money from the Byrd amendment, they should keep it safe—if the WTO rules against the Byrd amendment, which I believe it will, the remedy will require the recipients to give the money back.

Second, the Byrd amendment and its method of passage reveal a deeper problem. We do not adequately debate our trade laws in this country. It is past time for a full debate on the trade remedy laws. Immediately, Congress should repeal the Antidumping Act of 1916 and the Byrd Amendment, and compel the Department of Commerce to abide by the WTO rules in subsidy cases. But we need to do more. We must look at the laws in their entirety. What “ills” are they trying to cure, are they doing a good job, and are the procedures open and fair to all affected parties? We call for open hearings in the jurisdictional committees to air these issues fully.

Trade remedy laws should recognize the fundamental economic reality that companies rely on open trade, not just for export markets (as important as they are) but on imports of components, raw materials and consumer goods. Trade remedy laws should not impose trade restrictions without adequately considering whether American businesses and consumers have reasonably available alternatives. If they don’t (and increasingly they do not), American businesses just move—to Canada, Mexico, Singapore or elsewhere, so they can get the materials they need. They don’t come to Washington to complain; they leave and take their jobs with them. While our economy is robust and growing, these lost jobs are replaced. But when our economy turns down, these job losses will not be replaced—and the trade laws will be a further drag on our economy.

The trade laws don’t need to be scrapped, but they desperately need to be improved. They must be flexible, to take account of the requirements of American industry for imported raw materials and components. They must comply with all applicable international rules, to prevent retaliation against American exports. And they must be inclusive, allowing our government to take intelligent action, not just action. CITAC has developed legislation that would make common-sense reforms to the trade laws. We hope we can join together with all American industries to push this agenda forward in 2001.

QUEST ION TO LEIBOWITZ – [Request that he review again the conditions he had said needed to be met in order for a company to qualify for redistributed AD or CVD duties.]

LEIBOWITZ: You need to meet two requirements basically. If you supported the petition. If you didn’t support the petition at the outset, then you are not eligible to receive the collected duties. If you supported the petition and you make qualifying expenditures, then you are eligible. Obviously, too, there has to be money to distribute.

LEIBOWITZ: In the United States, which is alone among major countries, we have a retrospective system. You can import first, and the duties are assessed later. The European Union and most other countries have a prospective system, where the investigation sets the duty. The duty is the imposed definitively at the time of importation. So, in Europe for example, you know what the duty is, you know what you are going to pay. You can contest it later if you think it is too high. But you know what the deal is.

In the U.S. you don’t know what the deal is. When you are buying something and you don’t know what you are going to pay for it, it inhibits your purchasing decision. That is a problem.

MR. MORRIS: Thank you. At this point, I would like to ask Charlie Blum for his thoughts.

Presentation Of
CHARLES H. BLUM
President, IAS Group, Ltd.
(From prepared remarks)

Good morning. I thank the Global Business Dialog and Market News International for this opportunity to contribute in some small way to a sounder, saner, and more efficacious trade policy. Let me say at the outset that I am speaking in a strictly personal capacity, as a veteran (and I might say, sometimes victim) of 24 years in the steel trade wars. For that reason, my remarks will be couched in terms of steel, although I should hope that their broader relevance will become apparent to all.

· The Byrd provision is incontrovertibly illegal. It does not meet the test of Article 1 of the WTO Anti-dumping Agreement which states: “An anti-dumping measure shall be applied only under the circumstances provided for in Article VI of GATT 1994 and pursuant to investigations initiated and conducted in accordance with the provisions of the Agreement.” “Shall … only …” -- without the benefit of formal legal education, I cannot imagine more restrictive language. As an additional antidumping remedy, this measure is WTO-inconsistent on these grounds, at a minimum.

· The Byrd provision seems impractical. It is difficult to imagine how it could be administered in a workable, fair, and effective way. For example, what should be done if one of the petitioners is acquired or enters into a joint venture with one of the exporters subject to an order?

· The Byrd provision is largely irrelevant to the solution of the pressing competitive problems of the steel industry. Whatever the number, future revenues from collected AD duties are unlikely to be large enough to make any significant impact on the industry’s massive financial woes. Even if they were, the stream of benefits would not begin for some time, and the steel crisis is now. Moreover, their almost certain illegal status means as a practical matter that either the beneficiaries will eventually have to repay the sums they receive, or some American exporters will suffer WTO-sanctioned retaliation.

The bottom line is, this remedy is so flawed as to be useless. Whatever its deficiencies as trade policy, the Byrd provision nonetheless conveys a strong political message about the sorry state of steel policy (I did not say steel trade policy) in this country. Over the past 25 years, American steel producers have managed to solve many of their competitive problems. As a group, they are no longer the over-manned, obsolescent, creaky producers they were in the 1970s. For the most part, American steel mills today are efficient and competitive on an operating cost basis.

· Huge legacy costs. That is, the obligations that remain with individual companies for the pensions and health care of their retired workers, who outnumber active workers by a multiple of 3, 4 or more. It is said that LTV Corporation, the latest but probably not the last in a line of steel companies seeking Chapter 11 protection, has more than 50,000 retirees, another 10,000 or more who are vested but not yet collecting benefits, and only 10 – 12,000 active workers. The annual claim on the company’s gross profits approaches ten figures, and the sum is rising, not falling. Obviously, this places an enormous, unsustainable financial strain on the company, depressing stock values, hampering new investment and driving away investors and strategic partners, both foreign and domestic.

· Adverse tax rules. The American steel industry is hindered by some of the chintziest depreciation schedules in the world and by the lack of a border-adjustable tax. As a result, there is no level playing field even within NAFTA, and steel investment is inadequate to the needs of the market. Throughout the last decade, the U.S. has had one of the strongest steel markets in the world, relatively high prices, and a rapidly growing short-fall in domestic supply. Our tax system helps explain why we have such an unusual combination of circumstances.

· Regulatory costs. A host of regulatory issues, especially in the environmental area, impose heavy costs on the industry, sometimes with dubious benefits.

I’m not here to propose any specific solutions to these problems. None of them is easy, most involve a clash of interests and substantial sums of cash, and only an integrated approach makes any sense. What I do wish to emphasize is that these problems need to be solved. For the sake of the steel mills and their workers, whose resources are simply not up to the task. For the sake of steel consumers who are facing the collapse of substantial portions of their supply lines and quite possibly their own failure as suppliers to powerful end-users. For the sake of a sound trade policy. Until and unless we as a society are willing and able to face up to the steel problem in its full dimensions, we will face a succession of Byrd-like provisions. Their enactment and the subsequent legal and political attack that they will inevitably encounter advances no one’s interest.

Instead, as a matter of enlightened self-interest, it would behoove all stakeholders in the steel issue to launch a process of reconciliation dedicated to the proposition that the country is best served by competitive steel works that are a vital part of a global steel industry. We need to stop pretending that all that ails the industry is imports, to work together for pragmatic solutions (including changes in government regulations and probably the commitment of public funds) and to the largest extent possible base those solutions on market mechanisms. One way to start is for the incoming administration to convene a series of meetings of all stakeholders seriously interested in finding workable solutions to the steel industry’s problems.

Is this possible? In the mid-1990s, I played a modest role in the peace process in El Salvador as Salvadorans of left and right tried to bring to an end their bloody civil war, a conflict that had begun in a real sense in 1932. We organized among other things a conference involving all parties to discuss various suggestions from around the world on how to achieve peace and reconciliation. We had one ground rule: Check your weapons at the door. And one compelling lesson was learned: Reconciliation is worked out by the contending parties “doing things together.” The American steel sector in its largest sense needs a similar process of reconciliation. We should start by all parties checking their whining at the door and proceed by learning to do things together. This is urgent business in my view. If it is done, done well, and done soon, we have a chance to exit the current crisis much better off; if it is not, we should brace ourselves for more bad trade policy, more political conflict, and a legacy of bitterness, frustration and failure.

For a civilized, compassionate society, the right choice should be easy to make.

QUESTION: I have a question for Mr. Stewart. If those of us that are on the other side are so wrong, if we exaggerated the bad aspects of the Byrd Amendment; if it is in fact WTO compliant; if it is good for consumers; if it is not a giant fund raising drive for the Washington trade bar; then why slip it in? Why not join those of us that are opposed to the Byrd Amendment and have a hearing before the Senate Finance Committee and the Ways and Means Committee and persuade those members that it is the right thing for U.S. policy for U.S. trade law?

MR. STEWART: I guess the answer to that is that there have been efforts to get a hearing on that bill as such for probably six years. There was discussion of the bill both in the Senate in 1999 and discussion of it in the House Ways and Means Committee in 1994 and 1995. As you know, the committee system has its advantages and disadvantages, one of which is that, if the staff or the chairman don’t want a matter to be debated, it won’t be debated. So, there has been an effort for many years to have a debate, but there was never a debate. There is no shyness in terms of wanting it examined and done. At every opportunity … . There were requests by seven or ten Republican senators last year to have it taken up by the Finance Committee, and it was not done.

As you know, in the same ag. appropriations bill and other appropriations bills, there are amendments which are, one could say, not technically germane to that particular sector. That is part of our process as well. And this is now the law of the land.

From our point of view, we were more than happy to have had the debate. We tried to have the debate, and the folks on your side basically encouraged the chairmen of the committees not to let this thing go up for debate. So, it became law the way it became law.

QUESTION TO MR LEIBOWITZ [regarding duty as a cost and separately on duty absorption and reference to a Mr. van Barlingen’s remarks and duty as a cost. ]

MR. LEIBOWITZ: First of all, I don’t think I heard Mr. van Barlingen argue for duty as a cost, which is a short-hand term. You sort of double-dip when you count the difference between the home market price and the U.S. price, then figure out what the duty is, and then you subtract that from the U.S. price. It effectively doubles the margin. …

MR. LEIBOWITZ: Again the EU has a prospective system. That changes a lot of the major aspects of how this works. …. The EU system is much different, and it is very hard to compare it with the US system.

As far as duty absorption is concerned, I think that does, first of all, establish that the Byrd Amendment does change the operation of the dumping and countervailing duty laws … The notion of setting up a related party importer for the sole purpose of getting around the payment of dumping duties, which after all will lead – if you accept the premise – it will lead the foreign company to lose tons of money over a long period of time simply to stay in the U.S. market. Most companies can’t afford to do that. So they stop doing it, and they stop trading. Seventy-fiver percent of trade is between related parties. It is a natural occurrence.

The antidumping law of the United States already penalizes companies that import through related companies. The calculation of home market price and US price changes to the detriment of the foreign producer if a related party importer is used. That does help get at the duty-absorption issue. There is a duty-absorption provision in the law that was added in 1994. [This] affects the consideration of orders at sunset time. It is there. It was argued for by the domestic producers. So, I think we have got to see how that works too.

I think duty-absorption per se is a complicated issue, and it may be that we can accomplish some progress on that if we sit down and talk about it. But, I think it is not something that I could buy off on, that a lot of people could buy off on…

MR. STEWART: I won’t try to guess what goes through the minds of our friends on the other side. From what you have heard, there is a lot of phobia that things are going to happen. We all, I guess, from time to time suffer from phobias. Part of the [reason for] getting information out is, hopefully, so that people can have a more rational reaction to what is going on. There is no petitioner’s counsel that I have talked to who believes that there will be a single new case in the U.S. in the next 100 years because of the Byrd Amendment.

Having people stand there and say, “The flood gates are opening! The flood gates are opening!” … If people have that concern and that belief, that is fine. You can present the facts. The facts can be checked as a matter of statute and a matter of regulation. If there is an administrative review after you bring a case and you are successful in getting an order, even if there is no appeal, you are three years out. We have had cases wherein, by the time you get through the litigation and the remands and take the matter up to the court of appeals, it is six, seven, eight, nine, ten years out. Anybody who actually believes that you are going to have lawyers saying, “Will you sign me up. I’d like to do this on contingency. I have no idea if I’ll win the case. There is a 50-50 chance I will lose on a meritorious case to the Commission [the International Trade Commission]. And, moreover, I have no idea if there will be any continued dumping. But I am willing to fight that fight for a decade or more.” I don’t know many of those people, but perhaps Lew does. Maybe he can give me some introductions.

MR. VAN BARLINGEN: What is all the fuss about? … The antidumping and CVD agreements are very carefully constructed. With great difficulty compromises [were made involving] exporting and importing countries in order to preserve fair trade. What we don’t like is the fact that any country can think that it can unilaterally change the rules. That it can say, “Well, we think the rules that exist are not good enough and we are going to institute extra relief, beyond what is provided for.” This is especially [troubling] in the areas of antidumping and CVD, which are very politically sensitive areas. …

The other risk of course is that other countries – and I am not talking now about the EU but third countries – may very well follow this bad example. If the U.S. thinks that it can do this kind of thing [, these countries may reason], why can’t we? Already the use of antidumping measures by third countries is very much on the increase. And they –[these new antidumping laws] – are not necessarily followed with the same due diligence and the same respect for procedural obligations and substantive obligations as is the case in the U.S. and the EU.

We are clearly worried about antidumping cases and CVD cases against EU companies, apart from the fact that our companies will suffer from the Byrd Amendment. … As a trend setter, as an example for the rest of the world, this is very bad.

QUESTION: (Directed to Mr. Stewart, the words of the question are unclear on the tape. The import seems to have been, if the benefits of this law are so small, why have its supporters worked so hard for its enactment?)

MR. STEWART: The companies that support this seek full relief if they win the case. Too often prices remain depressed in the U.S. marketplace. What they are looking for is to get that changed at such time as an order is put on the books.

I like to think I am a pretty good salesman. [However,] I can’t think of any client I could go to and sell the concept that, “We know that when you, the current chairman, are no longer here, the company may be able to get a few million dollars out of this if your opponent refuses to clean up their act in the marketplace.”

I think most of the companies we talked to that actively supported this believe that there is an intent motive with a lot of their competitors, that the reason continued dumping goes on in a lot of these cases is that there is an effort to drive them out of business. The concept that the money that these people [the foreign exporters/importers] are coughing up to Uncle Sam may come back to them [the U.S. domestic firms] someday may bother them enough [to induce them to stop dumping]. We have seen this in terms of the press releases out of various trade associations representing the foreign producers. That is one of their concerns.

Is this a full remedy to the problem [from the perspective of the supporters of this law]? [No.] Is it a financial contribution? Sure. … I think our supporters believe that the law may cause people to think twice about continuing to dump.

I disagree with Lew. We have had the opportunity, for some companies, to work on both sides, and whether or not companies are dumping is capable of being estimated to a close degree of accuracy.

The people who have supported this are people who faced years of double-digit margins, but they don’t get relief in the marketplace. That is not why they brought the case. They didn’t bring a case to get no relief. Now, it looks like we will have a chance to find out whether or not a government decision as to how to spend money will constitute “measures” in the WTO, and we can look forward to that.

Being a member of the WTO doesn’t hamstring a nation from doing things that are not addressed within the WTO. We would also say [this], in response to the NAFTA issue: 1902, if one looks, is essentially trumped by 1904. That wasn’t accidental within NAFTA. That was done by the negotiators specifically because governments, legislators, do the things they feel they need to do. That doesn’t always include consulting with trading partners.

MR. LEIBOWITZ: I will be as brief as I can. We could debate endlessly. I have had lots of experiences with companies that deserve two percent margins and get 15 percent margins out of the Commerce Department. We can trade examples all day long. There is an abiding sense of unfairness among firms.

Let me just give you one example of what I think I was referring to before: crude oil. A case was filed against crude oil imports, which was rejected by the Commerce Department on standing grounds because they had no other basis in the law to reject it. The petitioners in that case, a group of oil producers out in the Great Plains, have successfully thus far challenged the dismissal of the case. The Court of International Trade has remanded the case. It has not yet been reinstated, but [things are going] that way.

Picture, if you will, the amount of antidumping duties that would be collected. Stopping the trade is not an option. Stopping the dumping is not an option because the dumping is manufactured by the rules of the dumping law. Crude oil imports from Saudi Arabia, Venezuela, Mexico [are involved] and Iraq is there also. Iraq will not fight the case and will get huge margins [against it]. That money would be put in a pot for that case. Petitioners out in Oklahoma and Texas would divide the dumping duties received by the importation of 12 to 14 million barrels of oil per day, and I think would make far more money doing that than they would producing oil.

The allotted time having been used, the audience and moderator thanked the panelists for their contributions and the program came to an end.

[1] The WTO member countries who formally requested consultations with the United States in this matter on December 21, 2000, are Australia, Brazil, Chile, the EU, India, Indonesia, Japan, Korea, and Thailand.