For more information or to schedule an interview, members of the press should contact Jacob Grier at jgrier@cato.org or (202) 218-4613. 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998 December 11, 2002 A Road Map for Antidumping Reform In November 2001, a new round of multilateral trade negotiations was launched at Doha, Qatar. Despite efforts by the United States to prevent inclusion of antidumping negotiations on the "Doha Round" agenda, the U.S. capitulated after realizing it was diplomatically isolated on the topic. However, the U.S. indicated it would not be amenable to proposals that might violate the "basic concepts, principles, and objectives of the Antidumping Agreement." In their latest study, "Reforming the Antidumping Agreement: A Roadmap for WTO Negotiations," Brink Lindsey and Dan Ikenson, director and policy analyst, respectively, of the Cato Institute's Center for Trade Policy Studies, set forth a detailed plan for antidumping reform. They begin by explaining that the basic concepts, principles, and objectives of the Antidumping Agreement have never been defined by any GATT or WTO agreement, and that such a definition would be a logical starting place for WTO negotiators. The authors turn to supporters of the antidumping status quo for guidance on these definitions and find the following consensus among them: "The basic objective of the Antidumping Agreement is to allow member states to offset artificial competitive advantages created by market-distorting government policies." Working from that foundation, Lindsey and Ikenson identify dozens of instances where antidumping laws in practice fail to further this objective. By illuminating the blatant mismatch that exists between justifications for the antidumping law and the very law itself, reform proponents could compel negotiators to "reduce the yawning gap between antidumping's accepted goals and its actual practice." The authors then outline 21 proposals to improve "antidumping laws' aim and limit the collateral damage inflicted on business practices that have nothing to do with 'unfair trade'." Such proposals include requiring evidence of market distortion, eliminating the cost test, revising criteria for the use of "constructed value," prohibiting "zeroing," revising the arm's-length test, and mandating a public-interest test. The authors maintain, "If the new rules proposed here are adopted and incorporated into the WTO Antidumping Agreement, dramatic improvements in antidumping practice would almost certainly ensue." Trade Policy Analysis no. 21 Trade Expert Calls Bush Tariff Plan Bold and Gutsy The Bush administration announced today a bold new proposal to eliminate tariffs on industrial goods by 2015. The proposal was made in the context of the ongoing "Doha Round" of World Trade Organization negotiations. Brink Lindsey, director of the Cato Institute's Center for Trade Policy Studies, had this comment: "This is a bold and gutsy proposal. It aims to finish the job begun over a half-century ago with the formation of the General Agreement on Tariffs and Trade: the conversion of the world into a duty-free zone for manufactured goods. "But make no mistake about it: The Administration's proposal is going to face a buzz saw of opposition. Domestically, the textile and apparel industries are the primary beneficiaries of the remaining high U.S. tariffs, and they can be expected to fight tooth and nail against the erosion of their protectionist privileges. Meanwhile, internationally, most developing countries continue to coddle so-called `infant industries' behind high tariff walls, and so it will be politically difficult to build support in those quarters for a zero-tariff world. "It should be noted that the administration's proposal for duty-free trade in industrial goods has a big red asterisk: the so-called `trade remedy laws' -- including the antidumping, countervailing duty, and safeguard laws -- that allow the United States and other countries to impose punishingly high special duties on politically sensitive imports. Unless a parallel effort is made to close or at least tighten those loopholes, the U.S. proposal will turn out to be much less bold than it now appears. It won't matter that normal tariffs on textiles are zero if double- or triple-digit antidumping duties continue to choke off access to the U.S. market. "With that caveat, the Bush administration deserves real credit for its proposal today. Over and above its effect on WTO negotiations, this proposal commits the administration to making the political case here at home for the benefits of imports and open U.S. markets. That marks a dramatic departure from trade politics as usual, where all the focus is on improved access abroad for U.S. exporters while the benefits of free trade here in the United States are given short shrift." Lindsey is the co-author of the new Cato study, "Antidumping 101: The Devilish Details of `Unfair Trade' Law". November 26, 2002 Exposing the Antidumping Charade Defenders of the U.S. antidumping law have long hailed it as a tool necessary to maintain "a level playing field" and to ensure "fair trade." But upon examination of the law and its administration by the U.S. Department of Commerce, this virtuous rhetoric is exposed as misplaced and misleading. A new Cato Institute analysis finds that the antidumping law is nothing more than pure protectionism operating behind a veil of complicated and arcane procedures, which has for decades remained immune from the proper scrutiny it deserves. In their study, "Antidumping 101: The Devilish Details of 'Unfair Trade' Law," Brink Lindsey and Dan Ikenson, director and policy analyst, respectively, of the Cato Institute's Center for Trade Policy Studies, expose the reality behind the rhetoric. The authors provide a step-by-step guide to how dumping is defined and measured under current rules, and they conclude that the antidumping law has nothing to do with "fairness." "In fact, the law systematically discriminates against foreign goods with skewed rules that generate dumping margins out of thin air," the authors argue. The study examines the basic issue of whether the antidumping law accurately measures differences between U.S. prices and foreign-market prices. "The purpose of the paper is to cut through the fog of technical complexity that surrounds the antidumping law--to show how it really operates, and show in particular that its actual operation all too often has nothing to do with its fine-sounding rhetoric," the authors explain. Lindsey and Ikenson use simplified examples, actual case data, and a hypothetical case study to demonstrate how particular steps in the dumping calculations operate to generate phantom dumping findings. They catalogue and measure the effects of methodological distortions perpetrated routinely under antidumping calculation procedures. They show conclusively that substantial portions of calculated antidumping duties are the products of flawed and biased methodologies. Their results clearly demonstrate, "Normal, healthy competition from abroad is all too often stifled in the name of fighting dumping." They conclude, "The antidumping law does not do what its supporters say it does," but instead, "indulges in old-fashioned protectionism." Trade Policy Analysis no. 20 October 15, 2002 U.S. Immigration Policy Borders on the Absurd For years, the United States has pursued an illogical and ineffective policy toward Mexican immigration. While the U.S. government has encouraged closer trade, investment, and political ties with Mexico, it has worked in vain to keep a lid on the flow of labor across the border. In the new Cato Institute study, "Willing Workers: Fixing the Problem of Illegal Mexican Migration to the United States," Daniel Griswold, associate director of Cato's Center for Trade Policy Studies, argues, "U.S. immigration law has been overwhelmed by economic reality. Demand for low-skilled labor continues to grow in the United States while the domestic supply of suitable workers inexorably declines. The Bush administration and Congress should work together to forge a border policy that accommodates the needs and aspirations of people on both sides of the border." Despite employer sanctions and dramatic increases in U.S. border control funding and personnel since 1986, the number of undocumented immigrants in the United States today has doubled since then to more than eight million. Griswold asserts, "The length of the U.S.-Mexican border and the volume of legal border crossings virtually guarantee that current U.S. border control policy will fail. Moreover, the U.S. government's expensive and coercive efforts to curb Mexican migration have caused a number of perverse and unintended consequences." It has spawned an underworld of smuggling, document fraud, and other criminal activity; it has contributed to the death of hundreds of migrants at the border; it has depressed wages; and it is threatening civil liberties. Griswold argues that a system that allows Mexican workers to enter the United State legally would free up thousands of government personnel and save an estimated $3 billion a year -- resources that would then be available to fight terrorism. Evidence indicates that legalization of Mexican immigrants will not burden taxpayers, hurt low-income Americans, balkanize U.S. society, or bring a flood of new immigrants. If a wide enough channel were opened so that the supply of workers from Mexico could be legally matched with the demand for their labor in the United States, through a temporary worker visa and earned legalization, the rationale for the current illegal flow of Mexican migrants would vanish. "President Bush and leaders of both parties in Congress should return to the task of reforming America's dysfunctional immigration system into one that is economic, humane, and compatible with how Americans actually arrange their lives," Griswold concludes. Trade Policy Analysis no. 19 WTO Allows Massive Sanctions Against the United States GENEVA--The World Trade Organization (WTO) ruled today that the European Union can impose sanctions of up to $4 billion against the United States in a tax dispute, the largest penalty it has ever allowed. Brink Lindsey, director of the Cato Institute's Center for Trade Policy Studies, had this to say: "The jig is up. We've been stalling and stringing out this dispute for years, but we've reached the end of the road. We now face a stark and unavoidable choice: reform our tax laws and live up to our WTO obligations, or else fall into a ruinous trade war with Europe." The dispute focuses on a provision in U.S. tax law--formerly known as the "foreign sales corporation" or FSC--that grants special tax breaks for U.S. exporters. The tax preference constitutes an illegal export subsidy, violating international trade rules. Wrangling over FSC has been ongoing for a number of years. The WTO found that the U.S. provision was inconsistent with WTO obligations in a March 2000 ruling. The United States passed a new law in November 2000 to comply with U.S. obligations, but the EU challenged this measure. In January this year, the WTO found that the new law was still inconsistent with U.S. WTO obligations. The sanctions decision had been postponed several times as the two sides tried, unsuccessfully, to reach an agreement. Although the U.S. has admitted to violating WTO rules, efforts to eliminate the tax breaks have made little progress. "It makes no sense to get trade promotion authority to negotiate new trade deals if we won't live up to the deals we've already signed," Lindsey commented, referring to the trade negotiating powers Congress recently granted President Bush. Meanwhile, Lindsey urges the European Union to exercise restraint. "Imposing these massive trade sanctions would be a terrible mistake. Trade sanctions would wreak havoc on European importers and consumers as well as American exporters, and so going through with them really amounts to cutting off your nose to spite your face. It's incumbent on both parties now to resolve the issue without coming to blows." August 1, 2002 Transatlantic Food Fight For the past three years, the European Union has imposed an unofficial moratorium on biotech crops from the United States to European markets. Facing an October 17th deadline by the European Commission to resume biotech approvals, several EU member states must now reassess their positions on the issue. Six European countries have stated they will not agree to lift the moratorium until new regulations on the labeling and traceability of genetically modified organisms (GMOs) take effect, regardless of the fact that multiple studies have concluded that biotech foods are safe to eat. In a new Cato study, "The Looming Trade War over Plant Biotechnology," author Ronald Bailey, science correspondent for Reason, argues that, "it is essential to preserve and insist upon standards based on scientific risk assessment in order to maintain and expand a freer international trading system." International studies, including those conducted by the EU, have confirmed that GMO products are safe for human consumption. Far from harming humans, "in developing countries, the deployment of plant biotechnology can spell the difference between life and death and between health and disease for hundreds of millions of the world's poorest people," says Bailey. GMOs are able to provide medicine and vitamins that would otherwise be absent in Third World diets, and biotech crops, which can be herbicide-resistant, drought-tolerant, or immunized against infectious diseases, are a boon for poor farmers. Allegations that GMOs endanger the environment are also unfounded. In fact, "plant biotechnology has helped American farmers protect the natural environment by reducing their use of agricultural chemicals and by preventing erosion," Bailey explains. In addition, research has proven that GMOs pose no threat to endangered butterflies or other wildlife, as some activists have claimed. The EU is justifying its restrictions on biotech crops on the basis of the "precautionary principle." Under that principle, regulators do not need to show scientifically that a biotech crop is unsafe before banning it; they need only assert that it has not been proved harmless. "Jettisoning scientific risk assessment and replacing it with a precautionary approach will open the entire trading system to interruptions based on arbitrary justifications," Bailey insists. Unwarranted restrictions of GMOs hurt American farmers, who produce two-thirds of the world's biotech crops. "Only objective standards should be used because regulations that are based on 'societal values' alone can never be agreed upon internationally and will restrict trade without protecting public safety," Bailey concludes. "Consequently, all U.S. negotiators involved with trade in biotech crops must make it unalterable U.S. policy to oppose the application of the precautionary principle and instead insist on scientifically based risk standards in all international trade forums." Trade Policy Analysis no. 18 To Help the World's Poor, G-8 Should Focus on Trade KANANASKIS, Alberta--Over the next two days leaders from the United States, Britain, Canada, France, Germany, Italy, Japan and Russia are meeting in Canada for their annual G-8 Summit. Topping their agenda this year are the issues of the world economy and African development aid. Brink Lindsey and Daniel Griswold, director and associate director, respectively, at the Cato Institute's Center for Trade Policy Studies, had these comments: Brink Lindsey: "If the G-8 is serious about reducing global wealth disparities, particularly for Africa, members should start by focusing on their own hypocritical protectionist policies. Rich-country trade barriers cost poor countries an estimated $100 billion a year, or twice the total annual sum of foreign aid worldwide. Total rich-country farm subsidies are over $300 billion a year, or six times the total sum of annual foreign aid worldwide. At the same time that they are lamenting the plight of third world countries and pledging superficial aid packages, rich countries are essentially cutting off the most important lifeline for poor countries--trade. Opening up their borders to products from poor countries is the most effective way for the G-8 to help nations pull themselves from the mire of poverty." Daniel Griswold: "President Bush should use the G-8 summit in Canada to reaffirm his commitment to more open markets at home and abroad. As the Cato Institute's just-released Economic Freedom of the World 2002 report confirms, economic liberty and free trade lead to faster growth and higher incomes. The summit offers President Bush an opportunity to reassert U.S. leadership and to begin to repair the damage done by U.S. steel tariffs and farm subsidies. We cannot create a more secure and stable world without expanding trade and development, and that cannot be achieved without U.S. leadership." Crippling Fast Track WASHINGTON--The United States Senate this week is continuing its debate on a trade package that includes reauthorization of the Andean trade preferences bill, trade promotion authority (TPA), and trade adjustment assistance. After a hard fought battle last December, a bill granting TPA for President Bush passed by one vote in the House of Representatives. That bill is now facing equally staunch opposition in the Senate, as several Senators have introduced amendments that alter the basic intention of the bill. One such amendment, proposed by Senators Larry Craig, R-Idaho, and Mark Dayton, D-Minn., would exclude changes to U.S. trade remedy laws, such as the anti-dumping law, from fast track consideration and require that those provisions be debated separately. Brink Lindsey and Daniel Ikenson, director and policy analyst, respectively, at the Cato Institute's Center for Trade Policy Studies, had this comment: "If this 'poison pill' is included in the bill there is no point in passing it. Negotiating major trade deals will be impossible. The amendment is a deal killer. Whatever you think of U.S. trade remedy laws, the fact is that we won't be able to get new market-opening agreements in either the World Trade Organization or the Free Trade Area of the Americans without some changes in current antidumping rules. Dozens of countries are demanding those changes, and they won't sign any deal if U.S. negotiators aren't in a position to offer them. "Consequently, voting for this amendment is indistinguishable from voting against TPA. The effect is the same: no progress in knocking down trade barriers around the world. "New trade agreements promise expanded business opportunities for U.S. manufacturers and service industries; perhaps more important, they will promote economic growth and pro-market reforms in underdeveloped regions that otherwise might become seedbeds of terrorism. But no agreements are possible unless TPA is passed first--and passed without foolish killer amendments." Trade and Foreign-Policy Failure As former President Jimmy Carter visits Cuba this week he has an unprecedented opportunity to highlight the failure of the four-decade-old embargo against Fidel Castro. Since 1960, Americans have been barred from trading with, investing in or traveling to Cuba. Unfortunately this policy has been counterproductive. Daniel Griswold, associate director of the Cato Institute's Center for Trade Policy Studies, had this comment: "As a foreign policy tool, the embargo actually enhances Castro's standing by giving him a handy excuse for the manifest failures of his oppressive socialist system. He can rail for hours about the suffering the embargo inflicts on Cubans, even though the damage done by his domestic policies is far worse. If the embargo were lifted, the Cuban people would be a bit less deprived and Castro would have no one else to blame for the shortages and stagnation that would persist absent real market reforms. "Lifting the embargo would not be a victory for Fidel Castro or his oppressive regime. It would be an overdue acknowledgement that the embargo has utterly failed, and that commercial engagement is the best way to encourage more open societies abroad. The U.S. government can and should continue to criticize the Cuban government's abuse of human rights, while allowing expanding trade and tourism to undermine Castro's authority from below. "The embargo against Cuba should be repealed. Americans should be free to travel to Cuba to spend their own money. American farmers should be free to sell their products to Cuba in the open market, either for cash or with private financing. The most powerful force for change in Cuba will not be a short visit by a former U.S. president, but daily interaction with free people bearing dollars and new ideas." Time to retire the Export-Import Bank, Cato study concludes WASHINGTON -- The House of Representatives faces a vote this week on whether to reauthorize the Export-Import Bank of the United States. A recent study published by the Cato Institute, "Rethinking the Export-Import Bank," finds that, "The Ex-Im Bank is a Great Depression-era agency that has little relevance in a time of increasingly open and sophisticated global markets." According to the study: Trade Policy Briefing no. 15 Bush's Protectionist Encore The United States Commerce Department today announced its final determinations in the U.S. antidumping and countervailing duty cases against Canadian softwood lumber. Specifically, the Commerce Department has called for a countervailing duty of 19.34% and antidumping duties ranging from 2.26% to 15.83%. Brink Lindsey, director of the Cato Institute's Center for Trade Policy Studies, had this comment: "The Bush administration has once again reared its protectionist head. Erecting new trade barriers against softwood lumber from Canada is a dismal encore to the recent steel sellout. Just as American steel-consuming industries will bear the brunt of the steel tariffs, hundreds of thousands of American families have just been priced out of the dream of homeownership by this new tax. "Unfortunately, unlike its steel counterpart, the lumber case has not attracted much attention, but that's no reflection of the stakes involved. U.S. softwood lumber imports from Canada last year totaled $5.8 billion--more than half the total value of U.S. iron and steel imports from the whole world. "In addition to threatening American homebuilders and home buyers with a big tax increase, the administration has further eroded its ability to reduce trade barriers abroad. American trading partners have every right to doubt our dedication to free trade. The administration cannot expect to be a leader in free trade when it is taking the path of protectionism." March 12, 2002 Ex-Im Bank Charter Should not be Renewed, Cato Study Concludes Congress will soon decide whether to reauthorize the Export-Import Bank of the United States (Ex-Im Bank). In "Rethinking the Export-Import Bank," Aaron Lukas, an analyst at the Cato Institute's Center for Trade Policy Studies, and Ian Vásquez, the director of Cato's Project on Global Economic Liberty, contend that "The Ex-Im Bank is a Great Depression-era agency that has little relevance in a time of increasingly open and sophisticated global markets." Although its official roles--first, assuming commercial and political risks that private lenders are unwilling or unable to take on and, second, helping U.S. exporters to compete with export subsidies provided by foreign governments--sound admirable, the Bank's actual impact is at best negligible, and probably harmful, the authors say. Supporters of the Ex-Im Bank claim that U.S. exporters are unable to compete effectively with foreign competitors that have access to more generous export subsidies. However, the authors show that U.S. export growth has outpaced the export growth of its main industrialized trading partners despite having one of the lowest percentages of subsidized exports among the G7. Lukas and Vásquez also note that only a third of Ex-Im Bank financing requests even allege that they are in response to official foreign competition--a figure that represents only a fraction of 1 percent of U.S. exports. The authors also argue that economic growth is not increased by subsidized export credit, nor does such credit "improve" the trade balance; that the Bank's cumulative impact on employment is indeterminate, but is not likely to be strong in either direction; and that the Bank provides financing primarily to countries and companies that do not have trouble obtaining credit. In many cases, Ex-Im lending merely displaces private lending. Given those shortcomings, Lukas and Vásquez conclude that "Ex-Im financing should immediately be restricted to only those cases where an American exporter faces verifiable subsidized competition abroad. The next step should be to retire the Bank as soon as possible. Such corporate welfare programs have no rightful place on the U.S. trade policy agenda." Trade Policy Briefing no. 15 March 1, 2002 Time for the Steel Industry to Demonstrate True Mettle On March 6 President Bush is expected to announce specific measures to further insulate the domestic steel industry from import competition. Although decades of protectionism and subsidization have only hastened the industry's demise, steel companies have returned to the trough, asking the administration to defy basic economics and common sense. In a study released today by the Cato Institute, "Steel Trap: How Subsidies and Protectionism Weaken the U.S. Steel Industry," scholar Daniel Ikenson concludes that "even with a new layer of import restrictions, the steel industry will continue to suffer many of the ills currently cited as evidence of import-caused injury." Ikenson highlights tactics used by steel producers to further their goal of maintaining an overindulged industry. He points to their self-titled label, "victims of unfair trade," which policymakers and the general public have apparently accepted, their false claims of national security interests, and their large number of antidumping actions. Such tactics only exacerbate the root problem facing the industry: Excessive, uneconomic capacity. Although the U.S. government has asserted that there are no significant structural barriers to exit in the U.S. market, Ikenson identifies three key obstacles: While "consolidation" is the latest, popular solution to the problem of excess capacity, Ikenson duly recognizes the burdensome obstacle of "legacy costs" and suggests that attrition is more realistic. A viable, competitive steel industry composed primarily of minimills and a few successful integrated mills is possible, provided that weak domestic firms shut down permanently. Protectionism is always bad policy. "But," Ikenson asserts, "in the case of steel, in which protectionism has been tried so often with such consistently disappointing results, it would be delinquent to pass on the current opportunity to change course once and for all. The U.S. steel industry--but more importantly, the country--will be best served if the president resists the temptation to impose new trade restrictions." Trade Policy Briefing no. 14 Slumping Imports, Shrinking Trade Deficit Signal Continuing Recession Friday morning the U.S. Commerce Department reported that the monthly U.S. trade deficit fell to $27.9 billion in November, down from $29.3 billion in October. The monthly trade deficit has now fallen almost 20 percent from its peak in September 2000. Daniel Griswold, associate director of the Cato Institute's Center for Trade Policy Studies, had this comment: "Opponents of free trade should be gleeful about the latest trade deficit numbers. Their wishes are finally coming true: The trade deficit shrank again in November and imports are way down from a year ago. But instead of being good news, the shrinking trade deficit only confirms America's continuing economic funk. The import drop has been especially brutal for capital equipment and industrial supplies. Imports of semiconductors have dropped by 35 percent year to date, iron and steel mill products by 30 percent, telecommunications equipment by 23 percent, and computer accessories by 18 percent. Falling imports are not a sign of economic success, but of slumping production and rising unemployment. "Today's trade report offers further proof that imports are not to blame for the slow economy or falling industrial production. Just the opposite is true: Rising trade flows, including imports, reflect a strong and expanding economy. Congress and the president need to work together to cut trade barriers at home and abroad to stimulate trade and help revive the U.S. and global economy."
Cato scholars outline a plan of action to reform the WTO Antidumping Agreement
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Cato scholar welcomes global "duty-free zone for manufactured goods"
The U.S. antidumping law, a façade for old-fashioned protectionism, Cato study finds
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Current laws are harmful; Mexican migration should be legalized, Cato study finds
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EU poised to impose $4 billion reatliation
EU rules on GMOs threaten scientific integrity of global trade, Cato study finds
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Risky amendments threaten trade promotion authority, Cato scholars say
Time to lift the Cuban embargo, Cato scholar says
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Threatened tariffs on Canadian lumber a costly mistake, Cato scholar says
Overall impact of export subsidies negligible at best
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Protectionist crutches should be discarded, Cato report finds
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"Good news" for trade opponents is bad news for economy, Cato scholar says