March 5, 2012 / 7:42 PM / 5 years ago

Senate OKs bill aimed at China subsidies

5 Min Read

WASHINGTON (Reuters) - The U.S. Senate on Monday voted unanimously to preserve Washington's ability to slap duties on subsidized goods from China and Vietnam, after a recent U.S. court ruling struck down that practice.

The U.S. House of Representatives could approve the bipartisan measure as early as Tuesday, sending it to President Barack Obama to sign into law. The Senate passed the bill on a voice vote, after the U.S. Chamber of Commerce and National Association of Manufacturers urged its quick approval.

"By passing this bill, we're backing American workers and businesses in the fight against China's unfair trade practices," Senate Finance Committee Chairman Max Baucus said in a statement. "We need to maintain these countervailing duties and strongly enforce our trade laws to level the playing field for U.S. businesses and workers."

The Obama administration helped craft the narrow legislation in response to an appeals court ruling in December that the U.S. Commerce Department did not have legal authority to impose countervailing - or anti-subsidy - duties on goods from "non-market economies".

The decision endangered countervailing duties on about two dozen goods from China and Vietnam worth billions of dollars in trade, as well as potential new duties in cases involving imports of solar panels and wind turbine towers from China.

Current duties, which supporters says protect some 80,000 American jobs, cover steel, aluminum, paper, chemicals and other products from China and plastic shopping bags from Vietnam.

Meanwhile, the Justice Department on Monday kept its legal options alive in the case by asking the full U.S. Court of Appeals for the Federal Circuit to review the decision made by a three-judge appeals panel in December.

"The panel's decision, if left uncorrected would severely undermine the economic security interest of the United States," the department said in its brief asking for what is known as an "en banc" review.

"China is now the largest source of United States imports, and it is imperative that the 'en banc' panel preserve the authority of Commerce to combat subsidized imports into the United States that have injured a domestic industry," the Justice Department said.

The bill steers clear of the more politically divisive issue of China's currency, which many lawmakers believe Beijing deliberately undervalues to give its companies an unfair price advantage in international trade.

The Democratic-controlled Senate passed legislation last year to pressure Beijing on the issue, but the Republican-dominated House has refused to take up the measure on the grounds it could start a trade war.

Non-Market Economies

For years, the Commerce Department did not impose countervailing duties on non-market economies on the grounds it was impossible to measure subsidies in countries where the state played such a central role.

That changed in the mid-2000s, when industry groups persuaded the administration of then-President George W. Bush that China had advanced enough that it was possible to calculate subsidies. However, the groups did not want Commerce to take the additional step of designating China as a market economy because that could potentially adversely affect how another type of trade remedy, antidumping duties, are calculated.

China contested the policy change both at the World Trade Organization and through the U.S. court system.

At the WTO, it won a decision that the United States was "double counting" many Chinese subsidies when it applied both countervailing and antidumping duties on the same good.

Then in December, the U.S. Court of Appeals for the Federal Circuit ruled the Bush administration should have obtained legislation from Congress to make the policy change because the previous practice of not applying countervailing duties to non-market economies had become embedded in U.S. law.

The conservative Republican group Club for Growth has urged lawmakers to reject the bill, arguing the administration should have pursued a "pro-growth solution" to the ruling by reclassifying China and Vietnam as market economies.

Reporting by Doug Palmer, Editing by Andrea Ricci and Eric Walsh

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