Congressional testimony at trade commission is in vain without statutory change

Congressional testimony at trade commission is in vain without statutory change
© Greg Nash

On Wednesday, the U.S. International Trade Commission voted against upholding a duty on uncoated groundwood paper from Canada. The proceedings included testimony from 19 members of Congress asking the commission to oppose the measure. They were all there on behalf of the newsprint industries in their districts, which use this type of paper and face higher costs with a tariff.

Those members may have come out on top this time, but in a sense, their testimony was in vain.

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“Downstream” industries that rely on another industry’s product (like paper) have no legal standing in these types of trade cases. If Congress wants its members’ own testimony to count for something, it has the power to change the trade remedy statute and allow the commission to consider downstream effects.

As the testimony showed, the downstream effects are not trivial. Newsprint prices have increased 19 percent since the North Pacific Paper Company filed a petition seeking trade protection earlier this summer. Media industry representatives say the “taxes have already caused job losses at newspapers and resulted in less news and information being distributed in local communities.”

Regardless, the commission was not allowed to take that into account. By statute, it cannot do so in antidumping and countervailing (AD CVD) duty cases.

In any such case, there are winners and losers. Winners typically include the industry being shielded from foreign competition. Losers often include domestic firms or industries that pay higher prices on the intermediate inputs they choose to (and sometimes must) import.

Trade remedies like AD CVD are one of the few types of regulation where little or no regard is given to the cost side of the equation. Environmental regulations require cost-benefit analysis for significant regulatory actions. Occupational safety and health regulations require analysis. The Department of Commerce has even increased its analytical capacity in recent years to conduct more rigorous impact analysis of regulations on industry.

In the end, the commission voted 5-0 against the duties. This was a tricky case. There appears to have been little or no rise in uncoated groundwood paper imports over the past three years (especially when a key Canadian producer was eventually excluded from the case). The health of the domestic paper industry has been pretty good, and it has been hard for industry representatives to show material injury or even threat of material injury. The official opinion will be out in a few weeks, and will provide insight into the commissioners’ reasoning. But don’t expect the interests of the downstream newspaper industry to even be mentioned.

To their credit, members of Congress show up on behalf of their constituents. Steel, tire, and paper cases tend to bring in the most members. Some support duties and others voice their opposition, usually based on which industries in their districts would be helped or harmed. The commission’s decisions have gone in both directions, but the downstream interest is never a factor in the written opinion.

The large and impressive showing from Congress this time may reflect the size and influence of the struggling newsprint industry, the severity of the downstream effects, or other factors. But it’s important to remember that there can be serious downstream effects to consider in every case. Getting your senator or representative to appear before the commission on your behalf should not be the threshold for getting fair consideration.

The commission went negative on the newsprint paper case because of the facts before them — the only facts that they can consider — such as import data, price data, and evidence or threat of material injury to the domestic industry seeking trade protection. The only way to ensure “full and fair” consideration for all affected U.S. manufacturers is to revisit the statute and allow the commission to consider each and every vested interest. If the commission could identify the downstream firms or industries, it could consider any reasonable indication that one could suffer material injury from the duty. 

In other words, Congress can make its own members’ presence worth it.

Christine McDaniel, a former White House senior trade economist, is a senior research fellow with the Mercatus Center at George Mason University. She co-wrote the recent study “The Downstream Costs of Trade Remedy Regulations” with Veronique de Rugy.