Antidumping and Countervailing Duties – Who Benefits?

We know that foreign companies may decide to sell products below cost in order to get a foothold in worldwide markets. In other cases, government subsidies may reduce the cost of production resulting in below-market prices. When global companies try to import these products into the US, at lower prices than they are sold for in their home market, American competing industries cry foul and file antidumping and countervailing duty lawsuits.

The politics, economics and the regulations of dumping and countervailing duties are difficult legal processes to understand. Investigations and legal proceedings in front of the International Trade Commission require teams of accountants and lawyers and very often cost millions of dollars in litigation fees. So who has the time and money to pursue unfair import cases?

Most often, industry trade organizations such as furniture associations, semiconductor associations, automotive associations and others gather money from their members to pursue collective legal action when they suspect foreign companies are selling below cost in the US. But there are far reaching implications for global supply chains and for consumers.

For example, as Beth Macy writes about in Factory Man, John Bassett (Bassett Furniture) went after Chinese companies producing low-cost furniture that was being imported by Bassett Furniture's competitors. Bassett couldn't compete on price and suspected the imports were being dumped in the US to take over the market here. Bassett's competitors were selling millions of low-cost imported furniture pieces. And as Bassett's competitors shifted more and more production to China, they shuttered their own American factories and put thousands of Americans out of work. Ultimately, the ITC ruled in favor of the Bassett coalition and slapped countervailing duty on the imports, resulting in significant imported furniture price increases.

So who is the victor in these cases? The industry associations? Probably not. The expense to pursue an antidumping case may outweigh the benefit of a favorable ruling, and the legal case can last for years. In addition, the countervailing duties don't last forever. Does the consumer win? Probably not because imported products with countervailing duties become much more expensive. The American worker? Probably not because countervailing duty payments may not filter down to benefit displaced workers for a long time, if ever. It's a vicious circle.

Pending right now in the International Trade Commission is an antidumping petition by major US steel manufacturers against steel from Brazil, China, India, Japan, South Korea, Netherlands, Russia, and the United Kingdom. The petitioners claim that imports of cold-rolled steel are causing material injury to the domestic steel industry.

American companies that use this steel, particularly in construction, automotive and appliances could see significant cost increases if the petition is successful. Countervailing duties for steel throughout supply chains could cause prices to double or even triple. Ouch.

While we think antidumping action and countervailing duties will help competing American companies, it is very much like the game of whack-a-mole. Just when we think we got the mole, another one pops up. We may be addressing a problem of undervalued imports, but causing major price increases in raw materials and consumer products. And we still aren't solving the problem of shuttered factories and laid off workers.

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