Monday, April 27, 2009
CVD for Vietman?
Historically, countervailing duties were not applied to so-called "non-market economies." Basically, NME's are communist or socialist countries where the economy is centrally controlled rather than acting at the whims of the marketplace as it usually does in free-market economies. Well, unless a company or sector gets "too big to fail," then apparently even the U.S. puts the brakes on the rough and tumble of the marketplace. But, I digress. And, note that I am not judging the policy, just noting that it exists. Personally, some of my favorite people and companies are in the too big to fail category.
That said, the problem with NME's from a countervailing duty perspective is that when the government sets prices and industrial policy from the top down, basically everything is subsidized. How is the U.S. Department of Commerce going to figure out the amount of the subsidy (i.e., a financial benefit provided to the producer) when the whole economy is jerr-rigged?
For example, a subsidy might exist where pig iron costs $200 per ton on the world market but the government (or the proletariat) controls the means of production and sells it to local manufactures at $150 per ton. This looks like a simple $50 subsidy, and it is. But so is the labor rate and the cost of every other material, and conceivably even he national health care system and pension plan. [Trade lawyers, please don't nitpick. I know a WTO Green Light Subsidy when I see one. We're just using examples here to prove a point.]
For years, Commerce's policy was not to apply CVD law to NME's. But in 2007, at least with respect to China, Commerce decided it was able to do the math and sort out the subsidy amount. This had to do with the growth of private enterprise in China and the fact that even government-owned entities have to compete in the world market. It also has to do with the principal of administrative law that an agency is permitted to change course so long as it provides notice and a rational explanation of why the change is warranted. Subsequent to the change in policy with respect to China, the courts affirmed that the ITA's changed policy was consistent with the law under the Chevron test.
Now the question is what to do with Vietnam? There is a petition pending relating to plastic retail carrier bags. Vietnam is an NME. The ITA would like comments on how to treat the request for the imposition of countervailing duties on products from the Socialist Republic of Vietnam.
P.S. I would like extra credit from the Department of Political Science and the University of Illinois at Urbana-Champaign for properly making an allusion to Marx and correctly spelling "proletariat."