In theory, the underlying purpose of U.S. competition laws has been to promote commerce and fair play in our laissez-faire economy. Historic antitrust legislation, such as the Sherman, Clayton, and Robinson-Patman Acts, were passed so as to ensure a vigorous, free and competitive U.S. economy.
Working side-by-side with these laws has been a recently expanding body of jurisprudence known as "international trade" laws. These laws allow for restrictions on imports if they are found to compete unfairly with U.S. products in the U.S. marketplace. The proliferation of international trade investigations is proof that U.S. companies find these laws attractive and effective.It is therefore worth examining a couple of hypothetical, but realistic, situations to see if U.S. international trade laws, such as the countervailing and antidumping statutes, are promoting a free economy and a "level playing field" for U.S. industry, or are instead being used to subvert basic competition principles.
Example I: Help! The U.S. Is Swamped by Foreign Catfish Filets.
A foreign manufacturer of catfish filets moves to the United States, apparently to escape creditors and judicial findings of criminal bankruptcy. This company, now "American," thrives quickly and becomes the only U.S. producer. Several years later, when it begins to feel competition for its U.S. monopoly from a foreign company run by one of its former employees, it files countervailing and antidumping duty petitions against imports from the former employee.
To support charges of dumping, the petitions contain the alleged price lists of the former employee. These lists are out-of-date, and deal with sales to countries other than the home market or the United States. To support charges of subsidization, the company attaches an article from a U.S. magazine, depicting the use of black market labor in the foreign country, but not mentioning the former employee.
Despite protests from the former employee, the U.S. Department of Commerce starts investigations against imports of catfish filets. After costly investigations, the former employee is cleared of the charges of subsidization. As a result of a court appeal, the department finally rules that the foreign company has not illegally dumped its catfish filets in the United States.
After three long years, the foreign owner of an enterprise as big in size as a typical McDonald's restaurant is exonerated. During this period, the small foreign company lost U.S. sales and market share because U.S. importers are afraid of buying the foreign products for fear of possible antidumping duties. Even today, the former employee finds it difficult to regain lost U.S. sales and market share.
Example II: Help! The U.S. Is Neck-Deep in Imported Mineral Water!
A U.S. manufacturer of mineral water files an antidumping petition. After filing the petition, the enterprise writes personal letters to the customers of its foreign competitors, stating that findings of dumping are assured. The U.S. company urges these customers to buy only from it.
Later, the U.S. manufacturer apparently induces a trade journal to publish an article with a bold headline saying foreign mineral water has been found to have been dumped, when in fact it hasn't. This results in immediate lost sales and a reduction of U.S. market share for the foreign competitors.
Despite requests by the foreign competitors that U.S. international trade agencies use their equitable powers to order the end to these unfair trade practices, the abuses continue. The imports of the foreign competitors are subsequently dismissed from investigation on grounds that they don't cause economic injury. Nevertheless, the foreign competitors find it difficult to regain lost sales and U.S. market share.
While the two hypothetical cases are not typical of all U.S. international trade investigations, they do point out how our laws are, sadly, often abused by U.S. companies. Many U.S. firms apparently have come to view the U.S. international trade laws not as a means of preserving competition, but as a convenient and cheap means of limiting it - particularly since the U.S. government shoulders the investigative burden. This phenomenon highlights the crucial and unfortunate conflicts in our legal system. While our antitrust laws seek to further competition, our international trade laws, when improperly invoked and administered, may encourage its restraint.
There is something even more tragic than the frequent abuse of our international trade laws, and the fact that U.S. international trade agencies have not seen fit to reconcile their investigative techniques with antitrust ideals: There appears to be no will to rectify these abuses.
Despite sound antitrust and competition reasons against some cases, U.S. international trade agencies have refused to exercise their discretion to weed out unwarranted, unjustified, and ill-conceived countervailing and antidumping petitions.
This has created an incentive for U.S. companies to file petitions, since the investigations themselves can chill U.S. sales of foreign competitors, regardless of whether duties are ultimately imposed. All of this is to the detriment of U.S. consumers, who are forced to pay higher prices for the U.S. products.
Why, then, are our politicians concerned only about the unfair trading practices of foreign companies but not about the abuse of the U.S. international trade laws by some monopolistic U.S. firms? By seeking votes, rather than promoting fairness, our politicians write laws that do not strengthen the United States, but instead weaken it.
By not interpreting international trade laws in a manner that properly takes into account abuses by U.S. companies - even when these abuses help explain economic conditions relevant to economic injury and countervailing and antidumping duty findings - our international trade agencies have managed to avoid unwanted conflicts with their political brethren.
In light of all this, one must ask: Is it the mark of a great nation to shrink from competition? Is it the mark of a great nation to write and implement laws that encourage U.S. firms themselves to use unfair trade practices to restrain trade? We think not. On the contrary, at the foundation of both our economic and political systems are the principles that fairness fosters competition and that competition fosters prosperity.