The Wall Street Journal published an editorial September 11 regarding legislation strongly supported by primarily two US congressmen to undercut fair trade with Japan, Korea, and China, amongst other countries. This is a follow-up to a more lengthy article on August 11 and inspired a response from the two congressmen, Democratic Senator Byrd of West Virginia and Democratic Senator Sherrod Brown of Ohio, in a letter-to-the-editor. Unfortunately, support for the Byrd Amendment--otherwise known as the Continued Dumping and Subsidy Offset Act--is bipartisan. The amendment was slipped into a large appropriations bill in 2000 and passed as rejecting the amendment would have required the entire bill being rejected.
Essentially, the amendment authorizes the US government to subjectively divert duties on imports to a handful of applicants from various industries claiming damages due to foreign imports.
The WTO highlights the case's history and the actions by the complainants, specifying that duties would be newly applied to a list of imported goods from the US.
Although the amendment was repealed by Congress in 2006, it will honor applications by US companies that applied before October 1, 2007. The pool of money applicants are vying for has included billions in held duties against Canadian softwood lumber. Rather than go into the US Treasury as required, it would get distributed to a small handful of applicants in respective industries, and in some industries that seem outside the scope of certain goods.
The Wall Street Journal states:
"As of 2007, some $1.9 billion had been handed out to thousands of supplicants, from bee keepers to steel manufacturers. The lion's share has gone to big business. A GAO report found that between 2001 and 2004, more than half of Byrd money went to five companies, and 20% went to just one, an Ohio bearings maker named Timken. In the 2007 rankings of 1,982 payees, Idaho's Micron semiconductor company won the jackpot, with $37,938,402.
"Back in 2005, the GAO also reported that nobody was even checking to determine the accuracy of losses claimed under Byrd. In each sector -- raspberries, catfish, pencils, furniture, etc. -- the more you claimed, the bigger your share of the pot. The American Italian Pasta Company of Kansas City, Mo., which alleged more than $8 billion in losses, raked in millions as a result.
"The losers in all this were the rest of us. That includes the American companies, as some told the GAO, which suffered or collapsed because they couldn't compete with domestic rivals flush with Byrd cash. Also incalculable are losses to American exporters. When the WTO ruled the Byrd Amendment illegal, it authorized 11 of our trading partners, including those in the EU and Japan, to impose retaliatory tariffs on American products. Many duly slammed us. A revived Byrd would trigger more retaliation, and at a time when exports are the main source of U.S. growth."
Basically, this kind of tool not only spurs more deficit spending (less US Treasury dollars received), it also allows US companies to postpone making the changes necessary to adapt to foreign competition and a globalized, highly integrated world economy.
The US needs to provide a business friendly environment to incentivize domestic companies to invest a percentage of profits into research and development and innovative practices, including for developing a skilled workforce. The government could also do more to help states facilitate programs that help strengthen export capabilities in US companies. The Byrd Amendment practices offer no such incentives and provide no guarantee how disbursements will be used by successful applicants.
The question is whether there is enough support to ensure a repeal remains in effect on such practices. It has had enough bipartisan support in the past to avoid such a permanent repeal, but, assuming the current, anti-FTA congress maintains its majority, there will be little opposition to extending the repeal once it expires. The Deficit Reduction Act (2005) that the repeal was a part of passed only with Vice President Cheney's tie-breaking vote, 51-50.
As a side note, in the context of this year's election, Senator McCain voted for the bill and Senator Obama against it, with 4 Republicans joining 46 Democrats in opposition.