Trade Cases
Bill Would Close "Back Door" into Free Trade Agreements
Written by Tim Triplett
September 21, 2021
China should no longer get a “free ride” and be able to “back door” imports via the current language in free trade agreements the U.S. has with other countries, said a trio of senators last week in a letter to U.S. Trade Representative Katherine Tai. The Market Economy Sourcing Act, sponsored by Sens. Bob Casey (Pa.), Sherrod Brown (Ohio) and Elizabeth Warren (Mass.), is designed to prevent products, such as steel, from nonmarket economies from being imported as parts of larger components.
The measure is aimed primarily at China, which has a reputation for dumping and other unfair trade practices. “We must ensure our trade policies do not further entrench our supply chains with those of the Chinese Communist Party (CCP) and other non-market economies,” the letter stated.
As currently structured, U.S. trade agreements could allow as much as half the content of FTA goods to come from outside the FTA region – in the form of parts that are components of a larger piece of heavy machinery, for example. To address these challenges, the U.S. must incorporate supplemental rules of origin to establish limits on FTA content that can originate in non-market economies, said the senators.
Under the proposal, during the first five-year period following entry into force of a free trade agreement, no more than 20% of the “remainder” of content in qualifying goods may originate from non-market economies, and no more than 10% thereafter. That is, 80% of the “remainder” (the allowable content from non-FTA party countries) must come from market economies. After five years, 90% of the remainder content in qualifying goods must come from market economies.
The USTR has documented the numerous instances of unfair trade U.S. firms face with respect to the CCP, as well as human rights abuses, repressive labor regimes and lax environmental standards. “We must ensure our trade rules do not provide countries that engage in these activities a back door into our market, as the current trade rules allow. It is counter to our national and global economic interests to allow countries that flout market principles to free-ride on trade agreements or to benefit from U.S. procurement dollars,” said the sponsors of the bill. “We believe USTR, on its own authority, can take action which will address the fundamental issue of the CCP free-riding on trade agreements and preference programs.”
The American Iron and Steel Institute supports the effort to reduce the amount of steel from unfair traders in non-market economies such as China and Vietnam that finds its way into the U.S. by being rolled up into other goods that are part of FTAs. “Chinese steel should not be getting the benefits of other free trade agreements,” said AISI President Kevin Dempsey in remarks to Steel Market Update.
He noted that the “melted and poured” requirements in the USMCA pact were designed to prevent such an influx of steel from outside North America. “Enhancing disciplines against nonmarket behavior in steel and other industries and incentivizing the use of lower emitting products like steel produced in the U.S. are two priorities for the Biden administration and should be key components of any trade negotiation,” he added. “I would note there can be nonmarket-type behavior in many steel markets around the world. It’s not just about China and Vietnam.”
By Tim Triplett, Tim@SteelMarketUpdate.com
Tim Triplett
Read more from Tim TriplettLatest in Trade Cases
Nippon respects HR dumping decision, expects lower rate in next review
Nippon Steel says it respects the US Department of Commerce’s findings in administrative reviews despite the agency recently assigning the Japanese steelmaker a higher dumping margin.
CRU: Trump tariffs could stimulate steel demand
Now that the dust has settled from the US election, as have the immediate reactions in the equity, bond, and commodity markets, this is a prime opportunity to look at how a second Trump presidency might affect the US steel market.
Rebar import duties to continue for 5 more years
Import duties on rebar from a handful of countries will continue to be collected for at least another five years.
Leibowitz: Trump 2.0 signals Cold War 2.0 trade and China policies
China is one of the elephants in the room as the transition to Trump 2.0 continues. While the people and policies are still being formulated, it’s possible to detect a strategy for the new Trump administration. I think there are two imperative issues that the new administration needs to balance. The Trump strategy will, I believe, follow the following points. First, trade is one of the issues that got President Trump elected in 2016 and 2024—it nearly got him elected in 2020, save for the pandemic. If President Trump had won in 2020, I might be writing chronicles about the end of his eight years in the White House now instead of projecting what the next Trump administration would accomplish or break. Oh, well—that’s life. Trade will necessarily be a key feature of relations with China for the next four years.
Commerce says Nippon dumped steel in US in 2022-23
Commerce determined a significant dumping margin for hot-rolled steel imports from Japan's Nippon Steel.