Taking yes for an answer on “zeroing”

What ought to be viewed as a good-faith effort to comply with our international trade obligations has instead turned into a Christmas tree of complaints. U.S. trading partners continue to suggest that the United States hasn’t complied as quickly or completely as they would like, while supporters of the practice in Congress and elsewhere are upset that the administration has done anything at all.  

While it’s easy to find fault in the byzantine world of antidumping regulations, both sides are missing the larger picture. The Administration has taken a politically-difficult step to bring the United States into compliance with its trade obligations, which is good for the country and for the trading system.  

Ending the practice of zeroing

In the past, the Department of Commerce, which calculates dumping duties, would ignore – or zero out – instances where companies were selling goods at a higher price in the United States than at home when calculating dumping margins. By ignoring these negative margins, the final duties applied on imports from those companies to offset the dumping would be higher.

Following repeated WTO panel decisions, the Commerce Department released a series of regulations indicating that it would end the practice of zeroing, first in original investigations and, subsequently, in administrative reviews.  

Seeing the forest from the trees

The administration’s announcements have provoked criticism from our trading partners, who remain unhappy because the Administration’s proposals do not explain how it intends to address several issues surrounding compliance with outstanding WTO decisions. But our trading partners should not lose sight of the clear willingness of the Administration to end zeroing on a prospective basis. That’s no small feat when the practice enjoys serious political support in the United States.

Some Members of Congress believe that the WTO Appellate Body went beyond its mandate and, as a result, that the United States should not implement the decision.

They’re right about that, but ignoring adverse decisions, whether you agree or not, undermines confidence in the WTO. It also sets a bad example and provides an excuse for our trading partners to ignore rulings that they dislike. Unfortunately, zeroing has turned into a high-profile issue internationally, and one that the United States government should not ignore. Failure to resolve zeroing allows countries whose economies are less open than ours to divert attention from the distortions and restrictions in their own economies by claiming that the United States is a WTO scofflaw.

Our trading partners also object that we continue to press to permit zeroing as part of the Doha Round of WTO negotiations. But just because the Administration is complying with the WTO rules doesn’t mean it has to like it. Zeroing enjoys support in the United States. It would be odd for the United States to abandon its interest in changing the rules to allow the practice.

Compliance with adverse WTO rulings is often a complicated process. Ultimately, the Administration will have to make additional tough and politically-contentious decisions about whether it needs to take other steps to bring the United States into compliance with the WTO’s rulings on zeroing.  

While those decisions are unlikely to leave either Congress or our trading partners completely satisfied, neither should lose sight of the importance of complying with our international trade obligations or the political difficulty of doing so.  The administration may never be able to please Congress and our trading partners, though perhaps the fact that both are equally unhappy is the best sign that they got it right.

Bill Reinsch is President of the National Foreign Trade Council.