The Effects of Section 201 Safeguards on U.S. Industries

Article excerpt

INTRODUCTION

I.  SAFEGUARDS IN INTERNATIONAL TRADE LAW
     A. Origins of International Safeguards Law: GATT
        Article XIX
     B. Modern Developments: Agreement on Safeguards and the
        WTO
II. SAFEGUARDS IN U.S. TRADE LAW
     A. Origins of U.S. Safeguards Law
     B. Modern Developments: Section 201 of the Trade Act
        of 1974
     C. Conflicts Between U.S. Safeguards Law and the WTO
     D. U.S. Safeguards in Practice
III. CASE STUDIES
     A. Case Study Methodology
     B. Case Study #1: Lamb Meat
        1. Background
        2. USITC Investigation
        3. Safeguards
        4. Industry Performance
           i.   Domestic Production
          ii.  Imports
         iii. Domestic Industry Market Share
          iv.  Price
           v. Number of U.S. Establishments
          vi. Conclusion
     C. Case Study #2: Wheat Gluten
        1. Background
        2. USITC Investigation
        3. Safeguards
        4. Industry Performance
           i. Imports
          ii. Domestic Industry Performance
        5. Conclusion
     D. Case Study #3: Circular Welded Carbon Quality Line Pipe
        1. Background
        2. USITC Investigation
        3. Safeguards
        4. Industry Performance
           i. Domestic Production
          ii. Imports
         iii. Domestic Industry Market Share
          iv. Average Unit Value
           v. Capacity Utilization
          vi. Hours Worked
        5. Conclusion
IV.  CONCLUSIONS AND RECOMMENDATIONS
     A. Apply Safeguards Only to Offset Import Surges Caused by
        Temporary and Unforeseen Factors
     B. Conduct Follow-Up Evaluations

INTRODUCTION

Over the past sixty years, the United States and many other countries have negotiated significant reductions in barriers to trade. (1) These reductions have helped spur the rise of international trade that has fundamentally re-shaped the modern world. While providing an engine for global economic growth and development, the liberalized trade regime has also increased international competition to unprecedented levels. (2)

The U.S. Congress passed section 201 of the U.S. Trade Act of 1974 (3) to mitigate the economic upheaval associated with the increased competition caused by liberalized trade and globalization. (4) Section 201 authorizes the President of the United States to instate temporary trade barriers, known as safeguards, to protect domestic industries that have been injured or threatened by increased imports. The stated goal of a section 201 safeguard is to facilitate efforts of the domestic industry to "make a positive adjustment to import competition." (5) The statute defines a "positive adjustment" as either (1) becoming "able to compete successfully with imports after actions taken under ... this title terminate," or (2) "experiencing an orderly transfer of resources to other productive pursuits." (6) In practice, the U.S. government generally implements safeguards with the goal of helping domestic industries become competitive with imports. (7) Four of the last six U.S. presidents implemented safeguards at least once to protect and restore injured or threatened domestic industries. (8)

Safeguards are permitted under the Global Agreement on Tariffs and Trade (GATT). (9) However, safeguards operate in tension with the general purpose of the international trade system. The trade system is structured around mutual obligations between countries to maintain agreed-upon levels of concessions for imports. (10) Safeguards explicitly allow countries to "escape" their obligations. Indeed, the portion of the GATT authorizing safeguards became known as the "escape clause." (11)

International lawyers and political scientists have engaged in considerable debate over the political and legal ramifications of safeguards. (12) However, the debate has not been informed by empirical data demonstrating whether safeguards are effective at achieving their primary function: to facilitate the efforts of the domestic industry to become "able to compete successfully with imports after [safeguard actions] terminate. …

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