Trade Enforcement

Trade Enforcement: Comparison of FY 2005 Actual Appropriation
(Current and Real Dollars) and FY 2006 Budget Request
(U.S. $ millions)

The administration's FY 2006 budget calls for a reduction in funding for trade enforcement, just when America's workers are most in need of a much more aggressive enforcement stance to combat unfair trade practices and support American jobs.

All together, the administration's budget would trim funding at agencies with responsibility for trade enforcement by 5 percent in inflation-adjusted dollars. These cuts would hamper the ability of the agencies to address violations of international and domestic trade rules just as low-priced imports are flooding the U.S. market. As a result, foreign firms would enjoy even more latitude to undercut America's workers and firms through unfair trade practices, increasing the trade deficit and destroying more good jobs.

This year's proposed cut of trade enforcement funds caps four years of failed trade enforcement by the Bush administration. Since entering office in 2001, the Bush administration has refused to enforce effectively domestic trade laws and failed to pursue aggressively our rights under international trade agreements. Numerous petitions to enforce our domestic trade laws have been rejected by the administration despite their merits, and the United States has filed only 12 complaints at the World Trade Organization in the last four years—a marked decline from the 62 complaints filed by the United States from 1997 to 2000 by the previous administration. Even when violators of our trade laws are identified and sanctioned, sometimes those violators still are allowed to escape the remedies imposed on them. In fact, our customs system failed to collect more than $260 million in duties owed on goods dumped into the country last year.

The administration's refusal to enforce the trading rights of American workers and producers has contributed to our ballooning trade deficit. When foreign governments and producers are allowed to violate trade rules with impunity, more underpriced goods flood into our market and more barriers to our exports persist, undercutting domestic producers who do play by the rules. Since President Bush took office, our trade deficit has jumped by more than 67 percent: It exploded from $358 billion in 2001 to more than $600 billion in 2004. As our trade deficit grows and the United States buys more from abroad than it sells, America's workers lose more good jobs. The deepening trade imbalance has been a major factor in the loss of more than 2.7 million manufacturing jobs since 2001. If allowed to grow unchecked, the trade deficit will continue to cost jobs and undermine economic growth, as we are forced to borrow more and more from foreign governments to finance the growing gap between what we consume and what we produce.

Rather than enact policies to reduce the unsustainable trade deficit through more aggressive trade enforcement and reformed trade rules, the administration has chosen to expand the flawed trade agreements that contribute to our deficit and has proposed actually reducing the funding dedicated to trade enforcement. This year's budget request is another disturbing reminder of the administration's abandonment of American producers and workers as they struggle to compete in an increasingly unregulated and imbalanced global economy.

Trade Enforcement for China

Trade Enforcement for China: Comparison of FY 2004 and FY 2005
Actual Appropriation (Current and Real Dollars)
and FY 2006 Budget Request
(U.S. $ millions)

The administration's FY 2006 budget calls for eliminating special funding set-asides for trade compliance and enforcement activities with regard to China. China is the country with which we have the single biggest bilateral trade deficit—in 2004, the deficit with China passed $150 billion, setting another annual record. According to the Economic Policy Institute, this surging deficit with China cost U.S. workers 469,000 jobs and job opportunities between 2001 and 2003.

An important factor affecting our severely imbalanced trade relationship with China is the ability of Chinese firms and the Chinese government to violate flagrantly both international and U.S. trade rules with impunity. Through massive repression of basic workers' rights, manipulation of its currency, disregard for intellectual property protections and illegal subsidies, among other actions, the Chinese government is able to drive down prices and undercut producers in the United States and abroad.

In the face of these abuses, the Bush administration has refused to take advantage of international dispute resolution or enforce domestic trade laws against China. The Bush administration only filed its first case against China in the World Trade Organization in 2004, after admitting that WTO rules were being flagrantly violated since China's entry into the organization. At the same time, the administration has rejected petitions under U.S. trade law to address China's violations of workers' rights and the undervaluing of its currency, without even bothering to investigate the petitions on their merits. The administration also has refused to enforce the China-specific safeguard and has proposed moving toward eliminating the special procedures that apply to China in anti-dumping cases.

Out of deep concern over China's unfair trade practices and the harm they cause to America's firms and workers, Congress set aside specific funds for trade compliance and enforcement activities with regard to China. In both FY 2004 and 2005, Congress appropriated $3 million for the International Trade Administration's newly created Office of China Compliance and $2 million for the U.S. Trade Representative to administer the China-specific safeguard and the special valuation rules for nonmarket economies that apply to China in anti-dumping cases. Yet the administration sees no need to focus trade enforcement resources on China, and has proposed eliminating these set-asides for China enforcement in its FY 2006 budget. If the administration is allowed to escape congressional directives and exercise its own discretion over funding for China enforcement activities, it once again will be American producers and workers who pay the price.

Trade Law Repeal

The Bush administration's FY 2006 budget once again calls for eliminating congressional instructions to seek a negotiated solution at the World Trade Organization to a dispute over the Countervailing Duty and Subsidy Offset Act (CDSOA). In effect, the elimination of this instruction would open the door to repealing the CDSOA in response to WTO complaints.

The CDSOA provides American companies and workers with an important safeguard against unfair trade practices. When foreign producers violate our trade laws by dumping their goods into the United States below market price or exploiting government subsidies to undercut U.S. production, the U.S. government can impose additional import duties on these products to remedy the trade law violation and to re-balance the playing field for American firms and workers. The CDSOA allows U.S. workers and producers harmed by unfair trade practices to access the funds generated by these import duties. They can use the funds to finance their adjustment costs, worker training and health care and pension benefits. Hundreds of millions of dollars have been distributed under the program, some of it directly to unions for programs to aid their members who have lost jobs to unfair trade.

The WTO has ruled that the CDSOA violates international trade rules, and eight foreign countries are threatening to impose sanctions on the United States if the law is not repealed. Rather than stand up to defend the law in the WTO and insist on a negotiated solution with other countries, it appears the Bush administration will push for a unilateral repeal of the law. In fact, the 2006 budget marks the third time in a row the administration has asked Congress to repeal its instruction to seek a negotiated solution to the CSDOA challenge in its annual budget.

Repealing the CDSOA would be a slap in the face to American workers who are losing hundreds of thousands of jobs a year to bad trade deals and offshore outsourcing. Not only has the program offered some badly needed assistance to workers harmed by unfair trade, it also has helped expose the failures of our broken customs system, which fails to collect millions in duties owed on dumped goods each year. Rather than fix these gross enforcement failures and address the underlying unfair trade practices that destroy good jobs, the Bush administration once again has chosen to put our trade laws—and the American jobs they support—up on the chopping block.