U.S.-China Trade
The United States Has Not Restricted Imports under the China Safeguard Gao ID: GAO-05-1056 September 29, 2005In joining the World Trade Organization (WTO) in December 2001, China agreed to a number of mechanisms to allow other WTO members to address disruptive import surges from that country. Among these was a transitional product-specific safeguard. In general, safeguards are temporary import restrictions of limited duration that provide an opportunity for domestic industries to adjust to increasing imports. U.S. law includes a number of other safeguards including a communist country safeguard, known as "section 406," and a global safeguard, known as "section 201," which have both applied to China. In light of increased concern about Chinese trade practices and the U.S. government response to them, the conference report on fiscal year 2004 appropriations requested that GAO review the efforts of U.S. government agencies responsible for ensuring free and fair trade with that country. In this report, which is one of a series, GAO (1) describes the China safeguard, (2) describes how it has been used thus far, and (3) examines issues related to the President's discretion to apply the safeguard. Other safeguards provide context to understand this mechanism. We provided ITC and USTR a draft of this report for their review and comment. Both agencies chose to provide technical comments from their staff. We incorporated their suggestions as appropriate.
The China safeguard permits WTO members, including the United States, to address disruptive import surges from China. In the United States, the China safeguard is implemented under section 421 of the Trade Act of 1974, which allows U.S. firms to petition for relief and establishes a three-step process. This process involves the International Trade Commission (ITC), Office of the U.S. Trade Representative (USTR), and the President and determines whether Chinese imports are causing market disruption to domestic producers and whether a remedy is in the national economic interest. The entire process takes about 150 days. Under the terms of China's WTO accession agreement, WTO members may use the China safeguard until 2013. To date, the United States has not applied the China safeguard in five cases brought by domestic producers. In a sixth case, ITC has not yet reached a decision. In two cases, ITC found no market disruption. In three cases, ITC found market disruption and USTR evaluated the pros and cons of various options and made a recommendation to the President. In all three cases, the President declined to provide relief to the domestic industry after he found it would not be in the national economic interest because the costs would outweigh the benefits. The success rate for China safeguard petitions is similar to communist country safeguard petitions, but differs from that of global safeguard petitions. The President's decisions not to provide import relief after ITC found market disruption generated controversy, including a lawsuit claiming that he exceeded his authority. The relevant House committee intended that the law create a presumption in favor of relief upon an ITC injury finding. Nonetheless, the U.S. Court of International Trade found the President has broad discretion not to apply a China safeguard. Moreover, the President considers the question of whether to provide relief from a broader perspective than ITC. The President weighs the benefits of relief against the costs and considers factors such as the effect on consumers and downstream users, which ITC does not. The President cited third-country imports in all his decisions denying relief under both the Chinese and communist country safeguards. Under the global safeguard, third-country imports generally cannot diminish the potential benefits of import relief to the domestic industry and the President has often provided relief, especially since 1988 when U.S. trade laws were revised.
GAO-05-1056, U.S.-China Trade: The United States Has Not Restricted Imports under the China Safeguard
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
September 2005:
U.S.-China Trade:
The United States Has Not Restricted Imports under the China Safeguard:
GAO-05-1056:
GAO Highlights:
Highlights of GAO-05-1056, a report to congressional committees:
Why GAO Did This Study:
In joining the World Trade Organization (WTO) in December 2001, China
agreed to a number of mechanisms to allow other WTO members to address
disruptive import surges from that country. Among these was a
transitional product-specific safeguard. In general, safeguards are
temporary import restrictions of limited duration that provide an
opportunity for domestic industries to adjust to increasing imports.
U.S. law includes a number of other safeguards including a communist
country safeguard, known as ’section 406,“ and a global safeguard,
known as ’section 201,“ which have both applied to China.
In light of increased concern about Chinese trade practices and the
U.S. government response to them, the conference report on fiscal year
2004 appropriations requested that GAO review the efforts of U.S.
government agencies responsible for ensuring free and fair trade with
that country. In this report, which is one of a series, GAO (1)
describes the China safeguard, (2) describes how it has been used thus
far, and (3) examines issues related to the President‘s discretion to
apply the safeguard. Other safeguards provide context to understand
this mechanism.
We provided ITC and USTR a draft of this report for their review and
comment. Both agencies chose to provide technical comments from their
staff. We incorporated their suggestions as appropriate.
What GAO Found:
The China safeguard permits WTO members, including the United States,
to address disruptive import surges from China. In the United States,
the China safeguard is implemented under section 421 of the Trade Act
of 1974, which allows U.S. firms to petition for relief and establishes
a three-step process. This process involves the International Trade
Commission (ITC), Office of the U.S. Trade Representative (USTR), and
the President and determines whether Chinese imports are causing market
disruption to domestic producers and whether a remedy is in the
national economic interest. The entire process takes about 150 days.
Under the terms of China‘s WTO accession agreement, WTO members may use
the China safeguard until 2013.
To date, the United States has not applied the China safeguard in five
cases brought by domestic producers. In a sixth case, ITC has not yet
reached a decision. In two cases, ITC found no market disruption. In
three cases, ITC found market disruption and USTR evaluated the pros
and cons of various options and made a recommendation to the President.
In all three cases, the President declined to provide relief to the
domestic industry after he found it would not be in the national
economic interest because the costs would outweigh the benefits. The
success rate for China safeguard petitions is similar to communist
country safeguard petitions, but differs from that of global safeguard
petitions.
The President‘s decisions not to provide import relief after ITC found
market disruption generated controversy, including a lawsuit claiming
that he exceeded his authority. The relevant House committee intended
that the law create a presumption in favor of relief upon an ITC injury
finding. Nonetheless, the U.S. Court of International Trade found the
President has broad discretion not to apply a China safeguard.
Moreover, the President considers the question of whether to provide
relief from a broader perspective than ITC. The President weighs the
benefits of relief against the costs and considers factors such as the
effect on consumers and downstream users, which ITC does not. The
President cited third-country imports in all his decisions denying
relief under both the Chinese and communist country safeguards. Under
the global safeguard, third-country imports generally cannot diminish
the potential benefits of import relief to the domestic industry and
the President has often provided relief, especially since 1988 when
U.S. trade laws were revised.
Outcomes of Completed China Safeguard Petitions (as of September 2005):
[See Table 4]
www.gao.gov/cgi-bin/getrpt?GAO-05-1056.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Loren Yager at (202) 512-
4347 or yagerl@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
U.S. Law Establishes Three-Step Process for China Safeguard Decisions:
The United States Has Never Applied the China Safeguard:
The President Has Exercised His Broad Discretion in Deciding Not to
Apply Relief:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Comparison of China, Communist Country, and Global Safeguards:
Table 2: Results of ITC China Safeguard Investigations (2002-2005):
Table 3: Reasons Cited by the President in Decisions Not to Provide
Import Relief:
Table 4: Outcomes of Completed China, Communist Country, and Global
Safeguard Cases (as of September 2005):
Figures:
Figure 1: China Safeguard Timeline:
Figure 2: Dates of China Safeguard Petitions:
Abbreviations:
ITC: International Trade Commission:
TPSC: Trade Policy Staff Committee:
USTR: Office of the United States Trade Representative:
WTO: World Trade Organization:
United States Government Accountability Office:
Washington, DC 20548:
September 29, 2005:
The Honorable Richard C. Shelby:
Chairman:
The Honorable Barbara A. Mikulski:
Ranking Member:
Subcommittee on Commerce, Justice, and Science:
Committee on Appropriations:
United States Senate:
The Honorable Frank R. Wolf:
Chairman:
The Honorable Alan B. Mollohan:
Ranking Member:
Subcommittee on Science, State, Justice and Commerce, and Related
Agencies:
Committee on Appropriations:
House of Representatives:
Imports from China have grown rapidly over the last decade, from a
total value of about $42 billion in 1995 to over $196 billion in
2004.[Footnote 1] While lowering U.S. prices, and therefore benefiting
consumers, this growth has presented a major challenge for U.S.
producers that compete with Chinese products in the U.S. market.
In joining the World Trade Organization (WTO) in December 2001, China
agreed to a number of unique import relief mechanisms. Among them was a
transitional product-specific safeguard (China safeguard) that allows
other members to impose import restraints (such as quotas or tariffs)
on China in the event of disruptive import surges.[Footnote 2]
In light of increased concern about Chinese trade practices and the
U.S. government response to them, the conference report on fiscal year
2004 appropriations legislation[Footnote 3] requested that GAO monitor
the efforts of U.S. government agencies responsible for ensuring free
and fair trade with that country. In subsequent discussions with staff
from the House Appropriations Committee's Subcommittee on Science,
State, Justice and Commerce, and Related Agencies, we agreed to provide
a number of reports on relief mechanisms available to U.S. producers
who are adversely affected by unfair or surging imports and the manner
in which these mechanisms have been applied to China.[Footnote 4] In
this report we (1) describe the China safeguard, (2) describe how the
safeguard has been used thus far, and (3) examine issues related to the
President's discretion to apply the safeguard.
To describe the safeguard, we reviewed U.S. laws and procedures as well
as relevant WTO agreements. We interviewed staff members from the
Office of the U.S. Trade Representative (USTR), the U.S. International
Trade Commission (ITC), WTO officials, and other experts on trade law.
In describing how the safeguard has been used thus far, we reviewed the
official case records for each of the five completed safeguard
investigations conducted by ITC and USTR. To clarify the views of those
favoring and opposing safeguard measures, we spoke with attorneys
representing both petitioners and respondents. We also interviewed
Chinese government officials to obtain their perspective on the China
safeguard. To examine the application of presidential discretion, we
reviewed and analyzed the presidential determinations, and documents
related to the legal challenge of one of these decisions. We compared
the China safeguard with other safeguards throughout the report in
order to provide context for understanding the outcomes so far. We
performed our work from January 2004 to September 2005 in accordance
with generally accepted government auditing standards. Appendix I
contains a more detailed description of our scope and methodology.
Results in Brief:
The China safeguard allows WTO members to restrict surging imports from
China that cause market disruption to the domestic industry. In the
United States, the safeguard is implemented by section 421 of the Trade
Act of 1974,[Footnote 5] which establishes a three-step process to
consider its application. First, after receiving a petition, ITC
determines whether there is market disruption by investigating whether
imports from China have injured U.S. producers. If ITC does not find
market disruption, the case ends. If ITC finds market disruption, it
proposes a potential remedy for USTR's and the President's
consideration. Second, USTR consults with China to seek an agreement
that would address ITC's finding of market disruption. Concurrently,
USTR obtains and evaluates information from interested parties on the
appropriateness of any proposed remedy and makes a recommendation to
the President. Finally, section 421 requires the President to provide
relief unless he determines that doing so is not in the national
economic interest, or would cause serious harm to U.S. national
security. The China safeguard was modeled after the communist country
safeguard and contains similar features. A number of these features
differ from the U.S. global safeguard, which generally must be applied
to products from all U.S. trading partners.
The United States has yet to apply the China safeguard, even though it
has completed its consideration of five petitions for relief filed by
U.S. producers. In a sixth case, ITC is expected to make a
determination in early October 2005. In two instances, ITC found no
market disruption and the cases ended. In the three other cases, ITC
found market disruption and recommended a remedy to USTR and the
President. In these three cases, USTR's consultations with the Chinese
did not result in any agreements to address the market disruption. USTR
held public hearings and heard testimony on a number of remedy options,
including ITC-proposed tariffs, quotas, and not providing any relief.
USTR evaluated the pros and cons of the various options and made a
recommendation to the President. In all three cases, the President
declined to provide relief because he found it would not be in the
national economic interest of the United States. Presidents have made
similar decisions to deny relief under the communist country safeguard.
In contrast, Presidents have granted relief in half of the global
safeguard cases in which ITC recommended relief, and in all such cases
after Congress revised U.S. trade law in 1988.
The President's decisions not to provide import relief after ITC found
market disruption generated controversy, including a legal challenge to
his first safeguard decision before the U.S. Court of International
Trade claiming that he exceeded his authority. The legislative history
of section 421 shows that the relevant committee intended that there
would be a presumption in favor of the President's providing relief
once ITC found market disruption. While section 421 court held that the
President still has broad discretion not to apply the China safeguard.
Furthermore, the President considers the question of whether to provide
relief from a broader perspective than ITC, which focuses on the
domestic industry. In contrast, the President focuses on the national
economic interest when weighing the benefits of relief against the
costs, and considers factors such as the effect on consumers and
downstream users, which ITC does not. Furthermore, the President cited
third-country imports in all his decisions denying relief under both
the Chinese and communist country safeguards. Conversely, under the
global safeguard, third-country imports generally cannot diminish the
potential benefits of import relief to the domestic industry. The
President's decisions have been different under the global safeguard.
We provided ITC and USTR a draft of this report for their review and
comment. Both agencies chose to provide technical comments from their
staff. We incorporated their suggestions as appropriate.
Background:
In general, safeguards are temporary import restrictions that provide
an opportunity for domestic industries to adjust to increasing imports.
Both the WTO Agreement on Safeguards and article XIX of the General
Agreement on Tariffs and Trade establish general rules for the
application of safeguard measures. Safeguard actions taken under the
WTO usually apply to all imports of a product irrespective of
source.[Footnote 6] Other multilateral and bilateral trade agreements
also contain safeguard provisions. China's WTO accession agreement is
an example of such an agreement. Its provisions contain a transitional
product-specific safeguard that permits WTO members, including the
United States, to take measures to address disruptive import surges
from China alone. Under the terms of China's WTO accession agreement,
members may use the China safeguard until 2013.
In addition to the China safeguard, three other safeguards have been
applied to imports from that country in the United States. First, a
communist country safeguard applied to China prior to its WTO accession
and still applies to import surges from other communist countries that
are not WTO members.[Footnote 7] Second, Chinese imports are subject to
a U.S. global safeguard that applies to all WTO members.[Footnote 8]
Third, a textile safeguard provided for in China's WTO accession
agreement covers textile and apparel imports from China.[Footnote 9]
U.S. Law Establishes Three-Step Process for China Safeguard Decisions:
In the United States, the China safeguard is implemented under section
421 of the Trade Act of 1974, as amended, which Congress enacted as
part of the legislation authorizing the President to grant China
permanent normal trade relations status.[Footnote 10] Under section
421, U.S. firms may petition the government to apply a China safeguard.
The section establishes a three-step process to consider China
safeguard petitions. This three-step process involves ITC, USTR, and
the President, and it results in determinations about whether import
surges from China have caused market disruption and whether a remedy is
in the national economic interest or, in extraordinary circumstances,
would cause serious harm to national security. The entire process takes
approximately 150 days (see fig. 1).[Footnote 11] The China safeguard
was modeled on the communist country safeguard, which applied to China
before it became a WTO member.
Figure 1: China Safeguard Timeline:
[See PDF for image]
Note: The President, USTR, the House Committee on Ways and Means, and
the Senate Committee on Finance may also request an investigation. Time
frames vary if "critical circumstances" are involved.
[End of figure]
U.S. Producers May File Petitions Claiming Market Disruption Due to
Chinese Imports:
U.S. producers and certain other entities may file petitions to
initiate China safeguard investigations with ITC. These include trade
associations, firms, certified or recognized unions, or groups of
workers that represent an industry. The President, USTR, the Senate
Committee on Finance, and the House of Representatives' Committee on
Ways and Means can also request investigations.[Footnote 12]
The petition must include certain information supporting a claim that
imports from China are causing market disruption to an industry.
Petitions must include, among other things, the following: product
description, import data, domestic production data, and data showing
injury. Petitions must also include information on all known producers
in China and the type of import relief sought.
The Role of ITC Is to Determine Market Disruption and Recommend a
Remedy:
ITC determines whether imports from China are causing market disruption
to U.S. producers and, if so, recommends a remedy to address it. Upon
receiving a petition, ITC initiates an investigation by publishing a
notice in the Federal Register and holding public hearings to afford
interested parties the opportunity to present information. ITC receives
information on both market disruption and potential remedies from
parties through written submission and oral testimony. ITC has 60 days
to determine whether the imports from China are causing-or threatening
to cause-market disruption to domestic producers.
More specifically, ITC must determine whether imports from China are
entering the United States in "such increased quantities or under such
conditions as to cause or threaten to cause market disruption" to
domestic producers. According to section 421, to determine that market
disruption exists ITC must make the following three findings:
* Imports of the subject product from China are increasing rapidly,
either absolutely or relatively.
* The domestic industry is materially injured or threatened with
material injury.
* Such rapidly increasing imports are a significant cause of the
material injury or threat of material injury.
If a majority of ITC commissioners determine that market disruption
does not exist, the case ends.[Footnote 13] After an affirmative
determination, ITC must propose a remedy. This could include the
imposition of a duty, or an additional duty, or another import
restriction (such as a quota) necessary to prevent or remedy the market
disruption.
Within 20 days after making a determination of market disruption, ITC
must transmit a report to the President and USTR. The ITC report must
include the determination, the reasons for it, recommendations of
proposed remedies, and any dissenting or separate views of
commissioners. The report must also describe the short-and long-term
effects that recommended remedies are likely to have on the petitioning
domestic industry, other domestic industries, and consumers. In
addition, the report must describe the short-and long-term effects of
not taking the recommended action on the petitioning domestic industry,
its workers, the communities where production facilities of the
industry are located, and on other domestic industries.
The Role of USTR Is to Make a Recommendation to the President:
If ITC renders an affirmative determination, USTR undertakes two
parallel efforts. First, USTR consults with China about ITC's finding
and seeks to reach an agreement that would prevent or remedy the market
disruption.[Footnote 14] If the U.S. and Chinese governments do not
reach agreement after 60 days (or if the President determines that an
agreement reached is not addressing the market disruption), the United
States may then apply a safeguard.
Concurrently, USTR obtains and evaluates information from interested
parties on the appropriateness of ITC's or any other proposed remedy
and makes a recommendation to the President. Within 20 days after
receiving the ITC report, USTR issues a Federal Register notice to
solicit comments from the public (e.g., importers and consumers). USTR
must hold a public hearing if requested to do so. USTR evaluates the
information it receives and consults with the other agencies of the
Trade Policy Staff Committee (TPSC).[Footnote 15] Within 55 days after
receiving the ITC report, USTR must make a recommendation to the
President about what action, if any, to take to prevent or remedy
market disruption.
The Role of the President Is to Decide Whether Relief Is in the
National Interest:
Under section 421 the President makes the final decision on the
provision of import relief. Within 15 days after receiving a USTR
recommendation, the President must decide whether and to what extent to
provide relief. Section 421 states: "the President shall provide import
relief— unless the President determines that provision of such relief
is not in the national economic interest of the United States or, in
extraordinary cases, that the taking of action— would cause serious
harm to the national security of the United States." Although the law
does not define "national economic interest," it further states that
the President may determine "that providing import relief is not in the
national economic interest of the United States only if [he] finds that
the taking of such action would have an adverse impact on the United
States economy clearly greater than the benefits of such action."
Finally, section 421 requires the President to publish his decision and
the reasons for it in the Federal Register.[Footnote 16]
China Safeguard Modeled on Communist Country Safeguard:
The China safeguard was modeled on the communist country safeguard. In
fact, according to its legislative history, it was intended to replace
the communist country safeguard for China since it would no longer
apply once China became a member of the WTO. As shown in table 1 below,
the safeguards share several important characteristics. Both safeguards
are limited in scope to imports from particular countries; while the
former is limited to imports from China, the latter is limited to
imports from one or more communist countries. They also share similar
criteria with regard to ITC market disruption determinations and
identify the President as final decision maker on whether to provide
relief. In addition, both safeguards have a 150-day determination
period.
In contrast, the China safeguard is significantly different from the
global safeguard. The China safeguard is narrower in scope than the
global safeguard; it can only be applied to imports from that one
country, whereas the global safeguard generally must be applied to all
foreign sources of a particular product. Also, the China safeguard's
market disruption standard is regarded to be easier to meet than the
criteria for determining injury due to imports under the global
safeguard. [Footnote 17] Furthermore, the standard for presidential
action is also different under the global safeguard as it places more
emphasis on assisting the domestic industries' efforts to adjust to
international competition (including worker adjustments), and sets
forth a broader range of factors for the President to consider in
determining whether to provide relief. Finally, the time frame for the
China safeguard process is shorter than the global safeguard.
Table 1: Comparison of China, Communist Country, and Global Safeguards:
Scope;
China safeguard (section 421) effective in December 2001: Imports from
China;
Communist country safeguard (section 406) enacted in 1974: Imports from
a communist country;
Global safeguard (section 201) enacted in 1974[A]: Imports from all
foreign sources.
Injury standard;
China safeguard (section 421) effective in December 2001: significant
cause of material injury or threat thereof;
Communist country safeguard (section 406) enacted in 1974: significant
cause of material injury or threat thereof;
Global safeguard (section 201) enacted in 1974[A]: substantial cause of
serious injury or threat thereof.
Presidential standard;
China safeguard (section 421) effective in December 2001: "—the
President shall provide import relief for such industry —unless the
President determines that provision of such relief is not in the
national economic interest of the United States or, in extraordinary
cases, would cause serious harm to the national security of the United
States.";
Communist country safeguard (section 406) enacted in 1974: "—the
President must provide import relief, unless he determines that relief
is not in the national economic interest.";
Global safeguard (section 201) enacted in 1974[A]: "—the President
shall take all appropriate and feasible action within his power which
the President determines will facilitate efforts by the domestic
industry to make a positive adjustment to import competition and
provide greater economic and social benefits than costs."
ITC statutory time frame;
China safeguard (section 421) effective in December 2001: 80 days;
Communist country safeguard (section 406) enacted in 1974: 3 months;
Global safeguard (section 201) enacted in 1974[A]: 180 days.
USTR statutory time frame;
China safeguard (section 421) effective in December 2001: 55 days;
Communist country safeguard (section 406) enacted in 1974: N/A;
Global safeguard (section 201) enacted in 1974[A]: N/A[B].
Presidential statutory time frame;
China safeguard (section 421) effective in December 2001: 15 days;
Communist country safeguard (section 406) enacted in 1974: 75 days[C];
Global safeguard (section 201) enacted in 1974[A]: 60 days.
Source: GAO.
[A] Congress amended the standard for presidential action for the
global safeguard in the Omnibus Trade and Competitiveness Act of 1988,
Pub. L. No. 100-418, 102 Stat. 1225.
[B] The Trade Policy Staff Committee must advise the President;
however, no specific time frame is outlined in the statute.
[C] The President has an additional 60 days to negotiate an orderly
marketing agreement, if necessary.
Note: Time frames vary if "critical circumstances" are involved.
N/A=Not applicable.
[End of table]
The United States Has Never Applied the China Safeguard:
Between August 2002 and September 2005, the United States considered
five petitions from domestic producers to apply the China safeguard but
it has not provided relief. ITC made negative determinations on two
petitions and, in three other cases, found market disruption and
recommended restricting imports to remedy the situation, ITC is
expected to make a determination in a sixth case in early October 2005.
In each of the three cases where ITC found market disruption, USTR
formulated a presidential recommendation after evaluating various
options. The President then decided not to provide any import relief.
The success rate for China safeguard petitions is similar to communist
country safeguard petitions, but differs from that of global safeguard
petitions.
U.S. Firms Filed Six Petitions:
U.S. firms have filed six petitions for China safeguard relief since
section 421 was enacted (see fig. 2). The petitioners representing the
domestic industry ranged from one firm in two cases to seven firms and
a union in the most recent petition. The products involved are the
following:
* pedestal actuators (for raising and lowering seats in mobility
scooters),
* certain steel wire garment hangers,
* brake drums and rotors,
* ductile iron waterworks fittings (for municipal water systems),
* uncovered innersprings used in mattresses, and:
* circular welded nonalloy steel pipes.
Figure 2: Dates of China Safeguard Petitions:
[See PDF for image]
[End of figure]
ITC Found Market Disruption in Three of Five Cases:
ITC made negative determinations in two of five completed China
safeguard cases.[Footnote 18] In cases brought by manufacturers of
brake drums and rotors and mattress innersprings, ITC determined that
Chinese imports had not disrupted the domestic market. More
specifically, in the brake drums and rotors case, ITC found that
although imports from China were increasing rapidly, the domestic
industry was neither materially injured nor threatened with material
injury. In the mattress innerspring case, ITC was divided on the
reasons for making a negative determination. Three of the commissioners
determined that imports from China were not increasing rapidly. The
other three commissioners determined that the domestic industry was not
materially injured or threatened with material injury. In both cases,
ITC cited the industries' healthy profit margins and stable or rising
prices as evidence that neither industry was materially injured or
threatened with material injury.
In the remaining three cases (pedestal actuators, wire hangers, and
waterworks fittings), ITC found market disruption and recommended
measures to remedy it. In all three cases, ITC cited factors such as
falling production and employment in its determinations that the
industry was materially injured. Furthermore, ITC noted declines in the
industries' health that coincided with a surge in Chinese imports when
they determined that rapidly increasing imports from China were a
significant cause of material injury. In other words, Chinese imports
caused market disruption to the domestic industry. In deciding which
import restriction to recommend, ITC considered the conditions of
competition in the domestic industry (e.g., demand conditions, and
import and domestic supply conditions), as well as comments received
from parties in the cases.
ITC recommended different import restrictions to remedy the market
disruption it found in each case. For example, as noted in table 2
below, ITC found that a 3-year, declining tariff on wire hangers from
China was the most appropriate remedy in that case. In contrast, ITC
recommended a 3-year quota in the pedestal actuator case because there
was only one supplier and one primary purchaser of pedestal actuators,
and the domestic-imported price differential was large. In addition,
the ITC also proposed that the President direct the Departments of
Commerce and Labor to provide expedited consideration of trade
adjustment assistance applications for workers in the wire hangers and
waterworks fittings industries.
Table 2: Results of ITC China Safeguard Investigations (2002-2005):
Product name: Brake drums and rotors;
Number of firms: 3-firm coalition;
Value of imports: Brake drums: $13,090,000, Brake rotors: $166,228,000
(2002);
ITC market disruption vote: 4-0 negative;
ITC majority remedy recommendation: N/A.
Product name: Mattress innersprings;
Number of firms: 4;
Value of imports: $5,894,000 (2003);
ITC market disruption vote: 6-0 negative;
ITC majority remedy recommendation: N/A.
Product name: Wire hangers;
Number of firms: 3;
Value of imports: $8,814,000 (2001);
ITC market disruption vote: 5-0 affirmative;
ITC majority remedy recommendation: 3-year duty in addition to the
current duty (25% in year 1; 20% in year 2; and 15% in year 3).
Product name: Waterworks fittings;
Number of firms: 1;
Value of imports: $22,656,000 (2002);
ITC market disruption vote: 6-0 affirmative;
ITC majority remedy recommendation: 3-year tariff-rate quota, in
addition to the current rate of duty (50% duty on imports above 14,324
short tons in year 1; 40% tariff on imports above 15,398 short tons in
year 2; and 30% tariff on imports above 16,553 short tons in year 3).
Product name: Pedestal actuators;
Number of firms: 1;
Value of imports: Number not publicly available;
ITC market disruption vote: 3-2 affirmative;
ITC majority remedy recommendation: 3-year quantitative restriction
(5,626 units in year 1; 6,470 units in year 2; and 7,440 units in year
3).
Sources: ITC staff reports and views of the commissioners.
Note: Value of imports in last full year before investigation.
[End of table]
USTR Consulted with Chinese, Sought Comments, and Considered Multiple
Options:
USTR consulted with the Chinese government, solicited and obtained
comments from a variety of sources, and analyzed the advantages and
disadvantages of the ITC remedies and other options in formulating its
recommendations to the President.
After receiving each of the three affirmative market disruption
determinations from ITC, USTR requested consultations with the Chinese
government. USTR notified the WTO Committee on Safeguards of the
consultation requests. Representatives of the two governments met but
did not reach any agreements to address the market disruption found by
ITC, according to USTR officials. During the 60-day consultation
period, USTR continued to gather information from interested parties
about any potential remedies.
USTR, in conjunction with other agencies on the TPSC, held a 1-day
public hearing for each of the cases and obtained views on what, if
any, type of import restriction was in the public interest. The parties
also had the opportunity to provide written comments. In addition to
the ITC-recommended remedies, USTR sought comment on alternate remedies
and on not providing relief. The hearings included both the domestic
petitioners and Chinese respondents, as well as other interested
parties such as importers and downstream users. For example, the wire
hanger hearing included testimony from a hanger distributor. In the
pedestal actuator and wire hanger cases, a representative from the
Chinese government testified that applying the safeguard would damage
U.S.-China bilateral economic relations, in addition to raising
procedural and substantive concerns.[Footnote 19] USTR officials said
that certain information relevant to the effectiveness of potential
remedies surfaced at these hearings, that did not surface in the ITC
proceedings.
After the hearings, the USTR staff weighed the pros and cons of the
various courses of action. USTR considered ITC's analysis, as well as
the testimony and written submissions provided by interested parties,
and sought comments from other TPSC members. According to detailed
briefings from USTR officials, in each case USTR considered the ITC-
recommended remedy among other remedies presented, as well as the
option of having no remedy. USTR staff worked with the U.S. Trade
Representative throughout the proceedings. USTR staff then drafted a
recommendation in a memorandum to the U.S. Trade Representative, who
assessed the various options. The Trade Representative then made a
recommendation in a memorandum to the President.
President Decided Not to Apply the China Safeguard:
The President declined to provide relief in all three cases.[Footnote
20] He found that imposing remedies such as duties and quotas would not
be in the national economic interest. The President's reasons for not
providing relief were printed in the Federal Register and are
summarized in table 3. The President's decisions did not cite national
security concerns as a reason in any of the three cases.
Table 3: Reasons Cited by the President in Decisions Not to Provide
Import Relief:
Case: Pedestal actuators;
Reasons by the President: Imposing the ITC's recommended quota would
not benefit the domestic producing industry and would cause imports to
shift from China to other offshore sources;
The cost of the quota to downstream users and consumers would
substantially outweigh the benefit to producer's income;
Relief would negatively impact workers in downstream industries, which
have a significantly larger number of workers than the domestic
pedestal actuator industry;
Relief would negatively affect disabled and elderly purchasers of
mobility scooters and electric wheelchairs.
Case: Wire hangers;
Reasons by the President: Imposing additional tariffs on Chinese
imports would affect domestic producers unevenly;
Domestic producers have already begun to pursue adjustment strategies;
Domestic producers have a dominant share of the market and thus have
the opportunity to adjust to competition from Chinese imports even
without import relief;
There is a strong possibility that if additional tariffs were imposed,
production would shift to third countries;
Additional tariffs would have an uneven impact on domestic distributors
of wire hangers;
Additional tariffs would likely have a negative effect on small dry-
cleaning businesses.
Case: Waterworks fittings;
Reasons by the President: A remedy would be ineffective because imports
from third countries would likely replace curtailed Chinese imports;
Import relief would cost U.S. consumers substantially more than the
increased income realized by domestic producers;
Domestic producers enjoy a strong competitive position in the U.S.
market[A];
In 2002 and 2003, imports of this product have been relatively stable
in volume terms and declined slightly in value terms[A].
Source: GAO summaries of presidential determinations of January 17,
2003, April 25, 2003, and March 3, 2004.
[A] The President noted that this reason was not necessary in reaching
his determination.
[End of table]
China and Communist Country Safeguard Outcomes Differ from Global
Safeguard:
The final outcomes of China safeguard cases are similar to those of
communist country[Footnote 21] safeguard cases but different than
global safeguard cases. As shown in table 4, domestic industries have
sought relief under the China and communist country safeguards far less
frequently than they have sought relief under the global safeguard.
Overall, petitioners have been denied relief in almost all China and
communist country safeguard cases but have been granted import relief
in about one quarter of global safeguard cases. Of those cases where
ITC found the industry was injured by imports, the President denied
relief in all but one of the China and communist country safeguard
cases. Conversely, the President granted relief in about half of the
global safeguard cases where the ITC found injury. Moreover, since
Congress amended the global safeguard's standard for presidential
action in the 1988 Trade Act, the President has always provided relief
when ITC found injury.
Table 4: Outcomes of Completed China, Communist Country, and Global
Safeguard Cases (as of September 2005):
[See PDF for image]
Source: GAO analysis of ITC import injury investigation statistics and
presidential determinations.
[A] Since section 406 was modified by the Omnibus Trade and
Competitiveness Act of 1988, there have been only two petitions. One
case was terminated; in the other, the ITC made an affirmative injury
determination and the President denied relief.
[B] Since section 201 was modified by the Trade Act of 1988, there have
been 13 petitions.
[C] China has been the target of 7 out of the 13 section 406 cases
brought by petitioners.
[D] In the case of a tie vote, the President may accept either an
affirmative or negative determination.
[E] The President directed the U.S. Trade Representative to negotiate
an orderly marketing agreement with China.
[F] With respect to the six tie votes referred to him under the global
safeguard, the President provided import relief in one case.
[G] In the one section 406 case in which the ITC commissioners were
evenly divided, the President took no action to restrict imports.
[End of table]
The President Has Exercised His Broad Discretion in Deciding Not to
Apply Relief:
The President's decisions not to impose relief in the three China
safeguard cases in which ITC found market disruption have been
criticized. Nevertheless, the President has broad discretionary
authority under section 421 to consider U.S. national economic and
security interests when weighing the facts and circumstances particular
to each case. This broad discretion was upheld by the U.S. Court of
International Trade. This, together with the fact that the President
considers factors that ITC does not, including consumer cost and the
potential for imports from other countries, allows him to reject relief
even when it has been recommended by ITC.
Presidential Decisions Not to Apply Safeguards Have Generated
Controversy:
Several different groups have criticized the President's decisions not
to apply China safeguard relief. For example, company officials and
trade lawyers who were unsuccessful in obtaining relief criticized the
President's decisions in several congressional hearings. As we discuss
later, one company subsequently filed a lawsuit against the President
claiming he exceeded his authority in rejecting ITC's recommended
remedy.
In July 2005, legislation was introduced in Congress to change the
President's discretion.[Footnote 22] Some congressmen expressed
disapproval over the President's decisions based on the fact that ITC
made unanimous, affirmative determinations in two of these cases. One
representative in particular argued that the President was not
following the intent of the law in rejecting the safeguard actions.
Also, 21 other House members wrote the President stating their belief
that Congress had carefully limited the President's discretion to deny
relief. In this regard, the legislative history of section 421 shows
that the House Committee on Ways and Means intended a presumption in
favor of relief. The House report stated:
The bill establishes clear standards for the application of
Presidential discretion in providing relief to injured industries and
workers. If the ITC makes an affirmative determination on market
disruption, there would be a presumption in favor of providing relief.
That presumption can be overcome only if the President finds that
providing relief would have an adverse impact on the United States
economy clearly greater than the benefits of such action, or, in
extraordinary cases, that such action would cause serious harm to the
national security of the United States.[Footnote 23]
This legislative history, together with the China safeguard's shorter
time frames and lesser injury standard, and other procedural
characteristics, may have created an expectation that the likelihood
for relief under the China safeguard was going to be greater compared
with the global safeguard.
Similarly, the U.S.-China Economic and Security Review Commission, a
body established by Congress to monitor and investigate the security
and economic implications of the bilateral economic relationship
between the United States and China, held hearings and criticized the
administration for failing to apply the safeguard after an affirmative
ITC injury determination. In March 2005, this commission recommended
that Congress consider amending the China safeguard to either eliminate
the President's discretion or limit it to the consideration of
noneconomic national security factors after an affirmative ITC finding.
In addition, the lack of any positive decisions by the President in
these cases may have discouraged other U.S. producers from seeking
relief under the China safeguard. Several trade lawyers representing
domestic U.S. producers with whom we spoke told us about their
reluctance to bring additional China safeguard cases in the future
because they thought that the President would reject them based on
political considerations. The U.S.-China Economic Security Review
Commission expressed similar concern that repeated presidential refusal
to apply the safeguard had undermined the instrument's efficacy.
Indeed, until August 2005, when producers filed a petition on steel
pipe, no China safeguard petition had been filed since March 2004, when
the President rejected an ITC recommendation to provide relief from
imports of Chinese ductile iron waterworks fittings.
Court Has Found that the President Has Broad Statutory Discretion:
Despite criticisms, the President's discretion under the China
safeguard is quite broad. The President must provide relief unless he
finds that it is not in the national economic or security interest.
With regard to the former, the President is authorized to deny relief
when he finds that the relief would have an adverse impact on the
United States economy clearly greater than the benefits.
In June 2004, the U.S. Court of International Trade affirmed the
President's broad discretionary authority in a case brought by the
petitioner in the first China product safeguard case.[Footnote 24] In
that case, Motion Systems Corp. contended that the President had
exceeded his authority under section 421 by not providing relief. In
particular, Motion Systems argued that the President was required to
quantify the adverse impact of providing relief and demonstrate that
the adverse impact was clearly greater than the benefits that the
relief would provide to the domestic industry. In this regard, Motion
Systems maintained that section 421 created a presumption of relief
once ITC made an affirmative determination of market
disruption.[Footnote 25]
In affirming the President's decision,[Footnote 26] the Court held that
the President had not exceeded his authority and said the law granted
him "considerable discretion."[Footnote 27] The Court found that
section 421 made no reference to evidence or a burden of proof that the
President must satisfy to support his conclusion that the imposition of
a safeguard would have an adverse impact on the U.S. economy clearly
greater than its benefits.[Footnote 28] The Court also noted that the
President was not prohibited from considering political factors in
making a finding about the adverse impact on the U.S. economy,
including trade relations between the United States and China.[Footnote
29] Finally, the Court did not specifically comment on the presumption
of relief issue.
President Considers a Broader Range of Factors than ITC:
While ITC makes remedy recommendations that would alleviate market
disruption, the President considers a broader range of factors than ITC
in determining whether to apply China safeguard relief. Specifically,
under section 421, ITC focuses on the domestic industry involved in the
proceeding, both in the context of making injury determinations and
recommendations for relief. For example, among the factors ITC
considered in determining material injury were the idling of U.S.
production facilities and the ability of firms within the industry to
produce at reasonable profit, wage, and employment levels.[Footnote 30]
Thus, ITC did not weigh the interests of other groups such as consumers
and downstream industries against potential benefits to the domestic
industry when developing its recommendations for the President to
consider. [Footnote 31] Nevertheless, ITC reports on the potential
economic effect of its recommended remedies, as described earlier.
However, section 421, does not require ITC to consider these broad
economic effects when developing its recommendations.
In contrast, as discussed above, section 421 authorizes the President
to consider overall U.S. economic and security interests in deciding
whether to impose China safeguard relief.[Footnote 32] In each of the
three cases where ITC found injury and recommended a remedy, the
President found, among other things, that relief would have an adverse
impact on other participants in the economy. The President determined
that relief would carry substantial costs for consumers or downstream
users of the products involved. Specifically, the President cited the
increased costs to aged and disabled consumers of mobility scooters as
a reason for not providing relief in the pedestal actuator case. In the
wire hangers case, the President stated that relief would have an
uneven impact on wire hanger distributors and impose increased costs on
dry cleaning companies. Finally, in the waterworks fittings case, the
President found that the costs to consumers would substantially
outweigh producer income benefits.
The President's decisions also took into account the unique facts and
circumstances in each case. For example, in the pedestal actuator case
there was only one petitioner seeking relief and one dominant
purchaser. In the wire hanger case, domestic producers had different
business models that affected whether a remedy would benefit or
disadvantage them. In addition, the U.S. Trade Representative noted in
a March 2004 congressional hearing that, while not necessary to the
President's decision, in the waterworks fittings case the petitioner
faced serious problems besides competing Chinese imports.[Footnote 33]
Although the President did not provide import relief in these cases, he
stated that he remains committed to applying the China safeguard when
circumstances warrant.
President Cites Third Country Imports When Denying Relief:
The President has considered whether relief would benefit the producers
involved in every case.[Footnote 34] In his decisions denying relief
the President stated that imposing a safeguard would have limited
benefits. One factor that the President has cited in all three cases is
that applying a safeguard would lead to production being shifted from
China to other countries rather than to U.S. producers. In the
waterworks fittings case, the President specifically identified other
current suppliers to the U.S. market such as India, Brazil, Korea, and
Mexico.
Similarly, in all but one communist country safeguard determinations,
the President found, among other things, that providing relief would
have resulted in imports shifting from the communist country involved
to other offshore sources. With only one exception, the President has
never approved a remedy under the communist country safeguard. In
contrast, under the global safeguard, imports from other countries
generally cannot diminish the potential benefits of import
relief.[Footnote 35] Since the global safeguard statute was enacted in
1974, the President applied relief in approximately half of the cases
in which ITC has made a positive injury determination. Moreover, since
it was substantially amended in 1988, the President has provided relief
in every such global safeguard case. It is not possible to identify all
the factors that contribute to such opposite results among the
different safeguards. However, one consistent factor has been that the
China and communist country safeguards, respectively, are limited in
scope to products from one or a few countries; this allows other
foreign sources to gain market share of the product and reduce the
potential benefit of the safeguard to the domestic producers.
Agency Comments and Our Evaluation:
We provided ITC and USTR a draft of this report for their review and
comment. Both agencies chose to provide technical comments from their
staff. USTR staff cautioned against drawing overall conclusions about
the use of the China safeguard given the small number of cases
considered thus far. Additionally, both USTR and ITC staff suggested we
clarify our characterizations of section 421's legislative history and
of the Motion Systems Corp. v. Bush lawsuit. We modified the report in
response to their suggestions. USTR and ITC also provided other
suggestions to make the report more accurate and clear, which we
incorporated as appropriate.
We are sending copies of this report to ITC and USTR, appropriate
congressional committees, and other interested parties. We will also
make copies available to others upon request. In addition, the report
will be available at no charge on the GAO Web site at
http://www.gao.gov.
If you or any of your staff have any questions about this report,
please contact me at (202) 512-4347 or yagerl@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix II.
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To address our objectives, we reviewed U.S. laws and procedures as well
as relevant World Trade Organization (WTO) agreements and China's
accession agreement. To ensure our understanding of relevant laws,
procedures, and agreements, we spoke with officials from the Office of
the United States Trade Representative (USTR) and the International
Trade Commission (ITC). In addition, we interviewed officials from the
WTO and officials from the government of China. Finally, we spoke with
law firms that had direct experience in China safeguard cases, as well
as law firms with broad experience in trade actions against China.
To describe how the safeguard has been applied thus far, we examined
each phase of the process. For the ITC phase, we reviewed and analyzed
each of the determinations the ITC commissioners issued during the five
China safeguard injury investigations completed as of July 31, 2005, to
understand the rationale behind them. We further obtained private
sector views of the ITC process by speaking with law firms that had
represented petitioners and/or respondents in each of the five China
safeguard injury investigations. For the USTR phase of the process, we
spoke with law firms that had represented petitioners and/or
respondents that participated in each of the three China safeguard
remedy investigations and reviewed the transcripts of all three USTR
hearings. USTR neither made the documents related to their analyses nor
their recommendations available to us. Instead, we relied on detailed
briefings from USTR officials on the nature and substance of their
deliberations culminating in a recommendation to the President. For the
presidential phase of the process, we reviewed each of the President's
three determinations made under the China safeguard. To compare the use
of the China safeguard with the communist country and global
safeguards, we reviewed ITC import injury investigation statistics and
presidential determinations in the China, communist country, and global
safeguard cases. We found the ITC injury statistics to be sufficiently
reliable for presenting and contrasting ITC's final disposition of
cases brought under these statutes.
To examine the issues related to the application of presidential
discretion, we analyzed the reasons the President gave in his decisions
not to provide import relief. Additionally, we reviewed the legislative
history of the China safeguard and written and oral testimony before
Congress and the U.S.-China Economic and Security Review Commission. We
reviewed the Court of International Trade's decision in the Motion
Systems case against the government and the submissions of parties to
the case. Finally, we analyzed the presidential determinations made
under the communist country and global safeguards.[Footnote 36]
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Loren Yager (202) 512-4347:
Staff Acknowledgments:
In addition to the individual named above, Adam R. Cowles, R. Gifford
Howland, Michael McAtee, and Richard Seldin made significant
contributions to this report.
FOOTNOTES
[1] Both values are expressed in constant 2004 dollars.
[2] WTO Protocol on the Accession of the People's Republic of China,
art. 16.
[3] H.R. Rep. No. 108-401, at 574 (2003).
[4] We have already published reports on both the China textile
safeguard and the application of countervailing duties to China. GAO,
U.S.-China Trade: Textile Safeguard Procedures Should Be Improved, GAO-
05-296 (Washington D.C.: Apr. 4, 2005) and U.S.-China Trade: Commerce
Faces Practical and Legal Challenges in Applying Countervailing Duties,
GAO-05-474 (Washington D.C.: June 17, 2005). A forthcoming report will
discuss antidumping measures against China.
[5] 19 U.S.C. § 2451.
[6] WTO Agreement on Safeguards, art. 2.2.
[7] The communist country safeguard is set forth under section 406 of
the Trade Act of 1974.
[8] In the United States, the global safeguard is set forth in section
201 of the Trade Act of 1974 and is sometimes referred to as the
"escape clause" or the "section 201 safeguard."
[9] GAO-05-296.
[10] Pub. L. No. 106-286, 114 Stat. 880.
[11] Petitioners may claim "critical circumstances" and seek that
provisional relief be provided within 65 days. 19 U.S.C. § 2451(i).
[12] Id. §§ 2451(b) and 2252(a).
[13] If the commissioners are equally divided with respect to injury,
the President can consider either finding (negative or affirmative) as
the ITC determination.
[14] There is some overlap between the ITC and USTR phases of the
process. The ITC has 60 days to determine whether there is market
disruption. After that it has 20 days to formulate a remedy to the
market disruption found to exist. USTR must request consultations
within 5 days after receiving the market disruption determination.
[15] The TPSC is the mechanism by which USTR consults with other
agencies on trade policy matters.
[16] 19 U.S.C. § 2451(l). Section 421 also authorizes the President to
modify, reduce, or terminate the safeguard relief that he imposed. On
the other hand, the President can also extend the effective period of
the safeguard action. Id. § 2451(n) and (o).
[17] See S. Rep. No. 93-1299, at 212 (1974) and 146 Cong. Rec. 18,112
(2000) (statement of Sen. Collins which included a September 7, 2000
letter from then-U.S. Trade Representative Charlene Barshefsky to Sen.
Collins).
[18] ITC is expected to make a determination in the steel pipes case in
early October 2005.
[19] For example, in both cases the Chinese government argued that any
remedy imposed would be ineffective because it would not help the
petitioners and would harm U.S. consumers.
[20] In the wire hangers case, the President directed the Secretary of
Commerce and the Secretary of Labor to expedite consideration of any
Trade Adjustment Assistance applications received from domestic hanger
producers or their workers and to provide such other requested
assistance or relief as they deemed appropriate, consistent with their
statutory mandate.
[21] There is no statutory list of communist countries. Petitioners
have brought cases against the following countries: Romania, China,
USSR, Poland, and East Germany.
[22] H.R. 3306, 109 Cong., 1st Sess. (2005).
[23] H.R. Rep. No. 106-632, at 18 (2000).
[24] Motion Systems Corp. v. Bush, 342 F. Supp. 2d 1247 (C.I.T. 2004).
[25] In making this argument Motion Systems relied, in part, on the
language in the House Report, quoted above in the text.
[26] An appeal of the decision is pending before the Court of Appeals
for the Federal Circuit.
[27] The Court's analysis focused on the standard of review the Court
should apply in reviewing presidential actions under U.S. trade
statutes. 342 F.Supp. at 1258-67.
[28] In this regard, the Court disagreed that the "clearly greater"
language requires that the evidence supporting the President's denial
must be "clear and convincing," "beyond a reasonable doubt," or "more-
than-substantial." Id.1261-62.
[29] Nevertheless, the Court found that neither the record before it,
nor the text of the President's decision, established that trade
relations between the United States and China were a factor in the
President's decision. Id. at 1265-66.
[30] The ITC commissioners have noted in their determinations that they
do not consider any one factor dispositive. E.g., Pedestal Actuators
from China, Inv. No. TA-421-1, USITC Pub. 3557 at 13 (Nov. 2002).
[31] Furthermore, ITC's recommended remedies only address imports from
China that caused market disruption.
[32] In making its required recommendations to the President about
what, if any, action to take to prevent or remedy market disruption,
USTR informed us that it both considers a broader range of information
about the domestic industry involved than ITC, as well as broader
national economic factors.
[33] President Bush's Trade Agenda: Hearing Before the House Comm. on
Ways and Means, 108th Cong. 43 (2004)(statement of Robert Zoellick,
United States Trade Representative).
[34] A USTR official testified in April 2005 that the extent to which
relief would benefit the domestic producers was "first and foremost"
among the economic factors that the administration examines in deciding
whether to impose relief.
[35] In global safeguards, the United States excludes developing
country imports that fall below a threshold level, and under varying
circumstances may also exclude imports from countries with which it has
entered into a free trade agreement, such as Canada and Mexico.
[36] We confined our analysis of presidential determinations under
section 201 of the Trade Act of 1974 to those made after 1988 when
Congress substantially amended the law.
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