15 May 2003
Bush Rejects Section 421 Quotas on Chinese Steel Wire Hangers
The White House statement also noted that tariffs on Chinese wire hangers would affect domestic producers unevenly, thereby creating a distortion of the domestic market. The statement further justified the decision by pointing out, "Additional tariffs would also likely have a negative effect on the thousands of small, family-owned dry-cleaning businesses across the US that would either have to absorb the resulting increased costs or pass them on to their customers". It added, "Moreover, after six years of competing with Chinese imports, domestic producers still account for over 85% of the US wire hanger market. With this dominant share of the market, domestic producers have the opportunity to adjust to competition from Chinese imports even without import relief".
Section 421 of the Trade Act of 1974 was added to US trade law by the US-China Relations Act of 2000. The latter implemented the November 1999 US-China bilateral agreement by granting permanent normal trade relations (PNTR) status to China upon its World Trade Organisation (WTO) accession. Specifically, Section 421 allows US domestic industries to obtain relief should an investigation by the US International Trade Commission (USITC) find that Chinese products are imported into the US in such increased quantities as to cause a market disruption. This provision is similar to Section 406 in that it is aimed at market disruption by imports from communist and transition economies, but Section 406 no longer applies to China since the country has become a WTO member, which is why Section 421 was added to the Trade Act of 1974.
The president's decision illustrates the current administration's desire not to allow Sino-American trade relations to become embroiled in a vicious, escalating cycle of trade disputes. The first two Section 421 cases have been followed closely by US manufacturing industries, and have been greeted with disappointment. Nonetheless, while it is true that to date the Bush administration has given no indication that it is prepared to disrupt evolving Sino-American trade relations with trade remedy measures, it should also be noted that the US manufacturers which have filed Section 421 cases are relatively small. As such, they do not possess much political clout and thus pose no significant political challenge to the White House, and President Bush's chief strategist Karl Rove.
The same is more or less true for the US textile industry, which is still politically powerful but has little leverage in the current situation, as illustrated by the recent bilateral US-Vietnamese textile agreement and the ongoing saga of the China-specific textile safeguard measures. After all, the US textile industry is largely located in states that are safely in the Republican Party's corner, which means that the political price that the White House would have to pay for ignoring its pleas for help are likely to be limited. However, this analysis should not tempt Chinese textile and apparel manufacturers to dismiss altogether the threat posed by various US trade remedy measures. China's mushrooming trade surplus with the US is likely to provide an inexhaustible supply of ammunition for China's congressional critics.