Remedying Trade Remedies

25/08/2008 12:00 - 1713 total view

Ever since the birth of the Union, competition has been an ideological beacon of its economic governance. Both the people and the government of the United States have believed that “the unrestrained interaction of competitive forces” will bring them prosperity and progress. Based on this belief, the United States enacted the Sherman Act, established the Federal Trade Commission (FTC), split Standard Oil and AT&T, and more recently challenged Microsoft’s abuse of its monopoly in the personal computer operating system market.
Nonetheless, competition has mostly been an internal affair involving domestic economic players. While internal competition is highly protected in the domestic market, external competition from foreign producers has largely been neglected and thus failed to be factored into antitrust scrutiny. On the contrary, the government, through its trade policies, has often hampered foreign competition to protect domestic producers at the expense of all the benefits that foreign competition might bring to the economy. In  particular, the antidumping statute enables the government to impose additional tariffs on foreign imports to neutralize their price competitiveness under the disingenuous rationale of unfair trade. In addition to its price-fixing nature, the antidumping regime further restrains trade when it is used to harass foreign rivals through a strategy labeled “non-price predation.” Non-price predation involves filing spurious petitions whose main purpose is to terrorize rivals regardless of the merit in initiating an antidumping proceeding. In fact, nearly a half of all antidumping petitions turn out to be without merits.

When confronted by the disturbing anticompetitive effects that these trade remedies tend to create, one may argue that antitrust authorities, in particular the FTC, should expand their hitherto largely domestic jurisdiction to international trade, thereby subjecting trade remedies to antitrust scrutiny. In doing so, the FTC can protect competition itself, not competitors. However, the FTC’s potential antitrust mission over trade remedies is severely obstructed by a judicially created antitrust immunity labeled the “Noerr-Pennington doctrine.” As a legal reincarnation of political pluralism under the Warren court, this doctrine expansively immunizes antidumping petitioners from any antitrust investigations over their potentially trade-restraining behaviors. Although the doctrine does have its own limitation, “the sham exception,” courts have interpreted the exception in an extremely narrow fashion to the extent that it nearly marginalizes its purposefulness in the antidumping context. This gap in enforcement of antitrust disciplines with regards to trade remedies is highly troubling. Foremost among concerns are the notoriously loose standards in determining dumping and injury, the central parameters of antidumping remedies. The present antidumping proceedings are vulnerable to manipulation by petitioners who are tempted to inflate, exaggerate and even misrepresent facts and data to prevail in dumping and injury determinations. The lack of antitrust enforcement as a backstop to trade remedies based on these misrepresentations tends to pass restraints on competition into the marketplace. Furthermore, while the demand for protectionism at home rises, globalization increasingly exposes the domestic economy to import penetration. A series of global trade talks has led to the replacement of conventional barriers, such as tariffs, by more esoteric administrative barriers, such as antidumping remedies. Consequently, if left unchecked, the frequent abuse of trade remedies is likely to multiply damages to the economy resulting from the stifling of competition in the marketplace. Against this backdrop, I argue in this Article that the failure to allow antitrust oversight when implementing trade remedies should be rectified by means of judicial and administrative intervention. I do not propose herein a repealing of the current antidumping statute: such a drastic measure would be politically infeasible in the current protectionist atmosphere of Congress. Instead, I take a more modest yet realistic stance: sanitizing antidumping remedies by bringing certain abusive behaviors in the  antidumping proceeding, such as deliberate misrepresentations of facts and data, under antitrust disciplines. In order to prevent such abuse of antidumping remedies by rent- seekers, courts should interpret the currently narrow definition of the sham exception broadly enough to effectively foreclose non-price predation. At the same time, the FTC, under its vested antitrust authority, should reinforce its surveillance and enforcement activities to guard against the abuse of trade remedies by domestic producers. In the long-term, these targeted judicial and administrative interventions will eventually lead the public, and legislators alike, to rethink the antidumping statute itself.

My thesis of remedying trade remedies via enhanced antitrust disciplines develops in the following sequence. Part I divulges the flawed rhetoric of fair trade behind the antidumping regime. It first traces the historical path of the antidumping statute to highlight its ironic transformation from an antitrust statute to a mercantilist law. Then the antidumping remedies’ façade legitimization under the fair trade mantra is exposed, from both an economic and legal perspective. The article illustrates how antidumping remedies lack economic sense because they neglect or misinterpret firms’ cost structure. Also illustrated is the lack of legal sense because the ultimate normativity hinges not purely on the merit of an underlying transaction, i.e., dumping, but cumulatively on its commercial effect and injuries. Part I concludes with an analysis of the antidumping remedies’ protectionist modus operandi, as evidenced by elusive concepts of prices and injuries as well as procedural injustice.

In the absence of a genuine fair trade justification, antidumping measures remedy nothing while creating distortions in market economies. Part II first defines antidumping remedies as a Madisonian failure in that they only serve the special interests of a handful of domestic producers, i.e., economic factions, at the expense of the entire economy. Part II then explains a more serious antitrust failure in which antidumping remedies tend to fix prices and restrain trade through a petitioner’s harassing behavior falling under the rubric of non-price predation. This process of harassment and intimidation eventually leads to cartelization of an industry.

Part III attempts to remedy the flaws of trade remedies by suggesting a course of action. Radical measures, such as repealing the antidumping statute, are politically infeasible. Therefore, this Part suggests that the FTC expand its statutory authority into the area of international trade. At the same time, however, the Part also points out potential obstruction of the FTC’s oversight of antidumping remedies by the Noerr-Pennington doctrine. Taking note of potential obstructions to FTC oversight of antidumping remedies, Part IV argues that the courts should adopt a broader interpretation of the sham exception to the Noerr-Pennington doctrine to facilitate the application of antitrust disciplines to trade remedies. It is also argued that the FTC should target certain abusive behaviors by antidumping petitioners, such as deliberate misrepresentations and repetitive petitioning, because the current Noerr-Pennington jurisprudence certainly reserves room for antitrust liability as to these unethical behaviors. The FTC can also monitor petitioners’ behaviors by requiring them to register before they file antidumping complaints in tandem with a similar requirement under the Webb-Pomerene Act. Part IV concludes by raising the possibility of disapplying the Noerr-Pennington doctrine to private rights of action based on abusive behavior which may constitute a tortious interference with business.

The Article concludes that a political marketplace ideal under the First Amendment should not unduly absolve patent antitrust violations in apolitical areas such as antidumping proceedings.