Mix of Section 301, Self-Initiated AD/CV Cases Needed for Overcapacity, Trade Enforcement Nominee Tells Senators

A mix of “creative cases” is needed to remedy trade violations created by Chinese industrial overcapacity, including Section 301 investigations and self-initiating antidumping and countervailing duty cases, Gilbert Kaplan, President Donald Trump’s nominee to be under secretary of Commerce for international trade, told the Senate Finance Committee Aug. 3. “I think it’s time maybe to dust off … Section 301,” he said. Section 301 of the Trade Act of 1974 allows the president to take all "appropriate and feasible steps" to eliminate “unreasonable restrictions” of countries found to “burden or restrict” U.S. commerce. The statute authorizes the executive branch to retaliate against these restrictions as well as anti-competitive subsidies through duties, other import restrictions and withholding trade agreement benefits.

Senate Finance International Trade and Customs Subcommittee ranking member Bob Casey, D-Pa., during the hearing decried the lack of G-20 action on global steel overcapacity since the intergovernmental group formed the Global Forum on Excess Steel Capacity in December (see 1612160017). The forum and the Organization for Economic Cooperation and Development are discussing how to reduce global overcapacity, yet the U.S. should use all the trade remedy tools at its disposal to address the issue, Kaplan said, including cases brought under Section 301 and 232, and to the World Trade Organization. He said WTO cases can take a long time, but certain rulings have benefited the U.S., including recent dispute settlement decisions on EU aircraft subsidies (see 1609220032 and 1706300035).

Section 301 could also be used to protect intellectual property rights, as it “has very strong intellectual property language in it, and if need be, [we should] return to that, and use the litigation approach to make sure our pharmaceutical companies are protected,” Kaplan said in a response to a question from Sen. Bob Menendez, D-N.J., on IP and biopharmaceuticals. The Office of the U.S. Trade Representative is reportedly being asked to consider starting as early as this week a Section 301 investigation on forced technology transfers in China.

Kaplan said he would consider using currency manipulation as a basis for bringing CV duty cases, if confirmed. “In my views, the U.S. countervailing duties law does cover currency manipulation, and it’s something we should look into doing if I’m confirmed,” he said. Sen. Sherrod Brown, D-Ohio, said he looks forward to supporting Kaplan’s nomination, but criticized the Commerce Department for extending its Section 232 investigation of steel imports well past Commerce Secretary Wilbur Ross’ June 30 self-imposed deadline (see 1705240034). Brown and full committee ranking member Ron Wyden, D-Ore., noted that foreign countries have recently rushed to ship more steel to the U.S. in anticipation of Section 232 trade actions. “The administration appears to be backing off,” Wyden said in his opening statement, adding that steel imports have increased by 18 percent since the Trump administration launched the steel investigation in April. “This episode demonstrates how tough talk without a real strategy hurts American workers.”

Kaplan also voiced his support for an agreement on duty evasion with Canada and Mexico to be included in any updated NAFTA, aligning with a USTR negotiating objective (see 1707180022). “Canada and Mexico share very long borders with” the U.S., Kaplan said. “And what has happened in terms of dumping duties, really, for ten or fifteen years now, is products have been circumvented through Canada and Mexico. They come in that way, back door, and duties are never paid.”

Wyden and full committee Chairman Orrin Hatch, R-Utah, called on Kaplan to help improve Commerce consultation with Congress, which both senators said is lacking. Hatch in his opening statement said “there is room for improvement” on such consultations, but added that he is “confident” that Kaplan and Ross will work to “ensure those responsibilities are met.”

Wyden said Congress must be consulted before Commerce makes proposals for a concluded softwood lumber deal with Canada. “Real consultation is not telling us five minutes before something’s going to happen -- before a proposal is offered or an agreement is agreed to,” Wyden said. “That is done in a way where members of this committee, both Democrats and Republicans, can actually have a chance to reflect on what is being considered, and offer our comments. That’s what we think real consultation is about.” Kaplan said he understands the committee’s concerns, and noted that final AD and CV duty determinations on Canadian softwood are currently expected no later than Sept. 6 (see 1705080023). At the end of the hearing, Kaplan gave a quippy nudge to Finance members to advance his nomination: “If I am privileged enough to be confirmed and be confirmed before then, then I’ll be more effective in that regard.”