Congress approves punitive tariffs against China

WASHINGTON – Congress on Tuesday overturned a court decision and reaffirmed that the government has the right to impose higher tariffs on goods from China and other state-run economies that subsidize their exports to the United States.

The House voted 370-39 to pass the measure and send it to President Barack Obama for his signature. The Senate approved it Monday on a voice vote with no debate.

"By passing this law, Congress has taken a clear stand against the unfair trade practices that have put countless American jobs in jeopardy," Vice President Joe Biden said in a statement.

The speedy and bipartisan congressional action came after a federal appellate court ruled in December that the Commerce Department did not have the authority to levy the punitive tariffs because Congress had never explicitly given the agency that right.

The Commerce Department has been applying these "countervailing" duties since 2007. The legislation ensures that 24 existing higher tariff orders and six pending investigations against imports from China and Vietnam will continue to be valid. Of those 24, 23 are directed at Chinese subsidies.

The duties are allowed under World Trade Organization rules to counteract unfair subsidies used by countries, such as China and Vietnam, with non-market economies. China agreed to abide by countervailing duty laws when it joined the WTO in 2001.

"China distorts the free market by giving enormous subsidies to its producers and exporters," said House Ways and Means Committee chairman Dave Camp, R-Mich.

Senate Finance Committee Chairman Max Baucus, D-Mont., said that since 2007 countervailing duties have protected some 80,000 jobs across the country. "China doesn't get a free pass to violate the rules at the expense of American jobs," he said.

U.S. Trade Representative Ron Kirk, at a House hearing last week, urged Congress to act quickly to overturn the "flawed decision." He said that "prompt legislative action would clarify the law and avoid harm from injurious, subsidized goods."

The Ways and Means Committee said the existing tariff orders provide relief for more than 80 American companies in 38 states. One of the larger cases involved Chinese tires: in 2009 the government imposed a three-year tariff, starting at 35 percent, on U.S. imports of low-grade Chinese tires. The tariff was approved after imports of those tires rose threefold to about 46 million tires between 2004 and 2008. Last year the World Trade Organization, rejecting an appeal from China, found that the United States acted consistently with its WTO obligations in imposing the duties.

The top Democrat on the Ways and Means panel, Sander Levin of Michigan, said that almost half of the countervailing duty orders in place today involve China, and that abusive trade practices were in part responsible for China's $295 billion trade surplus with the United States last year, "A central element of Chinese industrial policy has been to provide massive subsidies to its producers to help them knock out the competition and dominate the market."

The House vote reflected strong congressional sentiments that China should be confronted over its trade practices. Last October the Senate passed legislation that threatened higher tariffs against China if it continued to artificially undervalue its currency, making Chinese exports cheaper. The House did not take up that bill.

The National Association of Manufacturers welcomed the congressional votes on countervailing duties, saying that failure to act "would leave manufacturers in the U.S. defenseless against rampant deep-pocket Chinese and other government subsidies."

Voicing opposition was the conservative Club for Growth, which said the bill "makes it clear that Congress wants to escalate its trade war rhetoric with China." The group also cited Congressional Budget Office estimates that the legislation would increase revenues by about $160 million over the next decade, saying that amounted to a tax increase.