Countervailing duties promoting trade PDF Print E-mail
Written by Stumo   
Thursday, 29 May 2008

Countervailing duties are good for trade.  They are a major enforcement mechanism. A "duty" is a fee imposed on imports.  But a "countervailing duty" is a fee imposed specifically to neutralize unfair subsidies making those imports artificially cheap.  It is pro-free market because it eliminates the trade distortion.  It brings us closer to the level playing field that does not now exist.

Private contracts between private parties would not be honored unless a good system existed to enforce the contract.  That is the court system.

Contracts among countries are treaties - though the trade agreements somehow avoided this "treaty" designation to get rid of the 2/3rds majority requirement in the Senate to get a new deal. 

Currency misalignment is an unfair subsidy.  China's blockbuster growth is not natural, at least not to the extent of that fast growth, but artificially maintained by government currency policies.  It can be neutralized with a countervailng duty, if we pass a law in the U.S. to do it.

Child and prison labor are an unfair subsidy.  It could be countervailed.

Foreign programs to rebate their domestic taxes when a company exports to us is a subsidy, taking the tax load off of exported goods while the tax load remains on domestically sold products.  It could be countervailed.

So the editorial boards of various newspapers should embrace, rather than oppose, enforcing true free trade through countervailing duties.  If you don't enforce a deal, what good is it?

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