The Leveling the Playing Field Act 2.0 is Tilted Against the American Economy

Senators Sherrod Brown (D-OH) and Todd Young (R-IN) recently introduced the Leveling the Playing Field 2.0 Act. The act is ostensibly intended to combat trade actions by China, but it would also hit U.S. businesses and allies.

As currently written, the bill would expand the reach of U.S. anti-dumping and countervailing duty (AD/CVD) laws. This is problematic in a number of ways.

1. The Leveling the Playing Field Act 2.0 is biased against the broad interests of Americans. When a domestic industry asks the government to impose tariffs on “unfair” imports, the law does not allow federal agencies to consider the impact of those tariffs on the overall U.S. economy, including downstream industries. Daniel R. Pearson, former Chairman of the U.S. International Trade Commission (ITC), explained: “In my career at the ITC, I often was greatly troubled by the legal requirement that I vote in the affirmative (in favor of protection) even when it was clear that the damage to users would be far greater than any possible benefit that would accrue to the petitioners.” As NTU pointed out last year, imposing tariffs without considering their impact on the overall economy could actually help China at the expense of American workers.
2. The Level the Playing Field Act 2.0 does not require evidence that proposed anti-circumvention tariffs would benefit the industry seeking protection. Filing an initial AD/CVD petition with the government requires that: (i) the domestic producers or workers who support the petition account for at least 25 percent of the total production of the domestic like product, and: (ii) the domestic producers or workers who support the petition account for more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for or opposition to the petition. There is no such requirement of broad industry support for an anti-circumvention case.
3. The Leveling the Playing Field Act 2.0 does not require evidence of “predatory pricing.” It is often alleged that foreign producers dump goods in order to drive American producers out of business and then increase prices. But as the Supreme Court observed in 1986, “there is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.”
4. The Leveling the Playing Field Act 2.0 does not target China. The bill’s authors repeatedly suggest that it is intended to combat actions by Communist China. But according to the Department of Commerce, nearly two-thirds of current in-force AD/CVD orders and suspension agreements affect countries other than China.
5. The Leveling the Playing Field Act 2.0 is not needed to respond to China’s Belt and Road Initiative. The bill’s authors claim their legislation is needed to counter subsidies China provides to other countries through the Belt and Road Initiative. But according to many reports, China is already scaling back the initiative. Moreover, the United States is itself guilty of subsidizing foreign production – for example, providing $99.7 million in Export-Import Bank financing for the expansion of an oil refinery in Indonesia.
6. The Biden administration has endorsed “friend-shoring” to strengthen U.S. supply chains with trusted trading partners. If U.S. policy is to encourage companies to produce in countries other than China, we should be cautious about adopting policies that discourage such moves.
7. Foreign subsidies intended to boost exports to the United States are tiny relative to U.S. subsidies, including expanded Export-Import Bank subsidies designed to increase U.S. exports at the expense of foreign producers.
8. The Leveling the Playing Field Act 2.0 would primarily benefit steel producers at the expense of jobs in steel-using industries. The International Trade Administration currently lists 727 total AD/CVD cases, of which 329 cover steel-related industries. Economists estimate that the number of jobs in industries that need steel as an input exceeds the number of steel-producing jobs by about 80 to one. This protection of a single industry comes at a great cost to steel-using industries.

NTU joined a dozen other organizations last year to express our concern that, despite its stated good intentions, the Leveling the Playing Field Act 2.0 would do more harm than good if passed. There are better ways to help American companies succeed across the globe, such as improving our tax code to allow for full expensing of capital goods and R&D expenditures.