Issue link: https://read.dmtmag.com/i/65232
Trade Wars A LEGAL LINE good deal of media cov- erage has been generated recently on the ongo- ing trade "war" between the U.S. and some of its foreign trading partners. Th e sum and substance of these disputes appears to be that companies in certain for- eign countries have been selling some rather complex "renewable energy" products at prices that cannot be realistically matched by U.S. competitors. This same situation is occur- ring in the European Economic Community (EEC), as well, with technology leaders in Spain, Italy, France and Germany being priced out of their home mar- kets by competitors from out- side the EEC. In both the U.S. and the EEC situations, some painful instances have occurred where "new" competitors were former partners, who used those relationships to learn, and in some cases "appropriate," estab- lished technology to compete, without having to engage in costly and independent research and development. Th e transfer and possible misuse of "partnership" technol- ogy is not, in the legal sense, a trade issue in the U.S. It is, rather, a long-term and costly process for the federal courts to resolve, while the market moves forward to the detriment of the U.S. producers. However, "trade" issues are defi ned by how the foreign competitor's pricing in the U.S. is determined and whether the foreign competitor is receiving "help" from its home government, either directly or indirectly. IDA UNIVERSAL May-June 2012 Th e background for this situation is founded in the concept of "free and fair" trade, which encompasses members of NAFTA in North America, most favored nation arrangements, other regionally negotiated trade agreements and the like. Unfortu- nately, in many instances, foreign competitors and their export-dol- lar-driven governments combine to provide unfair trade incen- tives and advantages that make domestic producers completely uncompetitive. Th ese "unfair advantages" can take several forms, and one or more practices can be combined. To simplify, however, two major tactics are used: 1. Direct or indirect subsidies by a government or government-con- trolled entity or agencies that can include, but are not limited to: a. Energy pricing below the cost of production or import from "state" companies or other cost reduction schemes b. Free facilities for manufac- turing or worker housing c. Cheap raw materials from other government "businesses" d. Worker subsidies for salary and "benefi ts" e. Tax credits or outright tax abatement f. "Free" or subsidized fi nanc- ing for working capital, plant and equipment g. Direct payments as a per- centage or other determiner by/of export values shipped f. Government off ered or backed export credit/payment guarantees Robert W. McIntyre IDA Association Legal Counsel 2. Dumping and Countervailing Duties Th is simply means that the foreign competitor sells in "your" market for less than the "reason- able" cost of production and deliv- ery and/or for less than the price in the competitor's home market, by dependence on a government subsidy or otherwise. Obviously, the foreign competitor may be able to do the above and stay in business whether they are subsidized or not. Th is is why these types of situations are so complex and hard to bring to justice in the U.S. Complexity and the trade law process make prosecuting and winning these types of cases both costly and time consuming, and very political. Here's how it should work: Uncle Sam GET Inc. (USGET) is losing market share by the boat- load to BadBoy GET Ltd (BB), a foreign competitor or competitors from the same country, because BB is able to land and sell GET for 45 percent less than USGET is able to even cast and fi nish it, let alone mark up and sell directly or through distributors. USGET is headed out of busi- ness on the fast track and decides Continued on page 52 15