Just as a new Bush administration official was hailing a World Trade Organization decision in an anti-dumping case against Korean chipmaker Hynix Semiconductor Inc., a former White House aide was railing against U.S. anti-dumping policy.
Last week, the WTO Appellate Body backed a U.S. decision to slap a 44-percent punitive tariff on dynamic random access memory chips manufactured by Hynix because the firm received subsidies from the Korean government in the form of just-in-time loans from state-run banks. Hynix makes chips for personal computers and mobile wireless devices.
The Office of the U.S. Trade Representative called the decision far reaching, and USTR Rob Portman was predictably upbeat about the verdict. “This is an important turnaround for U.S. high-tech manufacturers, as well as [for]the international trading system,” said Portman.
What about everyone else?
In the July/August issue of Foreign Affairs, N. Gregory Mankiw, a Harvard economics professor and former chairman of the President’s Council of Economic Advisors, and Phillip Swagel, an American Enterprise Institute scholar and former chief of staff of the Council of Economic Advisers in the Bush administration, write U.S. anti-dumping law has become “little more than an excuse for special interests to shield themselves from competition at the expense of both American consumers and other American companies.”
Mankiw, you may recall, created a stir after opining (in his role as CEA chair) that outsourcing-at least in the long run-is “probably a plus” for the American economy. Now, Mankiw again is going against the grain at a time of a massive U.S. trade imbalance.
The anti-dumping law, the authors explain, was designed to address predatory pricing by foreign firms-that is, those that temporarily lower prices to crush competition only to raises prices later-by prohibiting the sale of overseas goods at less than fair value.
“In a competitive system of world trade, where resources are allocated by the invisible hand of the market and prices are untainted by either government intervention or the exercise of monopoly power, prices are determined by supply and demand, and the voluntary nature of commerce ensures that trade benefits both parties,” said Mankiw and Swagel.
There was a time when cell phones were pricey. In the 1980s, Japan was the big threat to Motorola Inc. At that time, the U.S. government was hot on anti-dumping investigations of mobile phones, pagers and cell-site transceivers imported from Asia. It’s hard to measure what impact the Japanese invasion had on the price of U.S. wireless gear. All we know is prices have dropped dramatically.
Meantime, Hynix reportedly is undaunted by the latest WTO ruling and will lobby Congress to remove the 44-percent tariff on chips.
