AAI Warns USTR Against Import Restrictions on Washing Machines That Would Stand Competition Policy on Its Head

Dec 12 2017
Testimony and Interventions

The American Antitrust Institute (AAI) has filed comments with the Office of the U.S. Trade Representative opposing the imposition of “safeguard restrictions” on the import of Large Residential Washers (LRWs) under Section 201 of the Trade Act.

Earlier this year, Whirlpool petitioned the U.S. International Trade Commission (ITC) for Section 201 relief, seeking an unconditional 50 percent tariff on imported LRWs. Last week, the ITC published a report transmitted to the President finding that low-priced, imported LRWs have caused serious injury to the domestic industry. Under the statute, safeguard restrictions can be imposed whenever a domestic industry is “injured” by import competition, even if the injury is the product of fair competition.

Although the ITC rejected Whirlpool’s proposed remedy, it recommended, among other things, a three-year tariff-rate quota, whereby a 50 percent tariff would apply to imported LRWs above 1.2 million units. The Commission split 2-2 on whether a tariff should also apply below the 1.2 million-unit quota. Two Commissioners recommended a 20 percent in-quota tariff, while the other two recommended that no in-quota tariff be imposed. The President now may decide whether to accept, modify, or reject the ITC’s recommendations.

The AAI comments encourage the President to carefully consider the impact of safeguard restrictions on domestic competition. Under the Statute, the President is permitted to implement such relief only if the President determines that safeguard restrictions would restore competitiveness to the domestic industry and foster social benefits that outweigh costs.

AAI argues that there is no sound theoretical basis to expect safeguard restrictions to achieve either of these goals. The President therefore should consider the ITC’s remedy recommendations with a strong presumption that they will not have the statutorily required effects.

In addition, safeguard restrictions can alter incentives for domestic competitors, potentially creating the kinds of anticompetitive market structures that antitrust law seeks to prevent. In the LRW market, an unconditional 50% tariff threatens to create a temporary duopoly among Whirlpool and GE, leading to a host of competitive harms. And the proposed tariff-rate quota, which would effectively reduce importers’ U.S. output by half, threatens to alter incentives that have thus far prevented coordinated oligopoly pricing. The problem would likely be significantly exacerbated if a 20% in-quota tariff is included.

AAI also recently filed comments in a similar proceeding to oppose safeguard restrictions on imported solar cells and modules.

Today's comments were written by AAI Associate General Counsel Randy Stutz, with assistance from AAI General Counsel Rick Brunell and AAI Research Fellow So Young Oh.