Escape Clause/Safeguard Actions (e.g., Section 201 of the Trade Act of 1974, as amended; Section 421 of the Trade Act of 1974, as amended)

The United States and its trading partners undertake various trade liberalization commitments, generally as part of trade negotiations. For the United States, since 1932, negotiating a trade liberalizing agreement has always been facilitated by including within the agreement the right of a country to the negotiations to “escape” from some aspect of the commitments when the rate of growth of imports or the ability of a domestic sector to adjust to new conditions of competition exceeded the national ability to handle the issue. Escaping obligations was not intended to be easy to do, nor is it intended to be long-term in nature. Because no unfair trade practice is alleged against imported products, a higher standard of injury is typically part of the provision. Article XIX of the GATT (now GATT 1994) provides the multilateral framework for the so-called “general” safeguard/escape clause remedy. Current U.S. law provides the general safeguard remedy under section 201 of the Trade Act of 1974, as amended. U.S. law provides for a factual determination of whether the conditions for a safeguard remedy to be conducted by the U.S. International Trade Commission, with the ultimate decision on what, if any, remedy to provide, resting with the President (discretionary decision). Relief can be increased tariffs, quotas, or a TRQ (or simply adjustment assistance). Relief is temporary and reduces over time. In addition, the domestic industry is required to implement an adjustment plan to so it can be in a stronger position once the relief is over. Relief, if granted, applies against all imports (although U.S. law permits exclusion for certain FTA partners under enumerated conditions).

Similarly, where the agreement is a Free Trade Agreement with one or more countries, there will typically be an FTA escape clause remedy which lets a country escape the additional trade liberalization of the FTA under the conditions provided (i.e., permits restoration of MFN duty rates). These are found in all U.S. FTAs.

Finally, when China joined the World Trade Organization, its trading partners insisted on a China-specific safeguard for a transition period (ending at the end of 2013) to permit WTO members to deal with import surges from China during a period of perceived likely heavy transition for China to a more WTO-consistent system within China. The China-specific safeguard in the U.S. is contained in Section 421 of the Trade Act of 1974, as amended.

Stewart and Stewart lawyers have helped industries and workers from the 1950s seek relief when needed under the relevant safeguard/escape clause provisions, whether under the general safeguard law (now Section 201), the China-specific safeguard, or otherwise. Indeed, the firm has participated in or brought some of the largest cases under U.S. safeguard provisions, including the only China specific safeguard to obtain relief in fact from the President. With extensive knowledge of U.S. trade laws and familiarity with the relevant legal and factual issues, our team can help clients respond to rapidly increasing import competition. Stewart and Stewart can provide assistance with safeguard/escape clause proceedings in a variety of ways, including:

  • monitoring and identifying new proceedings and ongoing proceedings that may affect clients’ interests in the U.S. and abroad;
  • advising clients on options available under and pursuing relief for clients via domestic laws; and
  • educating the Administration and Congress on issues relevant to, and marshaling political support for, clients’ interests when an action is brought to facilitate obtaining relief.

Section 201 of the Trade Act of 1974, as amended, has not been used since 2001.  On April 18, 2016, the USW filed a petition on primary unwrought aluminum seeking both temporary relief and negotiations to eliminate the massive amount of excess capacity in the world which had led to the collapse of global prices.  The USW also sought a finding of critical circumstances to obtain relief during the pendency of the 201 investigation and hopefully prevent the further collapse of the US aluminum smelting industry.  The Chinese government has recognized that there is significant excess capacity in China.  The US has raised the problem of excess capacity bilaterally.  The 201 petition was withdrawn on April 22, 2016.  The challenges presented by global excess capacity and collapsed prices for primary unwrought aluminum hopefully will be addressed through government-to-government talks.

A New York Times article about the filing of the petition can be read here.

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