The Resilient Communities Act repeats past mistakes on trade

Even if Congress was indifferent about the WTO legality of the Resilient Communities Act, the prospect of foreign retaliation should give members pause.

Here we go again. 

On Dec. 6, Sens. Tammy Baldwin (D-Wisc.) and Bill Cassidy (R-La.) introduced their Resilient Communities Act of 2023, which proposes using tariff revenue from antidumping and countervailing duties to help trade-affected regions of the country. 

A one-page presser says “The bill is compliant with international trade obligations.” Probably not. 

The bill calls for the Department of Commerce to give out economic development “grants” to local governments in areas adversely impacted by trade. In turn, local governments would award grants to domestic producers that were idled or made unprofitable by imports, for example. Priority would be given to those domestic producers “most likely to increase production and employment.” 

The act draws its inspiration from the Continued Dumping and Subsidy Offset Act of 2000, better known as the “Byrd Amendment” because of the ardent support it received from Sen. Robert Byrd (D-W.Va.). Eleven countries sued over the Byrd Amendment at the World Trade Organization, which ruled in their favor in 2003.  

As per the presser, however, the co-sponsors of the Resilient Communities Act believe that they’ve learned from the mistakes of the Byrd Amendment and fixed them. This is highly doubtful. 

The purported fix is that, whereas the Byrd Amendment gave tariff revenue from antidumping and countervailing duties to the petitioning companies, the Resilient Communities Act will give it to local governments, which in turn would award grants to domestic producers. This is clever, to be sure. But will it really make the act complaint with U.S. trade obligations? 

The answer is likely no. The question is whether the Resilient Communities Act constitutes a “specific action against dumping” that goes above and beyond what the WTO allows. Having a local government serve as the go-between in administering grants, or spending the tariff revenue on good works, is beside the point. 

The Resilient Communities Act adds grants on top of the duties collected and thus bears on the competitive relationship between dumped or subsidized goods and domestic producers. Moreover, it wouldn’t matter how the grants are used. As the WTO explained it “since money is fungible, what the recipient actually does with the cash received is irrelevant.”   

Even if Congress was indifferent about the WTO legality of the Resilient Communities Act, the prospect of foreign retaliation should give members pause. Eight of the 11 countries that filed against the Byrd Amendment went on to ask the WTO for authorization to impose punitive tariffs on American goods. Canada, Europe and Japan slapped 15 percent tariffs on U.S. products, while Mexico put 30 percent tariffs on U.S. milk products, and 20 percent tariffs on a variety of other goods. 

The Resilient Communities Act would likely trigger worse. Retaliatory tariffs were provocative back in the early 2000s, but this is no longer the case. America’s trade partners are now more able and willing to fight back. 

The European Union, for example, has a new “anti-coercion instrument,” and vows to use it to compensate for the WTO’s “weakened role.” In recent years, Canada has followed through on several threats to retaliate against the U.S., including for President Donald Trump’s national security tariffs on steel and aluminum. Ottawa would be motivated to do so again if in if the Resilient Communities Act impacted the softwood lumber dispute, in particular. 

Moreover, the presser draws attention to problems that the Resilient Communities Act can’t solve. It would not make it cheaper or faster to file for an antidumping or countervailing duty. And it would do nothing to stop foreign companies from dodging these duties by trans-shipping goods through third markets or otherwise circumventing them. 

The Resilient Communities Act checks a lot of the right boxes. The idea of fighting China’s unfair trade practices with antidumping and countervailing duties, and spending this tariff revenue on regional economic development, sounds too good to be true. Quite simply, that’s because it is. 

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University, and a Global Fellow at the Wilson Center’s Wahba Institute for Strategic Competition. Follow him on X @marclbusch.