The Cato Institute, a conservative think tank, has embarked on a campaign to repeal the U.S. government’s power to exclude unfairly imported products into the United States for sale in this country. The institute abhors labeling itself by “libertarian” or any other term, so I will refer to it by one of the labels that it prefers to use on its website — dedicated to “expanding civil society while reducing political society.”
Cato’s effort is advanced by articles authored by Bill Watson, a Cato trade-policy analyst whose work is described by Cato as focusing on “U.S. trade remedy policies, disguised protectionism, and the institutional aspects of global trade liberalization.” Watson aims Cato’s lance at § 337 of the Tariff Act of 1930, a litigation forum that determines whether U.S. Customs and Border Protection should exclude from entry into America foreign-made products that infringe the U.S. patents of a domestic industry. This patent litigation is conducted before administrative law judges of the U.S. International Trade Commission (ITC). For 14 years, I litigated Section 337 cases before the ITC as a staff attorney and as a clerk for its administrative law judges.
Wilson’s opinion piece, “A redundant patent tribunal” [NLJ, October 8], is well written and well researched. It wrongly emanates, however, from a naïve notion of the modern neoconservative intelligentsia that free trade must be the sine qua non of modern economic policy and that all national barriers to free trade must fall, including Section 337.
As Watson points out, § 337 originated in the isolationist Fordney-McCumber Tariff of 1922 and the early Depression-era, pre-New Deal Smoot-Hawley Tariff of 1930. But the roots of § 337 run even more deeply. The remedy afforded by § 337, known today as an “exclusion order,” was known long before as an “embargo” and was employed often by U.S. governments in the 18th and 19th centuries, in fact even before the American colonies became independent from Great Britain. As early as 1774, the First Continental Congress organized an embargo of British goods in order to protest Parliament’s punishment of Boston for its famous “Tea Party.” By 1917, the embargo of German goods from U.S. ports was an effective policy in World War I that transformed after the war into the broader protections that eventually became § 337.
No one denies the federal government’s power “to promote the Progress of Science and the useful Arts,” as the Constitution puts it, by issuing and protecting patents. By the same token, no one can deny that the federal government can exercise that power by any “necessary and proper” constitutional means. This includes the long-standing power to restrict imports. Section 337 and its forebears have long served this end, and § 337 was duly amended to address the challenges of the 1989 General Agreement on Tariffs and Trade (GATT) panel report that Watson resurrects now, a quarter-century later, to bolster his argument for § 337′s repeal.
NO REAL FREE TRADE YET
Even though GATT and its successor, the World Trade Organization (WTO), mandate “national treatment” of imported goods such that imports are to be treated by governments equally to their own domestic goods, the world is a long ways away from fulfilling this utopian goal. There is, as of yet, no free trade in the world. Today, import licenses, import quotas and subsidization of domestic export industries abound throughout the developed and underdeveloped world, notwithstanding GATT and the WTO. Argentina has been called to account for its restrictive import licensing of many products, as has Vietnam for its import licensing regime, and India for its licensing for boric acid and marble imports. It is ironic that Cato, dedicated as it is to less government, would strive to replace one of the long-range objectives of the “world government” bureaucracy of the WTO for the purely American structure of the ITC. No other country in the world would do this.
Watson is undoubtedly right in pointing out that there are many problems in the administration of § 337 by the ITC. It is a very small agency by comparison with other U.S. administrative agencies. It is seriously underfunded, given the extent of its congressionally authorized mission. There are only six administrative law judges who must hear and decide massive cases with thousands of exhibits and reams of testimony. They are overworked and underpaid for their task, particularly in this era of compressed administrative pay and governmental resources. At the ITC’s door awaits a large bar of private patent attorneys, experienced litigators who, at great expense, fight aggressive battles for Fortune 100 companies with endless resources. Perversely, for all the heavy demands that these titans of industry place on this small agency to host their expensive contests, they pay not one cent in filing fees to litigate at the ITC; this agency’s services are offered to them absolutely free, courtesy of the U.S. taxpayer.
Some conservatives think that no government agency should be large enough to avoid being drowned in a bathtub, but the ITC should not be one of them. It should be strengthened rather than sunk. For all of Watson’s recitations of its faults, the ITC’s § 337 process is a necessary component of the real world’s trade structure that depends heavily on intellectual property rights to direct the course of the huge flows of capital that industry generates. If it were otherwise, then the multinational corporations that annually flood the ITC’s docket with complex patent cases would not be there. Watson and the Cato Institute should think more carefully before they throw the § 337 baby out with the protectionist bathwater.
Steven A. Glazer is an administrative law judge with the Federal Energy Regulatory Commission and an adjunct professor of law at the University of Maryland Francis King Carey School of Law. The views that he expresses are his own and do not reflect the views or positions of the Federal Energy Regulatory Commission, its chairman and commissioners, the U.S. International Trade Commission, or any other agency or instrumentality of the federal government.