Monday, 13 April 2009

$1 billion lawsuit against U.S. insurance companies over Chinese food dumping

Five food producers bring a $1 billion lawsuit over "dumping" of food imports from China at below production costs. The defendants are... U.S. insurance companies and the federal government.

Okay, I think I have this straight.

Domestic producers complain for years about "dumping" of food imports from China, a major trade policy concern.

In what sounds on the face of it like a reasonable compromise, imports are permitted to continue, so long as the importers put up a bond for any penalty they may owe if the federal government concludes they were dumping.

Importers buy insurance policies to cover their losses if they do have to pay the bond. Risk markets to the rescue!

The federal government then assesses hundreds of millions of dollars in dumping penalties against the importers. The penalties are supposed to be distributed to domestic producers.

The insurance companies refuse to pay and the importers cannot afford to honor their bond.

The U.S. producers are trying to sue the insurance companies and the federal government.

Just another day in U.S. Food Policy.

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