"Consumer Safety" Bill Could Boomerang against U.S. Manufacturers

September 29, 2010

Barriers to trade can be straightforward and transparent, or can take the form of rules and regulations proposed in the name of protecting public health and safety but have a secondary effect of restricting trade.  An example of such a nontariff barrier is legislation now before Congress called the Foreign Manufacturers Legal Accountability Act (FMLAA), say Daniel Griswold, director of the Center for Trade Policy Studies at the Cato Institute, and Sallie James, a trade policy analyst with the center.

The sponsors of the legislation claim that their principal goal is to protect American consumers from unsafe foreign products, but there are warning signs that the bill may be more about restricting trade than protecting the public.

  • The FMLAA would require foreign producers selling goods in the U.S. market to designate a legal agent located in the United States who could be served papers in a product liability suit.
  • By registering an agent, the foreign producer would agree to accept the jurisdiction of the state and federal courts of the state where the agent is located.

The concern raised by advocates of the legislation is that American consumers harmed by foreign products will not be able to collect damages if the foreign-based producer has no legal presence in the United States.

Americans damaged by faulty products, whether made abroad or domestically, should be able to seek compensation through the courts.  But the approach advocated by supporters of the FMLAA would not solve the problem, say Griswold and James.

Source: Daniel Griswold and Sallie James, "'Consumer Safety' Bill Could Boomerang against U.S. Manufacturers," Cato Institute, September 28, 2010.

For text:

http://www.cato.org/pub_display.php?pub_id=12174

 

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