Download - Our objectives:
Trade Remedy Actions in NAFTA for Agriculture & Agri-food Industries: Increasing? Alternatives?
Linda Young, John Wainio and Karl Meilke
Our objectives:
Examine the economic rationale for administered protection Does it hold in NAFTA?
Evaluate data on the use of AD/CVD Propose changes to current
procedures Broaden the options-new ideas
Economic Rationale: AD actions make little economic sense,
particularly within an FTA Protectionist actions rewarding rent-
seeking behavior Punish firms for behavior in foreign markets
that is considered normal for domestic firms Expensive to initiate and defend, but… CVD actions are different Economic efficiency losses associated
with both
AD/CVD Cases Initiated by NAFTA Countries 1/1/1984 - 6/30/2001
0
20
40
60
80
100
120
140
160
180
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Avg
United States Canada Mexico
AD/CVD Case Outcomes 1/1/1984 - 6/30/2001
0%
10%
20%
30%
40%
50%
60%
70%
80%
United States Canada Mexico NAFTA Rest of World
AD CVD Total
Active AD/CVD Measures As of 6/30/2001
Antidumping Measures
21%
8%
6%
19%
11%
35%
United States Canada
Mexico European Communities
India ROW
Countervail Measures
51%
11%
1%
23%
7%
7%
United States Canada
Mexico European Communities
Australia ROW
.
As traditional trade barriers are lowered, the use of trade remedy law rises.
Trade Liberalization Has Not Resulted in More AD/CVD Investigations
0
5
10
15
20
25
30
1984-88 1989-93 1989-93 1994-98
US-CN CN-US US-MX MX-US
Pre-CUSFTA Post-CUSFTA Pre-NAFTA Post-NAFTA
NAFTA Partners Target Each Other’s Imports Less Than Those of Other Countries 1989 - 1999
8%
27%21%
69%
22%
75%
0%
25%
50%
75%
United States Canada Mexico
Percent of all cases against NAFTA partners Percent of imports from NAFTA partners
NAFTA Countries Are Far More Likely to be the Target in Cases Investigating Agricultural Trade 1989 - 1999
8%
21% 21%
53%
22%
57%
0%
20%
40%
60%
United States Canada Mexico
Percent of all cases against NAFTA partners Percent of ag cases against NAFTA partners
Is Agricultural Trade Overrepresented in AD/CVD Cases? (1989 - 1999)
5%4%
11%
5%
7%8%
0%
3%
6%
9%
12%
United States Canada Mexico
Agriculture's proportion of all cases Agriculture's proportion of all imports
Even in Agriculture, the Three Countries Target Partner’s Trade Less Than Others 1989 - 1999
21%
30%
53%
66%
57%
77%
0%
25%
50%
75%
United States Canada Mexico
Percent of ag cases against NAFTA partners Percent of ag imports from NAFTA partners
Active AD/CVD Measures Within NAFTA As of 6/30/2001
8 9
15
1
11
00
4
8
12
16
20
United States Canada Mexico
CanadaMexico
United States
Mexico
United States
Canada
Malt beverages (220300)Initiation - 1991 Duty - 1991 Revoked - 1994
10,000
20,000
30,000
40,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Value of US Exports to Canada ($1,000)
Tomato paste (200290)Initiation - 1992 No injury finding - 1993
0
10,000
20,000
30,000
40,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Value of US Exports to Canada ($1,000)
Cauliflower (070410)Initiation - 1992 No injury finding - 1993
15,000
20,000
25,000
30,000
35,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Value of US Exports to Canada ($1,000)
Lettuce (070511)Initiation - 1992 AD duty in effect
30,000
40,000
50,000
60,000
70,000
80,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Value of US Exports to Canada ($1,000)
Refined Sugar (1701 & 1702)Initiation - 1995 AD duty in effect
0
10000
20000
30000
40000
50000
60000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Value of US Exports to Canada ($1,000)
Apples (080810)Initiation - 1994 Duty - 1995 Revoked - 2000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Value of US Exports to Canada ($1,000)
What do we want to achieve?
Reduce incidence, retaliation, costs
Maintain transparency Maintain ability to protect
producers Cognizant of the goals of FTA; And…
One more criterion
The extent to which changes assist producers in considering their domestic market to be tri-national
Why? Rules have changed quickly Paradigms and institutions have
not kept pace
Trinational Market (almost) However, producers still largely
identify with the national market Slow to develop bi or tri-national
commodity groups Such institutions may increase gains to
producers through cooperation in market development, research, joint work on SPS, lowering costs of crossing the border, other joint efforts
Options for Change: Tweaks
Increase the difficulty of requirements to impose duties or change criteria for the level of the duty Increase the de minimis level Increase the level of negligible imports Restrict the duty to address injury only Change the calculation of duties to
account for practices in the domestic industry.
Options for Change: Tweaks (con’t)
Provision requiring evaluation of the impact of duties on the general interest of the FTA
Consultations
Not required for AD/CVD Important component of dispute
resolution systems of NAFTA and WTO
Involve: Clarification of legal basis of dispute Discussion on why policy undertaken Options for resolution explored
How Successful are Consultations?
WTO considered 51 cases (July 2001) with completed panel reports
37 cases resolved in consultations, 7 more before completed panel reports
Thought required to adopt within NAFTA AD/CVD Scope of parties included
Eliminate AD Suits Entirely
Australia and New Zealand have Canada and Chile have
Also working on eliminating CVD Why? Trans-Tasman market:
Hamper efficient allocation of resources Rationale no longer exists Detrimental to commercial relationships
Introduce Alternative Dispute Resolution ADR: processes usually involve a
third party neutral Why change a system? Does the
current system produce: Acceptable and durable outcomes? Are the costs acceptable? Impact on relationships-does it
matter? Disputant involved in the resolution?
Factors Leading to AD/CVD Suits-More than rents
•Import surge•Change in industry
structure•Low prices•Misinformation•Different policies and
marketing institutions•Leadership bid
AD/CVD process Duty or not
Tensions underlying are not alleviated!
Causes of dispute
Treat one symptom, low prices (maybe)
Reoccurrence!Reoccurrence!
Causes of dispute largely
unalleviated
Characteristics of Dispute Resolution Systems
Assessment of resolution options Identification of issues and
development of agenda of issues Fact finding Collaborative problem solving Settlement
AD and CVD processes:Are not dispute resolution systems!
‘Administrative review’ No choice of resolution options to
participants Does not considered broad interests
Access to other NAFTA markets Avoidance of a counter-suit General de-escalation of use of trade-
remedies
AD/CVD are not dispute resolution systems (con’t)
Regulatory and policy harmonization Trade liberalization generally Unified domestic industry
Fact finding rigid, not participatory No problem solving – duties or not Settlement- trade tension still
exists
Good Offices
When a third party works to correct misunderstandings and fear, and increase communication
Used by the WTO and the UN Good Offices might be useful
within NAFTA
Mandatory Facilitated Dialogue
Proposal: complainants engage in a dialogue, facilitated by a neutral, before the suit can be investigated by national protection agencies
Purpose: In general a type of mediation to
explore interests, issues and options, less geared toward settlement
Mandatory Facilitated Dialogue
Specifically, to engage the complainant in a wide-ranging discussion on the consequences, costs and benefits widely defined, of pursuing the suit
Costs and Benefits Will the defending industry retaliate?
Is the domestic industry unified? Costs of proceeding?
Gains from cooperation – how affected?
Correct misinformation through joint
data collection
It could happen…
If one NAFTA industry is selling below the costs of production then likely all are
… might be discussed during the facilitated dialogue
Need to think further a field
Tensions from economic integration inappropriately channeled into AD/CDV
NAFTA needs processes for industry groups for managing those tensions
An array could include good offices, faciliated dialogue, mediation offered by the NAFTA secretariate
What is Possible
Economists have long been disenchanted with AD/CVD processes-
Political opposition to eliminating them is fierce
Leaving them in place may make it possible to put more effective measures of dispute resolution up front