INTERNATIONAL AND REGIONAL TRADE LAW: THE LAW OF THE WORLD TRADE ORGANIZATION

J.H.H. Weiler NYU School of Law

Sungjoon Cho Chicago-Kent College of Law

Isabel Feichtner Goethe University, Frankfurt

Julian Arato Brooklyn Law School

Unit XIII: Anti-Dumping © J.H.H. Weiler, S. Cho, I. Feichtner & J. Arato 2016

International and Regional Trade Law: The Law of the World Trade Organization

Unit XIII: Anti-Dumping

Table of Contents

Supplementary Reading

1. Overview

2. Antidumping: Basic Information (WTO Website)

3. Excerpts from the Australian Government’s Productivity Commission’s Research Paper onAntidumping (Feb. 2016)

4. “Frankenshrimp” (CITAC Shrimp Task Force)

5. Mexican HFCS (Panel Report: Edited Version)

Optional Reading

- Zeroing (ASIL Insights)

- China's Non-Market Economy Status (ICTSD)

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Supplementary Readings

Peter van den Bossche, The Law and Policy of the World Trade Organization, 2013, 673-743.

Raj Bhala, Modern GATT Law. A Treatise on the General Agreement on Tariffs and Trade, 2013, 701-1054.

Michael J. Trebilcock et al., The Regulation of International Trade, 4rd ed. 2013, 333-363.

John H. Jackson et al., Legal Problems of International Economic Relation, 6th ed. 2013, 831-900 .

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"Developments in Anti-Dumping Arrangements," Productivity Commission Research Paper (Australian Government, Feburuary 2016), pp 10-15

The system makes us worse, not better, off

The costs of imposing measures exceed the benefits for recipients

As noted, anti-dumping protection — like other trade protection — reduces the competitiveness of the imports concerned and thereby helps to support activity, employment and investment in recipient local industries (and their suppliers). Especially when these industries have been under significant competitive pressure, such positive impacts may be highly visible.

But there are offsetting activity, employment and investment effects — including for locally based importers and for downstream industries using the goods concerned. Anti-dumping measures also result in higher prices for consumers, whether felt directly as a tax on imports purchased, or indirectly via higher input costs for some goods and services, or the higher price levels permitted by reduced competition.

Importantly, though often diffuse, the costs imposed on the community by anti-dumping protection will exceed the benefits for recipient industries. This net cost arises from, among other things, less efficient resource use and muted incentives for protected industries to innovate or otherwise improve their competitiveness. In fact, the economic costs of anti-dumping protection will generally be higher than the costs of ‘comparable’ tariff protection:

• The highly technical, applications-based nature of the system means that theadministrative and compliance costs are proportionately greater than for tariffprotection.

• As well as directly increasing the price of some goods, the system, as noted, willinevitably cause some other overseas suppliers to compete less aggressively on price.

• More generally, the channels of influence are more explicit under an administeredprotection law than under a conventional tariff regime. This suggests that the potentialfor gaming of the system — a matter explored extensively in the literature — will becommensurately higher.

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• Where the government accepts an undertaking in lieu of imposing a duty, revenue thatwould otherwise have accrued to taxpayers is retained overseas.

By increasing access to, and the scope of, protection offered to eligible industries, the recent changes to the anti-dumping system almost certainly have increased, or will increase when they come into full effect, the net cost of the anti-dumping system for the Australian community.

Yet the harm arising from Australia’s anti-dumping policy is largely ignored in deliberations as to whether measures should be imposed and in current policy development processes.

There is no cogent reason for anti-dumping protection

Since the inception of anti–dumping protection more than a century ago, an array of explanations has been advanced in support of its retention.

Objective assessment of rationales has often been sidetracked by the emotive terminology and concepts employed in the system’s architecture (box 2). Putting terminology aside, almost all of the arguments put forward to justify this type of protection lack credibility.

• The arguments suggesting a potential economic efficiency benefit are highly theoreticaland of little practical relevance.

– In a globalised trading environment, it is hard to conceive of circumstances thatwould enable an overseas supplier to successfully deploy a predatory dumpingstrategy. For a supplier to exercise other than transitory market power, there wouldhave to be no third supplier of those goods and no prospect of other suppliersentering the market. In globalised markets with few regulatory barriers to entry, thisis unrealistic. Indeed, the focus on predation as a rationale in anti-dumping systemsdisappeared by the 1920s and is now widely acknowledged to be irrelevant.

– As a small country, Australia’s countervailing arrangements are likely to haveminimal, if any, impact on the global incidence of trade-distorting subsidies. Inthese circumstances, countervailing measures simply act as a tax on imports.

• The system is poorly designed and targeted if its intent is to aid structural adjustment.

– There is no requirement or expectation that recipients of anti–dumping protectionimplement strategies to improve their competitiveness. Indeed, because the hurdlefor continuing measures beyond the initial five year period is low, measures canmorph into long–term protective instruments that dull adjustment incentives. Tosuggest that measures in place for a decade or more were promoting adjustment isplainly stretching credulity.

– Duties can be triggered by price shocks that are small in the context of the multitudeof other pressures that import-competing firms may face. For example, in contrastto the sizable appreciation in Australia’s exchange rate during the mining boom, a

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subsidy margin equivalent to just 1 per cent of the price charged by an overseas supplier can result in countervailing duties being imposed. The provision of assistance in such circumstances is in stark contrast to the general expectation of good public policy that governments will only step in when pressures are particularly acute and disruptive, and where there is a genuine prospect of sustainable employment and investment. Businesses are otherwise expected to respond to changing market circumstances without relying on public assistance.

– The material injury test simply requires that injury is not immaterial and, as a resultof recent changes to the test, can now be met even when an industry is profitableand its sales are growing (albeit below the market rate).

• ‘Fairness’ arguments ignore outcomes for anyone other than those who benefit fromanti–dumping protection. This includes, as noted earlier, users of the protected importsand the community as a whole. Notably, following the Christchurch earthquake in2011, the New Zealand Government temporarily exempted various constructionmaterials from the coverage of its anti–dumping system to avoid increasing rebuildingcosts for people already experiencing significant hardship.

– Further, system criteria, together with significant application costs for those seekingmeasures, have meant that access to the system has effectively been limited to arelatively small group of Australian industries. The bulk of Australian industrieshave therefore been required to deal with much the same competitive pressureswithout a protective leg up.

– The bulk of Australia’s anti–dumping measures are imposed on products fromcountries that are less well off than Australia. Hence, from an internationalperspective, the fairness of the system is also open to question.

– The argument that countries discouraged from trading ‘unfairly’ in other marketswill target Australia if it does not have an anti-dumping system mistakenlypresumes that unilateral market opening is harmful rather than beneficial. As bothtrade theory and empirical studies demonstrate, the gains for a country fromreducing protection do not depend on reductions elsewhere. Commission modellingin 2010 suggested that the benefit to Australia from a unilateral removal of itsremaining import tariffs would be 1.5 times greater than the benefit it would receivewere every other country in the world to remove their tariffs.

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Box 2 Looking beyond terminology The anti–dumping policy area is characterised by emotive or suggestive terminology. This has hindered balanced consideration and debate on the impacts of anti-dumping measures on those directly affected and the broader community.

The use of the term ‘dumped’ to describe the sale of goods at a lower price than in the supplier’s home market implies undesirability. Yet it is only one manifestation of the very common practice of varying prices across markets, or the customer base within a market, to take account of differences in the price sensitivity of demand. For example:

• Discounting in price sensitive markets will often help firms to reduce an excessive build–upin inventory.

• Similarly, discounting is a common strategy for firms with long-lived assets to better utilisetheir production capacity in periods of excess supply (such as that which has characterisedthe steel industry for a number of years).

• Retailers will often use loss leaders to entice more price-sensitive customers into theirstores.

• Airlines and hotels frequently sell cheap seats/rooms in order to fill surplus capacity.

Attempting to deter such pricing behaviour through imposing taxes whenever it was observed would clearly be nonsensical. Indeed, Blonigen and Prusa (2015, p. 4) portray the pricing concept that underlies the anti–dumping system as ‘… convict[ing] a foreign firm for not making enough economic profit from a country’s consumers.’ Were anti–dumping pricing principles extended more broadly, large numbers of Australian businesses would face the risk of regulatory action to prevent them charging lower prices to those less able or willing to pay. The pricing concept also stands in contrast to the ‘beachhead pricing’ strategy (sacrificing early margins) that has been endorsed by Austrade (2015) for Australian exporters as a means to break into new export markets.

Another illustration of the terminology issue is the concept of ‘injury’ caused by a dumped or subsidised product. In practical terms, such injury may be little different from the loss of sales or profits that a local producer may experience for a range of other market-related reasons, or simply by virtue of the fact that there is a foreign competitor in the market. Through the link to the practice of dumping or subsidisation, however, such injury assumes a special policy significance.

More broadly, the concept of ‘fairness’ which features prominently in anti–dumping discussions is emotionally charged and subject to selective interpretation (see text).

In recent years, the case for the system has increasingly fallen on the so-called ‘system preservation’ argument. In this case, the contention is that anti–dumping protection satisfies a political need to act against adverse effects of foreign competition for some import-competing industries and, as such, may act as a safety valve that preserves the wider system for progressing trade liberalisation. In essence, this is saying that the costs of anti–dumping protection may be worth incurring to secure greater support for, and benefit from, broader trade liberalisation.

In the Australian context, this argument, too, is very weak. For a range of reasons, including significant trade liberalisation achieved by Australia in past decades, any system

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preservation benefits potentially on offer will almost certainly be small. And the costs of securing any such benefits have risen due to the recent changes to increase the stringency and reach of Australia’s anti–dumping arrangements. At best, the system preservation argument could only ever justify a much less protectionist and therefore economically less costly mechanism than the one now in place.

The detriment from the system is set to increase

The absence of a robust rationale for anti–dumping protection is not just an issue for Australia’s current system. It is evident that the problematic logic that underpins the system in itself has provided reason to increase the system’s stringency and reach.

That is, the anti-dumping system focuses exclusively on whether injurious dumping or subsidisation to an import-competing firm has occurred and remedying the perceived injury. However, the weight of studies, including in Australia, suggests that this focus is to the detriment of countries as a whole. The recent changes to Australia’s anti-dumping arrangements have given little, if any, recognition to the weak conceptual basis for anti-dumping protection.

The current environment is therefore one in which policy is being driven by the interests of a small group of local industries; and justified by what the WTO rules do not prohibit.

The system has been sustained by a lack of consolidated public reporting on system outcomes and significant gaps in the information that is available on those outcomes (box 3). It is apparent, however, that this lack of information is not just a failure to publish. The procedural apparatus in a system that currently has no regard to the overall benefits and costs for the community is simply not geared towards collecting information of this nature.

In countries where the system’s ‘logic of permission’ has been extended furthest, such as the United States, anti–dumping systems are a significant economic burden (see above). It is concerning that these systems are now frequently being portrayed as the ‘gold standard’ to which Australia should aspire. For example, as part of the Senate Economics Legislation Committee which examined the Bill to give effect to the 2014 Levelling the Playing Field package, Senator Nick Xenophon said:

… there ought to be a willingness on the part of the government to explore the toughestpossible measures to ensure dumping does not occur that does not contravene WTO rules. It seems other countries, particularly the US and European Union, have taken a much more active approach against dumping than successive Australian Governments … (p. 37)

And the Government has recently signalled its intention to work with stakeholders to further strengthen the anti-dumping system. In this environment, it is naïve to look at the impacts of recent changes in isolation. Rather, they are part of a trend that could see the system become increasingly more protectionist and damaging.

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This is not to suggest that the current policy path will necessarily lead to a US–style system. At some point, Australia’s general embrace of freer trade and the benefits it brings is likely to exert some constraint on the attenuation of those benefits.

However, that point may be some way off. In the meantime, and absent a fundamental rethink on the basis for, and the operation of, Australia’s anti–dumping system, the economic costs of the system could increase considerably.

Box 3 The need for greater transparency While this research study clearly indicates that the costs of the anti–dumping system outweigh its benefits and that this net cost is growing, the Commission’s analysis has been constrained by information gaps. The analysis that has been possible has also been dependent on the Commission assembling information that should already have been readily accessible. For example:

• Neither the Anti-Dumping Commission (ADC), nor the Department of Industry, Innovationand Science, routinely publish consolidated reports on system usage trends (number ofmeasures in force, new cases initiated, new measures imposed). Likewise, there is noconsolidated summary of the degree of support provided through extant measures, or ontheir industry or country coverage. Rather, as the Commission has done, this sort ofinformation must be assembled from the status reports published by the ADC or from WorldBank data. As such, both the overall significance of the system, and its focus in terms ofbeneficiaries and targets, is far from transparent.

• Published ad valorem duties and equivalents are sometimes more an indication than anaccurate measure of the level of protection a recipient industry is actually receiving. Also,there is no consolidated information published on the proportion of measures that arecontinued beyond their initial five–year term. Yet this is central to understanding the degreeof protection afforded by the system and, more particularly, the extent to which measuresare providing long–term protective support to certain industries.

• There is only limited information available on the numbers of applications that do notproceed to investigation. As well as being relevant to understanding system usage and howthis is changing over time, data on unsuccessful applications is one of the few empiricalavenues for exploring whether the threat of anti–dumping and countervailing action is beingused as a strategic deterrence tool.

• There is no public reporting of the impacts of anti-dumping and countervailing measures onusers and the broader economy.

Given WTO rules and commercial-in-confidence considerations, there are limits on the degree to which certain types of detailed information relating to specific parties can be made publicly available. As the report explains, however, there is scope to do more than at present.

Improved reporting on system outcomes would add to administrative costs. If the anti–dumping system is to continue, however, such reporting — and especially the juxtaposition of the benefits and costs for the various stakeholders — is essential.

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Issue: 8Volume: 16By: Sungjoon Cho

Date: March 09, 2012

Home (/) / No More Zeroing?: The United States Changes its Antidumping Policy to Comply with the WTO

No More Zeroing?: The United States Changes its Antidumping Policy to Complywith the WTO

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Introduction

Threatened by trade retaliation against U.S. exports by the European Union (â EUâ ) and Japan, on February 14, 2012, the U.S. Department of Commerce (â DOCâ ) announced a

policy change to generally end the practice of â zeroingâ in antidumping cases. The DOC had earlier ended zeroing in antidumping investigations; the February 14 policy change

covers future administrative reviews of existing antidumping orders, including new shipper reviews, expedited antidumping reviews, and sunset reviews.

Since this change in practice will apply to all imports, it may facilitate settlement of similar pending World Trade Organization (â WTOâ ) casesâ except those seeking antidumping

duty refunds on past zeroing. But the United States is not likely to stop trying to negotiate legalization of zeroing. The DOC may also continue to use zeroing in targeted

dumping analyses, which have not yet been the subject of a WTO panel ruling.

What Is â Zeroingâ ?

General Agreement on Tariffs and Trade (â GATTâ ) Article VI and the WTO Antidumping Agreement (â ADAâ ) authorize importing countries to impose extra tariffs on imports

found to be â dumpedâ and to cause material injury or threat to the domestic industry producing a like product. Article VI defines â dumpingâ as sales for export below â normal

valueâ (the comparable price for sales within the exporting country or to a third country, or the cost of production plus overhead and profit). The DOC and other antidumping

authorities calculate the margin of dumping for a product by computing the difference between normal value and export price for each model or type of a particular product, and

aggregate the results. â Zeroingâ meant that the DOC would omit (â zeroâ ) the calculations where export price was higher than normal value, thus inflating dumping margins.

The DOC, the EU, and some other importing countries originally used zeroing both in antidumping investigations and in administrative reviews of antidumping orders.[1]

Zeroing in the GATT/WTO

In the pre-WTO period, Japan unsuccessfully challenged zeroing in the ECâ Audio Cassettes case, though the panel report's adoption was blocked.[2] The Uruguay Round

negotiations also failed to clarify whether zeroing would be legal. India then challenged zeroing under the WTO in ECâ Bed Linen.[3] The EC argued that without any explicit

instruction by the ADA, an antidumping authority could establish a dumping margin for each product model and therefore need not aggregate any negative results to obtain a

final dumping margin for the product as a whole. The panel and the Appellate Body rejected the ECâ s position. The Appellate Body ruled that the â fair comparisonâ

requirement in ADA Article 2.4.2 meant that the EC should have established the dumping margin â for the productâ cotton-type bed linenâ and not for the various types or models

of that product.â [4] The Appellate Body also concluded that the EC should have taken into account â all comparable export transactions,â including those with negative individual

dumping margins.[5]

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The Appellate Body then reiterated this position in cases against U.S. antidumping investigations.[6] The battle eventually shifted to whether ADA Article 9.3, which governs

administrative reviews, also would exclude zeroing,[7] and whether the zeroing jurisprudence would apply to other types of zeroing (weighted-average-to-transaction and

transaction-to-transaction, as well as weighted-average-to-weighted-average).[8] Initially, panels resisted the Appellate Bodyâ s sweeping stance against zeroing, and one panel

even questioned the binding nature of the Appellate Bodyâ s anti-zeroing decisions.[9] However, the Appellate Body reaffirmed the vitality of jurisprudence within the WTO system,

emphasizing that â adopted panel and Appellate Body reports are often cited by parties in support of legal arguments in dispute settlement proceedings, and are relied upon by

panels and the Appellate Body in subsequent disputes.â [10]

The battle concerning zeroing in administrative reviews has focused on the United States because of the U.S. retrospective method of assessing antidumping duties. In the U.S.

system, the antidumping duty rate established by the DOC in an antidumping investigation does not determine an importerâ s final antidumping duty liability for imports of the

subject goods into the United States. In the U.S. system, the importer deposits a security (in the form of a cash deposit) at the time of importation. The importer, or any

interested party (a domestic producer or a foreign exporter or producer) may annually ask the DOC to perform an administrative review. In its review, the DOC gathers data on

actual export prices and normal values for the period under review, and it calculates margins of dumping. If the calculated dumping margin is higher than the cash deposit, the

importer must pay the difference with interest, and if it is lower, the difference is refunded with interest. The final margin of dumping for each importer becomes the new cash

deposit rate for future entries of merchandise.

If no periodic review is requested,[11] entries for that period are liquidated (duty assessment becomes legally final) at the initial cash deposit rate.[12] The U.S. industry

(petitioners) and importers and foreign exporters (respondents) both viewed zeroing as possibly making the difference between keeping or losing long-standing U.S. antidumping

orders. Respondents argued that zeroing was creating margins where dumping had ceased; petitioners argued that respondents should not be able to hide targeted dumping

by averaging dumped prices in competitive markets with non-dumped prices in non-competitive markets.

The U.S. Resists

U.S. negotiators tried to negotiate a solution, proposing in the Doha Round Negotiations on Rules that ADA Articles 2.4 and 9.3 be amended to permit zeroing.[13] This position

found little or no support and was met by strong opposition by the â Friends of Anti-Dumpingâ anti-zeroing alliance.[14] No resolution is likely on this issue in the now-deadlocked

Doha Round negotiations.[15]

The U.S. antidumping authorities did only the minimum to comply with the Appellate Body decisions on zeroing. After the Appellate Body found that zeroing in investigations

violated ADA Article 2.4, the DOC eliminated zeroing in original investigations[16] but continued to use zeroing in administrative reviews. The EU and Japan then pursued and

won WTO challenges to U.S. use of zeroing in administrative reviews,[17] and then pursued compliance proceedings.[18] They both threatened trade retaliation against U.S.

exports unless the DOC stopped using zeroing in administrative reviews.[19]

On December 28, 2010, the DOC published a Federal Register Notice under Section 123(g) of the Uruguay Round Agreements Act (â URAAâ ), seeking comments on a proposal

to change its methodology for calculating dumping margins and antidumping duty assessment rates in reviews, to parallel its methodology for investigations.[20] Section 123

applies when the WTO has determined that a U.S. federal regulation or practice is WTO-inconsistent; it provides that the regulation or practice may be modified to implement the

WTO decision only through a final rule or other modification published in the Federal Register, after the agency concerned has consulted with Congress and has published a

proposed modification for comment.[21]

Meanwhile, the Court of Appeals for the Federal Circuit ruled that the inconsistency in the DOCâ s interpretation of U.S. law as permitting both non-use of zeroing in original

investigations and use of zeroing in administrative reviews was arbitrary and unreasonable.[22] Trading partners have continued to bring, and the United States has consistently

lost, challenges to use of zeroing in U.S. antidumping cases.[23] The U.S. has not won a single case on zeroing in the WTO.

The End of Zeroing?

On February 6, 2012, the United States, together with the EU and Japan, announced that it had reached agreements settling its zeroing disputes. The agreements provide that

the United States will expeditiously complete the process under URAA Section 123 to modify its methodologies, as described in the December 2010 Federal Register notice, by

signing the final modification and submitting it promptly for publication. The agreements also require the United States to promptly initiate proceedings under URAA Section 129

for certain listed antidumping duty orders on products from the EU and Japan, and to issue final Section 129 determinations within four months, revising cash deposit rates

established on the basis of zeroed calculations.[24] Section 129 deals with correction of antidumping or countervailing duty actions to comply with a WTO dispute settlement

decision.[25] U.S. Trade Representative Ron Kirk declared that these agreements would benefit the U.S. economy by enabling American farmers and businesses to â invest in

job-creating export markets without the uncertainty of possible trade retaliation.â [26]

On February 14, 2012, the DOC published its final notice of policy change on zeroing under URAA Section 123 in the Federal Register.[27] The notice states:

[I]n a review of an antidumping duty order conducted under 19 CFR 351.213 (administrative review), 351.214 (new shipper review), and 351.215 (expedited antidumping review)

(collectively â â reviewsâ â ),. . . the Department will calculate weighted-average margins of dumping and antidumping duty assessment rates in a manner which provides offsets

for non-dumped comparisons while using monthly average-to-average (â â Aâ Aâ â ) comparisons in reviews, paralleling the WTO-consistent methodology that the Department

applies in original investigations. The Department is also modifying its practice in five-year (â â sunsetâ â ) reviews, such that it will not rely on weighted-average dumping margins

that were calculated using the methodology found to be WTO inconsistent.

The notice also amends the DOC antidumping regulations. These changes will apply to all reviews pending before the DOC for which the preliminary results are issued after

April 16, 2012; to all sunset reviews for which preliminary or expedited final results are issued after that date; and in issuing recalculated antidumping determinations to

implement the results of four adopted WTO dispute settlement reports.[28]

Commentators have noted that there could be a catch. The DOC notice states that DOCâ s intention is to apply a methodology which (as in antidumping investigations) â will

necessarily include any exceptional or alternative comparison methods that are determined appropriate to address case-specific circumstances.â [29] Commentators have

suggested that this leaves the door open for the DOC to use zeroing in â targeted dumpingâ situations[30] referred to in ADA Article 2.4.2, which explicitly permits use of weighted-

average-to-transaction comparisons â if the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods.â [31] There are

no WTO rulings on targeted dumpingâ yet.

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The U.S. policy change on zeroing could facilitate resolution of pending zeroing disputes with other trading partners. The U.S. agreements with the EU and Japan provide that

the DOC will eliminate zeroing from dumping margins in antidumping orders covered by the four dispute settlement reports referred to above. The DOC will now calculate non-

zeroed margins for all administrative reviews going forwardâ even for countries that have not brought WTO casesâ but not for reviews that are concluded before April 12. For

outstanding antidumping orders, an interested party will be able to request elimination of zeroing from existing cash deposit rates in the next annual administrative review (or any

ongoing review that concludes on or after April 12). A country that wants more than that will have to bring a WTO dispute. Moreover, due to the prospective nature of remedies

under the WTO system, the current U.S. policy change does not entail any compensation for previous antidumping duties paid on imports because of zeroing.

Korea has continued to pursue a dispute against the United States regarding zeroing on past imports of corrosion-resistant flat steel, and the Dispute Settlement Body

established a panel in this case on February 22, 2012, under expedited procedures agreed by the parties.[32]

Conclusion

The U.S. policy change on zeroing is likely to bring the United States into conformity with the relevant Appellate Body decisions, although the United State will continue to seek

legalization of zeroing through negotiations. Some countries still want to continue to challenge U.S. zeroing in past administrative reviews in the hope that the United States will

recalculate dumping margins on those products under URAA Section 129 as it did for the EU and Japan. The jury is still out on the DOC use of zeroing in targeted dumping

situations, though if this occurs, it is realistic to expect further litigation in the WTO.

About the Author:

Sungjoon Cho, an ASIL member, is Visiting Professor of Law at Northwestern University School of Law, and Professor of Law and Norman and Edna Freehling Scholar at IIT

Chicago-Kent College of Law. He currently serves as Co-Chair of the ASIL International Economic Law Interest Group. During the period of 1994-96, he represented the Korean

government in negotiations under the WTO and the Organization for Economic Cooperation and Development (OECD). He is the author of Free Markets and Social Regulation:

A Reform Agenda of the Global Trading System (Kluwer Law International, 2003), and The Law of the World Trade Organization Through the Cases

(http://centers.law.nyu.edu/jeanmonnet/wto/Units/index.html) (2011) (with J. H. H. Weiler, I. Feichtner and A. Afilalo).

Endnotes:

[1] 19 U.S.C. § 1675(a) (2008) (mandating periodic review of the amount of the anti-dumping duty).

[2] Panel Report, ECâ Anti-Dumping Duties on Audio Tapes in Cassettes Originating in Japan, ¶ 119, ADP/136 (Apr. 28, 1995) (unadopted).

[3] Appellate Body Report, European Communitiesâ Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, ¶ 11, WT/DS141/AB/R (Mar. 12, 2001) [hereinafter ECâ Bed Linen].

[4] Id. ¶ 53.

[5] Id. ¶ 55.

[6] Appellate Body Report, United Statesâ Final Dumping Determination on Softwood Lumber from Canada, ¶¶ 95-96, WT/DS264/AB/R (Aug. 31, 2004).

[7] Appellate Body Report, United Statesâ Laws, Regulations, and Methodology for Calculating Dumping Margins (â Zeroingâ ), WT/DS294/AB/R (May 9, 2006). See also Sungjoon Cho, The WTO Appellate Body Strikes Down the U.S.Zeroing Methodology Used in Antidumping Investigations, ASIL Insights (May 4, 2006), http://www.asil.org/insights/2006/05/insights060504.html (http://www.asil.org/insights/2006/05/insights060504.html).

[8] Appellate Body Report, United Statesâ Final Dumping Determination on Softwood Lumber from Canada (Article 21.5â Canada), WT/DS264/AB/RW (Sept. 1, 2006); Appellate Body Report, United Statesâ Measures Relating toZeroing and Sunset Reviews, WT/DS322/AB/R (Jan. 23, 2007).

[9] Panel Report, United Statesâ Final Anti-Dumping Measures on Stainless Steel from Mexico, ¶ 7.102, WT/DS344/R (Dec. 20, 2007) (ruling that panels â are not, strictly speaking, bound by previous Appellate Body or paneldecisions that have addressed the same issueâ ). See also Sungjoon Cho, A WTO Panel Openly Rejects the Appellate Bodyâ s â Zeroingâ Case Law, ASIL Insights (Mar. 11, 2008),http://www.asil.org/insights/2008/03/insights080311.html (http://www.asil.org/insights/2008/03/insights080311.html).

[10] Appellate Body Report, United Statesâ Final Anti-Dumping Measures on Stainless Steel from Mexico, ¶ 160, WT/DS344/AB/R (Apr. 30, 2008). See Sungjoon Cho, The Appellate Body Has Reversed the Panelâ s Departure fromthe Zeroing Jurisprudence, ASIL Insights (Update) (June 6, 2008), http://www.asil.org/insights/2008/03/insights080311.html#update (http://www.asil.org/insights/2008/03/insights080311.html#update). In a subsequent decision, theAppellate Body ruled unequivocally that the United States â continuedâ use of zeroing was inconsistent with the WTO antidumping norms. Appellate Body Report, United Statesâ Continued Existence and Application of ZeroingMethodology, ¶¶ 304-13, WT/DS350/AB/R (Feb. 4, 2009).

[11] Interested parties do not always request an annual review because reviews can involve substantial costs and legal fees.

[12] See Panel Report, United Statesâ Continued Existence and Application of Zeroing Methodology, ¶ 7.159-7.161, WT/DS350/R (Oct. 1, 2008).

[13] The United States proposed to insert the following paragraph: â Authorities are not required to offset the results of any comparison in which the export price is greater than the normal value against the results of any comparison inwhich the normal value is greater than the export price.â Communication from the United States, United Statesâ Laws, Regulations and Methodology for Calculating Dumping Margins (â Zeroingâ ), ¶ 29, WT/DS294/16; Proposal onOffsets for Non-Dumped Comparisons, TN/RL/GEN/147 (Jun. 27, 2007).

[14] Negotiating Group on Rules, Statement on â Zeroingâ in the Anti-Dumping Negotiations, Statement of Brazil; Chile; China; Colombia; Costa Rica; Hong Kong, China; India; Indonesia; Israel; Japan; Korea, Rep. of; Mexico;Norway; Pakistan; Singapore; South Africa; Switzerland; Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Thailand; and Vietnam, TN/RL/W/214/Rev.3 (Jan. 25, 2008).

[15] Negotiating Group on Rules, Communication from the Chairman, at 6, TN/RL/W/254 (Apr. 21, 2011).

[16] Antidumping Proceedings: Calculation of the Weightedâ Average Dumping Margin during an Antidumping Investigation; Final Modification, 71 Fed. Reg. 77722 (Dec. 27, 2006).

[17] Appellate Body Report, United Statesâ Laws, Regulations and Methodology for Calculating Dumping Margins (â Zeroingâ ), WT/DS294/AB/R (Apr. 18, 2006); Appellate Body Report, United Statesâ Measures Relating to Zeroing andSunset Reviews, WT/DS322/AB/R (Jan. 9, 2007).

[18] Appellate Body Report, United Statesâ Laws, Regulations and Methodology for Calculating Dumping Margins (â Zeroingâ ) - Recourse to Article 21.5 of the DSU, WT/DS294/AB/RW (May 14, 2009); Appellate Body Report, UnitedStatesâ Measures Relating to Zeroing and Sunset Reviews - Recourse to Article 21.5 of the DSU, WT/DS322/AB/RW (Aug. 18, 2009).

[19] United Statesâ Laws, Regulations and Methodology for Calculating Dumping Margins (â Zeroingâ )â Recourse to Article 22.6 of the DSU by the United States: Communication from the Arbitrator, WT/DS294/39 (Dec. 8, 2010);United Statesâ Measures Relating to Zeroing and Sunset Reviewsâ Recourse to Article 22.6 of the DSU by the United States: Communication from the Arbitrator, WT/DS322/38 (Dec. 15, 2010).

[20] Antidumping Proceedings: Calculation of the Weighted Average Dumping Margin and Assessment Rate in Certain Antidumping Duty Proceedings, 75 Fed. Reg. 81533 (Dec. 28, 2010).

[21] 19 U.S.C. 3933(g).

[22] Dongbu Steel Co., Ltd. v. United States (Fed. Cir., Mar. 31, 2011); JTEKT Corp. V. United States (Fed. Cir., Jun. 29, 2011). However, the U.S. Court of International Trade has recently upheld the DOCâ s revised determination onremand in this issue, concluding that â Commerce did not abuse its discretion in changing its investigation methodology, but not its review methodology, in the Final Modification in response to WTO decisions.â Union Steel & Dongbuv. U.S. (USCIT, Feb. 27, 2012).

[23] See Tania Voon, Orange Juice, Shrimp, and the United States Response to Adverse WTO Rulings on Zeroing, ASIL Insights (July 20, 2011), http://www.asil.org/insights110720.cfm (http://www.asil.org/insights110720.cfm).

[24] Joint Communication from the United States and Japan, United Statesâ Measures Relating to Zeroing and Sunset Reviews, WT/DS322/44 (Feb. 8, 2012); United Statesâ Laws, Regulations and Methodology for CalculatingDumping Margins (â Zeroingâ ), United Statesâ Continued Existence and Application of Zeroing Methodology, WT/DS294/43, WT/DS350/20 (Feb. 8, 2012). The statutory deadline under Section 129(b)(2) (19 U.S.C. 3538(b)(2)) is 180days; four months shortens that.

[25] 19 U.S.C. 3538.

[26] Office of the United States Trade Representative, United States Trade Representative Ron Kirk Announces Solutions to Years-Old Zeroing Disputes, Demonstrating Export Growth and Job Creation (Feb. 6, 2012). See also USAgrees to Quit Zeroing, Avoids EU and Japan Retaliation, 16 Bridges Wkly Trade News Digest (Feb.8, 2012).

[27] Antidumping Proceedings: Calculation of the Weighted-Average Dumping Margin and Assessment Rate in Certain Antidumping Duty Proceedings; Final Modification, 77 Fed. Reg. 8101 (Feb. 14, 2012).

[28] 77 Fed. Reg. 8113. The reports to be implemented are USâ Zeroing (EC), USâ Zeroing (Japan), USâ Stainless Steel (Mexico), and USâ Continued Zeroing (EC).

[29] 77 Fed. Reg. 8102.

[30] Commerce Final Rule Leaves Door Open to Future Use of Zeroing, Inside US Trade, Daily News (Feb.10, 2012).

[31] ADA art. 2.4.2.

38

[32]â United Statesâ Anti-Dumping Measures on Corrosion-resistant Carbon Steel Flat Products From Korea â Request for the Establishment of a Panel by Korea,â WT/DS420/5 (Feb. 10, 2012); Daniel Pruzin, U.S., Korea Agree onProcedures at WTO to Accelerate Zeroing Dispute Complaint, Intâ l Trade Daily (Feb. 17, 2012).

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39

TRADE REMEDIES BRIDGES

EU Lawmakers Debate China "Market Economy" Status19 May 2016

EU parliamentarians approved a non-legislative resolution last week calling for treating China’s exports to the 28-nation bloc in a “non-standard”way until the Asian economic giant meets EU requirements for being deemed a market economy.

The 12 May vote had 546 lawmakers in favour, 28 against, and 77 abstentions.

The text of the resolution highlights the importance of the bilateral EU-China trade and investment relationship, while “stress[ing] that China is nota market economy and that the ퟋve criteria established by the EU to deퟋne market economies have not yet been fulퟋlled.”

These ퟋve criteria speciퟋcally involve the level of government intervention in company decision-making and resource allocation; lack ofgovernment distortions in “the operation of enterprises linked to privatisation;” the use of non-discriminatory, transparent company laws; ane埌ective, transparent legal system protecting property rights; and a “genuine ퟋnancial sector which operates independently from the state.”

It also calls for a discussion on the market economy issue in the next bilateral summit between the two sides. The EU and China hold annualbilateral meetings at the leaders’ level, along with bringing together key ministers.

Furthermore, the resolution says that the European Parliament “is convinced that, until China meets all ퟋve EU criteria required to qualify as amarket economy, the EU should use a non-standard methodology in anti-dumping and anti-subsidy investigations into Chinese imports indetermining price comparability.”

This provision cites Section 15 of China’s WTO accession protocol, which the resolution says allows for applying this “non-standard methodology,”and asks that the European Commission prepare a proposal in this context.

The Parliament resolution also calls for the EU to coordinate with its main trading partners at the upcoming G-7 and G-20 summits – the latter ofwhich is being hosted by China – in order to counter “any unilateral granting” of market economy status to the Asian country, among otherrecommendations.

Another section of the resolution refers to e埌orts aimed at reforming the EU’s trade defence instruments (TDIs). While a “modernisation package”was tabled by the Commission over three years ago on the subject, this has not advanced past the level of the Council.

The Parliament “stresses the imminent need for a general reform of the EU’s trade defence instruments in order to guarantee a level playing ퟋeldfor the EU industry with China and other trading partners in full compliance with WTO rules; [and] calls on the Council to rapidly seek agreementwith Parliament” on the subject, the resolution says.

While the current resolution is not a legislative one, the Parliament will have to vote on the Commission’s future proposal, as part of the co-decision process that also includes the Council.

Timing

, VOLUME 20 - NUMBER 18

40

The EU’s executive arm is expected to announce its proposal on the subject later this year, possibly before the summer break, with theCommission putting o埌 an earlier February announcement for the sake of conducting further study and consultation. (See Bridges Weekly, 24March 2016 and 18 February 2016)

The European Commission completed last month a public consultation on how and whether to revise its anti-dumping legislation in relation toChina. (See Bridges Weekly, 18 February 2016)

Behind the ongoing discussions is an upcoming deadline including in the terms that Beijing agreed to when joining the WTO in December 2001.

At the time, it agreed to terms regarding how to address price comparability when determining subsidies and dumping, among others. Outlined inSection 15 of the document, these terms allow for China’s fellow WTO members to treat the country as a non-market economy in anti-dumpingprobes, speciퟋcally as it relates to determining price comparability under Article VI of the General Agreement on Tari埌s and Trade (GATT) 1994and the WTO’s Anti-Dumping Agreement.

While WTO members are to use Chinese prices or costs if the producers being investigated can demonstrate that market economy conditions“prevail” in their industry, according to subparagraph (a)(i) of that section, the following subparagraph provides for an alternative methodology ifthis is not the case, allowing for an importing member to deviate from using a “strict comparison” with Chinese domestic prices or costs.

This must occur if those producers are unable to prove the existence of market economy conditions in their industry. However, a latersubparagraph notes that these terms “shall be terminated” once Beijing has established under an importing member’s domestic laws “that it is amarket economy.”

It then notes that, “In any event, the provisions of subparagraph (a)(ii) shall expire 15 years after the date of accession. In addition, should Chinaestablish, pursuant to the national law of the importing WTO Member, that market economy conditions prevail in a particular industry or sector,the non market economy provisions of subparagraph (a) shall no longer apply to that industry or sector.”

Whether such a change would be automatic, however, has fuelled debate in trade circles, particularly in light of the global steel crisis and China’srole as a major trader.

EU Parliament stance not “constructive,” says Chinese o។cial

The result of last week’s vote drew criticism from Chinese Foreign Minister Wang Yi, who told reporters in Beijing that the move was not“constructive at all.”

“The decision about whether or not to give China its market economy status or MES cannot be based on the implementation of Article 15 inChina’s Protocol of Accession to the WTO. These are two di埌erent things,” he said, in comments reported by CRI English.

Wang then added that the same article “clearly stipulates that WTO members stop the ‘surrogate country’ practice in anti-dumping investigations.”

Council-level discussions

During a meeting last Friday of EU trade ministers under the European Council, France and Germany reportedly pushed for changes to currenttrade remedy investigations, for instance in terms of timeframes or retrospective application of duties, especially given the ongoing steel crisisa埌ecting the bloc’s sector. The two countries also referred to the ongoing market economy discussions, according to Reuters.

The international steel market has struggled to deal with heavy overcapacity, with prices dropping dramatically and trade 韓ows signiퟋcantlya埌ected. As the world’s top supplier of steel, China has faced growing questions over what it can – or should – do as a result, and whatresponsibility falls on other countries. (See Bridges Weekly, 21 April 2016)

The EU’s steel industry has been among those advocating against granting China market economy status, cautioning that doing so could behugely damaging to an already struggling job market. Axel Eggert, Director-General of industry group EUROFER, welcomed the Parliament’s vote,calling the message “abundantly clear.”

“A signiퟋcant majority of [EU parliamentarians] do not believe it is the right time to grant China market economy status. China is not a marketeconomy, and thus cannot be treated as such for the purpose of anti-dumping investigations,” said Eggert.

ICTSD reporting; “China Slams EU Legislature’s Refusal to Grant Due Market Economy Status,” CRI ENGLISH, 17 May 2016; “France, Germany urgetighter trade defence in face of China steel,” REUTERS, 13 May 2016; “MEPs: China is not a market economy,” EU OBSERVER, 11 May 2016.

TAG: CHINA, EUROPEAN UNION (EU), TRADE REMEDIES, WTO

This article is published under Bridges, Volume 20 - Number 18

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