Transcript How to reconcile the conflicting interest among domestic

How to balance the conflicting interests
under the Anti-dumping Agreement?
Young Jae, Cho
Dumping & Anti-dumping
 Dumping
 Dumping is exporting at prices below those charged on the domestic market
• International Price Discrimination
• Scale of economy, Product Life Cycle, etc.
 The effects of dumping
• Distortion of Free Market Economy Principle
• Export of unemployment, etc.
 Anti-dumping
 Level playing field
 Domestic producers’ (DPs’) interests
• Even DPs with monopoly profit
• Regulation of monopoly profit is on Anti-trust (AT) law aiming at consumer’s welfare
• In integrated market (advanced FTA), AT tends to replace AD
 Workers’ interests (job)
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Anti-dumping Agreement (ADA)
 What ADA secures for interested parties
 Domestic producers (DP) : legitimate right for remedy
 Investigating authorities (IA) : quasi-judicial power
 Foreign exporters (FE) : due process right
 Possibilities of abuse by interested parties
 Domestic producers : strategic construction of petition
ex) standing, definition of industry, product scope, sunset review, etc.
 Investigating authorities : excessive discretion
ex) zeroing, facts available, NME, etc.
 Foreign exporters : evasive tactics
ex) targeted dumping, circumvention, absorption, etc.
 Adjudication (Dispute Settlement), New Rule Making (DDA)
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Guidelines for DDA negotiation & Major issues
 Guidelines for DDA negotiation
 Reflecting WTO jurisprudence
 Balancing conflicting interests among DP, IA, FE while ensuring legitimate
rights but disciplining abuse or moral hazard
• Shifting the focus from member countries to 3 parties might help outcome of negotiation
depend more on rationality than on political bargaining
 Considering technical feasibility
• Remove undue burden on DP, FE as well as IA
 Some major issues to be dealt with in light of the Guidelines
 Dumping & Import : Zeroing, Targeted Dumping, De minimis, Negligibility, etc.
 Domestic Industry & Injury : Standing, Definition of domestic Industry, Injury
Margin, Non-attribution, Causation, etc.
 Sunset Review : Automatic Termination, Standard, etc.
 Product Scope : Substantive rules, Procedural rules, etc.
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Dumping & Import
 Zeroing & Targeted Dumping (TD)
 Under ADA & WTO jurisprudence, prohibited except for TD
• Art. 2.4.2 (fair comparison, all comparable export transactions), Art. 9.3 (not exceed DM), etc.
 Need other exceptions than TD?
• In case that, in sunset review, IA calculates DM and adjusts duty rate, FEs might try to adjust
export volume & price to get low or no DM during the period of original duty
• However, zeroing could be applied pursuant to Art. 2.4.2, assuming Art. 2 applies to Art. 11
 TD, detour to zeroing
• Significant difference in export prices among different purchasers, regions or time periods
• Pattern of export prices (a regular form or order in which a series of things occur)
• Explanation as to why A-A or T-T is not appropriate, or A-T is necessary
 Need to further clarify requirements for TD because zeroing is likely to move
its battleground to TD in the near future
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Dumping & Import
 De minimis : raising the standard (2%)
 Pros : business practice/ abuse/ margin of error/ no material injury, etc.
 Cons
• FE’s room for TD  IA’s frequent resort to TD
ex) 5%: 1/2 export (10% DM), 1/2 export (0% DM)
• Commercially meaningful, cumulative effect, etc.
 Negligible volume
 Basis of 3% : total imports of the like product (LP)  domestic market of LP
• Negligibility for the impact of dumped import on domestic market rather than on total import
• Impact of dumped imports on the other imports
 Repealing cumulative standard of 7 %
• Encouraging DP to include as many small sources as possible
• However, repealing cumulative standard of 7% along with changing the basis of 3% might
restrict DP’s legitimate right to petition
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Domestic Industry & Injury
 Standing & Definition of Domestic Industry
 Support by 50% out of domestic producers expressing support or opposition
in terms of output & 25% of total production of domestic industry (Art. 5.4)
 Domestic industry refers to the domestic producers as a whole of the like
products or to a major proportion of the total domestic production of those
products. (Art. 4.1)
 What are the loopholes & how to deal therewith?
 Need dual standards for standing?
• Both are based upon proportion of total production
 50% & 25% are too low?
• Arguably not, considering many producers expressing no opinion
• Alternatively, a single standard ex) support by 50% of total production of domestic industry
 Relation between standing & ‘a major proportion’ as the domestic industry?
• Not clear, but probably would pass WTO jurisprudence if IA includes 25% or more of total
domestic production for injury determination
• But, what if IA includes less than 25% of total domestic production?
• If a single standard for standing(50%) & apply it to the definition of domestic industry, better
representation for both petition & injury determination
• In Art. 4.1, a major proportion  the major proportion, i.e. 1/2
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Domestic Industry & Injury
 Lesser Duty & Injury Margin
 Desirable that the duty be less than the margin if such lesser duty would be
adequate to remove the injury to the domestic industry (Art. 9.1)
 Lesser Duty Rule (LDR)
• Very difficult to measure injury caused by dumping because it could take various forms
ex) profit, market share, employment, operating rate, etc.
• However, AD is to remedy injury caused only by dumping
• A legal fiction to regard the gap between DP’s P & FE’s P (or between DP’s actual P & DP’s
non-undercut P) as injury caused by dumping
 Calculation of Injury Margin (IM)
• Need a lot of assumptions
• Even more complicated in relation to non-attribution & causation
• Alternatively, provide for essential factors in calculating injury margin ex) FE’s P & DP’s P in
the market, average profit rate in the industry of DP, the degree of suppression of DP’s P due to
FE’s P, etc.
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Domestic Industry & Injury
 Non-attribution & Causation
 Injuries caused by other factors not attributed to the dumped imports (Art. 3.5)
 Need to Separate & Distinguish other factors?
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Desirable in principle, but how?
Given current causation standard, however, little difference be it Quantitatively or Qualitatively
Affirmative determination if there is injury & dumping is a cause thereof
Standard of Causation comes before Non-attribution
 Improvement of standard of causation
• Dumping be the primary cause or one of the major causes of material injury?
• Need weigh dumping against other factors?
 Relevant issue
• IM & LDR might be able to play 2nd causation role, complementing flaws of current causation
• Need to improve at least one out of Causation & LDR
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Sunset Review
 Automatic termination
 If no automatic termination, DP may use sunset review repeatedly
• Worse, if IA gives sympathetic consideration to DPs
 However, if automatic termination with no possibility of extension, FE may
keep dumping or absorbing duty especially under the prospective assessment
 Examples of extension, assuming possibility of extension
 5yrs + 3yrs (continuation only)
 5yrs + 3yrs (continuation, recurrence)
 5yrs + 5yrs (continuation only)
 5yrs + 5yrs (continuation, recurrence)
 Additional standard for sunset review
 Continuation, Art. 3.2, 3.4, 3.5 can generally apply because injury continues
 Recurrence, might need additional standard
• Loose, recurrence if AD duty applied & injury recovered
• Tight, recurrence only if it is ‘clearly foreseen & imminent’
• Intermediate, likely to recur in the ‘foreseeable future’
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Product Scope
 Product Under Consideration (PUC) & Product Scope (PS)
 No direct provision for PUC/PS
• Like product is a product alike to all respects to PUC, or a product of characteristics closely
resembling those of PUC (Art. 2.6)
 PUC, not just about definition or description but about scope of a product
• Under PUC, many sub-models, sub-types, market segments, etc.
 Legal implication of PUC/PS
• Affects overall AD proceedings i.e. Standing, DM, Injury, imposition of AD duty, etc.
• Subject to legal assessment, severally and jointly
 Interested parties’ behaviors
• DP : expansion of PS, selective PS (arbitrary line drawing)
• FE : circumvention by minor alteration
• IA : excessive discretion
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Product Scope
[Example of Selective PS]
C1, C2 : Generally Accepted Criteria Of Categorization, C1 > C2
C1
C2
[Case 1]
C1
C2
[Case 2]
C1
C2
[Case 3]
 While all the products in the PS share the same basic physical characteristics with
each other, the above examples have the following problems.
 [case 1,2] PS singles out fragmented market segments
 [case 3] PS disregards C1 ex) C1: Physical characteristics, C2: Color
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Product Scope
 Substantive rules for PS
 Rule 1 : A single product in one AD investigation
 Rule 2 : Sharing of the same basic physical characteristics among sub-items
 Rule 3 : PS not in conflict with generally accepted criteria in the industry/market
• “Selective PS” is prohibited
• If no clear dividing line, all sub-items shall be a product
 Exception? ex) Exclusion of certain sub-items for public interest
• Even if allowed, in the stage of imposition of AD duty, not in the stage of investigation
 Procedural rules for PS
 Amending PS
• Exclusion as in case1 & Inclusion as in case2
 Time limit for amending
• Exclusion, by final decision to impose AD duty
• Inclusion, within certain period after the initiation
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