Transcript What are trade remedies? - US

Overview of
Trade Remedies in WTO System
Antidumping, Subsidies, Safeguards
Presented by Kenneth J. Pierce and Matthew R. Nicely
Willkie Farr & Gallagher
for the Georgetown University Law Center
NCIEC WTO Conference
sponsored by the U.S. – Vietnam Trade Council
11 March 2004
Introduction to Willkie Farr & Gallagher

New York-based law firm with more than 500 attorneys in offices
around the world

Washington DC office houses our international trade practice –
one of the largest and most prominent in the United States

Practice includes 18 lawyers and 5 trade analysts with decades of
experience in the field

Focus of practice is international trade remedies, particularly
antidumping and countervailing duties and safeguard measures

Our successes span all aspects of the litigation, from work before
U.S. agencies to appeals before U.S. courts and the WTO

Currently representing Vietnam in shrimp antidumping case
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Agenda
Introduction to trade remedies
 Safeguard Measures
 Anti-dumping Duties
 Countervailing Duties
 WTO Dispute Settlement

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What are trade remedies?

Permissible import restraints that otherwise would be
contrary to WTO principles


Designed to allow relief from imports deemed “unfair,”
or adjustment from a surge in imports


essentially, exceptions to the bedrock rules of binding tariffs and
MFN (most favored nation) treatment
often called the “safety valve” to allow further trade liberalization
WTO identifies three primary types:



safeguards (temporary relief from import surges)
countervailing duties (counteracting subsidies)
antidumping (counteracting unfairly low prices)
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Historical Development


In early years, little attention paid to trade remedies

original GATT: Article VI covered anti-dumping measures; Article
XVI covered subsidy practices and Article XIX dealt with safeguards

focus of GATT was reducing tariffs
Over time, focus on trade remedy measures

Kennedy Round (1969) produced first rules on antidumping duties;
but only agreed to by a limited number of countries

Tokyo Round (1979) expanded Anti-Dumping Code; produced
Subsidies and Countervailing Duties Agreement, but did not really
address substance of subsidy practices

Uruguay Round produced first agreement on application of safeguard
measures; addressed substance of subsidies
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Frequency of Use

As tariffs are reduced or eliminated, more
countries are invoking WTO trade remedies to
assist domestic industries

From 1995 through June 30, 2003:

259 safeguard proceedings were initiated (huge
increase in 2002 due to steel measures)

2,156 antidumping proceedings were initiated

160 CVD proceedings were initiated
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Frequency of Use - cont’d
Trade Remedy Cases Initiated
350
300
250
200
150
Antidumping
100
Subsidies
50
Safeguard
0
1995
1996
1997
1998
1999
2000
2001
2002
156
221
242
232
339
251
348
285
Subsidies
9
5
8
16
40
16
27
10
Safeguard
2
5
3
10
15
26
53
132
Antidumping
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Frequency of Use - cont’d

Historically, relatively few users of trade remedies;
recently, more and more countries have utilized
Countries Initiating AD Investigations - 2001
Argentina
Australia
Brazil
Canada
China
Colombia
EC
Egypt
India
Indonesia
Israel
Jamaica
Japan
Korea
Malaysia
Mexico
New
Zealand
South
Africa
Taiwan
Thailand
Turkey
Uruguay
Venezuela
USA
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Frequency of Use - cont’d
Number of Initiations: 2000-June 2003
2000
2001
Country
No.
1
US
46
2
Argentina
3
2002
Country
No.
1
US
79
36
2
India
India
35
3
4
EC
31
5
Canada
6
2003 (6 months)
Country
No.
Country
No.
1
India
80
1
US
16
75
2
US
35
2
India
12
Argentina
28
3
China
29
3
China
11
4
EC
27
4
Thailand
21
4
Canada
6
21
5
Canada
25
5
EC
20
5
Indonesia
6
South Africa
20
6
Australia
23
6
Australia
16
6
Mexico
6
7
Australia
15
7
Brazil
17
7
Argentina
14
7
Turkey
6
8
Brazil
11
8
Turkey
13
8
Peru
13
8
EC
3
9
New Zealand
8
9
China
12
9
Turkey
12
9
S. Korea
3
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Distinctions

Nature of underlying activity
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AD and CVD counteract “unfair” trade practices
–
unfairly priced (AD) and government subsidized (CVD) imports
–
the added tariff is intended to offset the improper dumping or subsidy
–
allegation of unfairness means must target individual country
In safeguard cases, there is no issue of unfairness
–
by law, all imports examined in a safeguards case are considered fairly traded
–
since fairly traded, all sources should be included (though exceptions apply for developing
country exclusions, country-specific safeguards (China and Vietnam), and possibly FTA
partners)
Nature of injury varies

AD and CVD require only material injury

Safeguards require serious injury
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Distinctions

Nature of remedy



AD and CVD limited to the amount of dumping or
subsidization
Safeguard remedies more flexible
Duration of remedy


AD and CVD can last forever, although there are
reevaluations every five years
Safeguard measures usually shorter in duration –
often three years to avoid need to compensate
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Similarities

Cases usually brought by domestic industries
struggling to compete with imports

Usually triggered by an increase in imports

Some degree of injury to domestic industry must be
demonstrated

regardless of dumping or subsidy margin (or size of
import surge), no import relief unless finding of injury
and causation
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Safeguards – Overview



Intended to “safeguard” domestic industries from
consequences of trade concessions made through
GATT/WTO process
Allows countries to temporarily suspend tariff
concessions to give domestic industry “breathing
room” necessary to adjust to increased import
competition
Belief is that having such a “safety valve” makes it
easier for countries to maintain the political resolve to
negotiate trade concessions
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Safeguards – The New Agreement

Before WTO Agreement, countries often imposed
“gray measures”, such as “voluntary export restraints”

U.S. demanded VERs on imported steel, autos and semiconductors
during 1980s

EU demanded strict VERs on cars

New WTO Agreement prohibits gray measures

Detailed mechanism for addressing import surges that
cause serious injury

New agreement applies to all WTO members
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Safeguards – The New Agreement

Under WTO Agreement three conditions must be
satisfied before imposing safeguard measures

(1) must find a recent increase in import volume that was
unforeseen and the result of trade concessions

(2) must find that the increased imports have caused (or threatened
to cause) the domestic industry to suffer serious injury

(3) must craft appropriate remedy that is no more restrictive than
necessary to eliminate the serious injury caused by the imports
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Safeguards – Developing Countries

Developing countries are accorded some favorable
treatment under Agreement

safeguard measures may not be applied against
developing countries that account for less than 3% of
total imports of the like product, UNLESS total share of
all developing countries is more than 9%

Example of U.S. steel case
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Safeguards – The Doha Round
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Safeguards agreement not currently on agenda;
however, very well could become “sleeper” issue
Recent Appellate Body decisions have interpreted
Safeguards Agreement to make it difficult to impose
import restraints
In particular, U.S. has lost every safeguard decision
that was challenged
Adverse domestic reaction to WTO rulings could
make U.S. willing to seek to revise Agreement
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Antidumping – Overview

Definition

what it is:
–

what it is not:
–
–

“dumping” refers to situation when an exporter sells goods in an
export market at prices lower than those same goods are sold in
its home market
dumping has nothing to do with actions of a foreign government;
dumping does not involve predatory pricing
antidumping remedy consists of additional tariff equal to
the amount of injurious dumping (discuss “lesser duty
rule”)
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Antidumping – rationale

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Economic theory is that it is unfair for foreign companies
to use profits earned from a closed market to capture
export markets
Rationale not reflected in AD Agreement or, in turn,
national laws
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
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law does not require showing that home market is closed
law does not even require showing of excess profits in home
market
Competition authorities dislike AD laws

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competition officials understand anticompetitive nature
but politicians love them
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Antidumping – historical development

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Concept of “dumping” has long history

first national AD law adopted in 1904 by Canada
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many other countries followed
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GATT 1947 recognized problem of dumping - Article VI
Increased use of AD laws, combined with lack of specificity in
GATT, led to attention during trade negotiations

refining AD rules became part of each round of negotiations
Kennedy Round: 11 pages, 4,613 words
Tokyo Round:
17 pages, 6,712 words
Uruguay Round: 26 pages, 11,746 words

more recently, dispute over AD Agreement almost derailed new round
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Antidumping – WTO Agreement

Primary purpose of WTO AD Agreement is to
establish disciplines for imposition of AD duties

Detailed rules on how to determine the magnitude of
any dumping

General rules on how to analyze whether the domestic
industry is suffering material injury
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New rules on how long AD duties can be imposed
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Antidumping – Developing Countries
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No real “breaks” for developing countries
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Article 15 historically ineffective
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De minimis rule applies to all countries
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Negligibility rule applies to all countries
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Cumulation largely negates negligibility exception
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Special rules for “non-market economies”
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Antidumping – the Doha Round
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Bona fide agenda item

Carefully negotiated mandate

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“improve and clarify”
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“but preserve “basic concepts and principles”
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U.S. agenda to strengthen anti-dumping measures,
avoid new disciplines.
Developing countries want better rules on
negligibility, make Article 15 real
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Subsidies – Overview

Harder issue than AD because no consensus about
the “problem”

many believed assisting industry was legitimate function of
government
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U.S. had strongly held contrary view

1979 Agreement was optional

1995 Agreement binds all WTO members
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first time adoption of substantive rules
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traffic light approach
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standards for determining countervailability
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Subsidies and CVD Measures

Addresses definition of “subsidy” for first time
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Provides alternative ways to attack subsidies

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WTO dispute settlement

Countervailing Duties
Provides procedural framework for CVD
measures
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Definition of Subsidy

Financial contribution by government

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Benefit conferred

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government versus private sector
use of market benchmarks
Specific to some industry



certain companies or industries
all export subsidies
de jure versus de facto
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Subsidies – The New Agreement

Framework for possible WTO challenge

Prohibited subsidies (“red light”)
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

export subsidies, import substitution
Actionable subsidies (“yellow light”)
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government financing; beneficial tax rates
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but must demonstrate “serious prejudice”
Non-actionable subsidies (“green light”)
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R&D assistance; facility adaptation for environmental regulations
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have since expired
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CVD – The New Agreement

Can attack red light or yellow light subsidies

Common theme: use of market benchmark to evaluate
subsidy

Must be “specific,” which is often a major issue to be
debated

Procedural framework largely mirrors Antidumping
Agreement
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Subsidies – Developing Countries


Developing and least-developed countries given time
to comply with new anti-subsidy rules

least developed countries (less than $1,000 per capita) are exempted
from disciplines on prohibited subsidies

other developing countries have until 2003 to eliminate export
subsidies

least developed countries to eliminate import substitution policies by
2003
More favorable de minimis and negligibility rules
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Subsidies – The Doha Round

Bona fide agenda item

Same careful mandate
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More fundamental issues
(e.g. renewing “green light” subsidies)
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Attacking trade remedies

As more countries use trade remedies, more
countries are turning to the WTO.

Binding dispute settlement makes WTO
alternative more attractive.

The trend will accelerate as developing countries
rush to use trade remedies.
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WTO Panel Decisions



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The WTO has adopted 84 panel reports. Of those 84
reports, 54 (or 64%) covered AD/CVD or Safeguard
Measures:
AD - 21 (or 25%)
(includes 2 regarding Mexico's High Fructose Corn Syrup,
2 regarding EC Bed Linen, 2 regarding Korean DRAMs,
and 2 regarding Guatemala cement)
Subsidies/CVD - 25 (or 30%)
(includes 2 regarding Australian leather, 3 regarding
Brazilian aircraft, 2 regarding Canadian aircraft,
3 regarding Canadian milk/dairy and 2 regarding US-FSC)
Safeguards - 8 (or 10%)
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Dispute Settlement: Issues to consider

Strength of claim.

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Authorities often make many mistakes; attack the weakest
parts of the decision.
Special standard of review for antidumping; others subject to
DSU Article 11 standard.

Alternatives under domestic law may be faster and
more effective

Commercial stakes: Need to balance governmental
systemic concerns with commercial stakes.
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Special antidumping standard

Unique standard of review

accept any “permissible” legal interpretation

accept any “unbiased” and “objective” factual findings

Uncertain future for this special rule

Panels have been deferential, but not excessively

Can succeed in challenge anti-dumping measures
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Implementation challenges

WTO process takes 18-24 months.

“Reasonable period of time” adds another 12-15
months.

National authority may repeat its decision.

Overall pattern is mixed; authorities sometimes
implement
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The longer term view

WTO review takes time, and outcome uncertain.

But can influence how authorities handle future
cases under that particular trade remedy.

Can also influence how authorities handle other
cases involving the complaining country.
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The role of new negotiations



Some changes are better pursued in negotiations
rather than litigation.
Ongoing negotiations for antidumping and
countervailing duties.
Possibility of safeguard issues being added
directly or indirectly.
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