Transcript International Trade System
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5. Trade Remedies
5.1. Safeguards 5.2. Anti-dumping 5.3. Subsidy/Countervail
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5. Trade remedies
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Conditions under which trade remedies measures can be applied Unfair competition Anti-dumping duties Countervailing duties “Normal” market conditions Safeguards Additional duties, exceeding bound rates Quantitative restrictions
5.1. Safeguards
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A
safeguard
is an emergency action taken by a government to provide temporary protection to domestic producers against unanticipated surges in imports caused by changes in competitive circumstances due to the reduction or removal of tariffs or other trade concessions.
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5.1. Safeguards
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When certain import surge's cause or threatens to cause
serious injuries
to domestic industry, safeguard measures may be used to give time to domestic producers to adjust to the new conditions.
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5.1. Safeguards
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Domestic industry
is defined as the
producers as a whole of the like or directly competitive products
operating within the territory of a Member,
or producers who collectively account for a major proportion
of the total domestic production of those products 5
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5.1. Safeguards
Safeguards are permitted under GATT Article XIX on certain terms.
The WTO Agreement on Safeguards establishes the rules for the application of safeguard measures provided for in GATT Article XIX, and a Committee on Safeguards to oversee their application.
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5.1. Safeguards
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Such measures, which take the form of
suspension of concessions or obligations
, can consist of quantitative import restrictions or of duty increases to higher than bound rates However, the WTO encourages trading nations to move away from quantitative restrictions.
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5.1. Safeguards
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Serious injury
as: “a significant overall impairment in the position of the domestic industry” taking into account such factors as: the rate and amount of the increase in imports; the share of domestic market taken by increased imports and; the changes in the level of sales, production, productivity, capacity utilization, profits, and employment in the importing country . If a
causal link
between the surges in imports and the serious injury is established, then safeguard measures may be applied.
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5.1. Safeguards
A WTO member proposing to take a safeguard action must offer to consult with those members whose exports will be substantially affected by it.
Under the Agreement on Safeguards, the member must endeavour to maintain the benefits of its trade concession to affected exporting countries.
To achieve this it may agree with the exporting countries on
compensation
sufficient to offset the adverse effects of the safeguard measure.
If no agreement is reached, the exporting members may suspend concessions they had agreed to for the benefit of the member applying to safeguards.
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5.1. Safeguards
Questions: What kind of compensations member countries could offer?
Who gets these compensations?
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5.1. Safeguards
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Competent authorities might apply safeguard measures after
following an investigation
conducted by pursuant to
previously published procedures
. reasonable
public notice
of the investigation, and that interested parties be given the
opportunity to present their views
publishing a report presenting and
explaining their findings on all pertinent issues
Confidentiality!
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5.1. Safeguards
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Maximum protection – 8 (10) years Progressive liberalization Review of the measures (if longer than 3 years)
De minimis import exemption
A safeguard measure shall not be applied to low volume from developing country Members (3% for individual Member and 9% from all developing countries). 12
5.1. Safeguards
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Forbidden grey area measures
protective devices as include such voluntary export restraints, orderly marketing arrangements, and discretionary impact on export licensing schemes.
Although they have been used as an alternative to safeguards to deal with similar economic phenomenon, they are quite distinct from safeguards.
However, they are dealt with (and prohibited) in the WTO Safeguards Agreement.
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5.1. Safeguards
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Safeguards must be: temporary applied on an MFN basis* States applying safeguards have notification and consultation obligations.
Developing countries are accorded special rights regarding the application of safeguard provisions. Disputes arising under the WTO Agreement on Safeguards may be referred to the WTO Dispute Settlement Mechanism.
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5.1. Safeguards
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Question:
Why do you think safeguards are used less
than
anti-dumping
and s
ubsidy countervail
?
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5.1. Safeguards
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By contrast
anti-dumping
and
subsidy/countervail
actions are taken on the basis of quasi-judicial procedures, and no compensation is required for "dumpers" or "subsidizers" as they are deemed to be acting in contravention of "fair trade" principles.
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5.2. Anti-Dumping
5.2. Anti-dumping
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Dumping
occurs when goods are sold into an importing market at prices below those prevailing in the home market or at prices below their cost of production (including reasonable amounts for administration, marketing costs, and profits).
An anti-dumping action is taken by a state as a remedy for dumping 18
5.2. Anti-dumping
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Question: How ho calculate an AD duty?
Answer: key beginning point is to calculate a normal value of the product
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5.2. Anti-dumping
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The mechanics of anti-dumping
Dumping occurs when the products of one country are introduced into the commerce of another country
at less than the normal value
of the products (
a
) is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country, or, (
b
) in the absence of such domestic price, is less than either (i) the highest comparable price for the like product for export to any third country in the ordinary course of trade, or (ii) the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit.
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5.2. Anti-dumping
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The usual remedy for dumping is an
anti dumping duty
that is applied to incoming shipments of "dumped" goods.
Since the purpose of the duty is to offset the effects of dumping, the amount of the duty should be equivalent to the difference between the "dumped" price and the "home market" price.
This difference is called the
margin of dumping.
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5.2. Anti-dumping
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Anti-dumping investigations are to end immediately in cases: where the authorities determine that the margin of dumping is insignificantly small (defined as less than 2% of the export price of the product). if the volume of dumped imports is negligible (i.e. if the volume from one country is less than 3% of total imports from one country of that product and 7% or more of total imports from several countries) 22
5.2. Anti-dumping
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The mechanics of anti-dumping (1)
1.A complaint is initiated on behalf of the industry affected (the complaining business must account for a "major proportion" of total domestic production of like products). If the relevant authorities find the complaint presents a sufficient basis for formal procedures, an investigation is begun.
2.The relevant authority may make a preliminary finding of dumping.
3.The relevant authority may make a preliminary finding of material injury.
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5.2. Anti-dumping
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The mechanics of anti-dumping (2)
4.On the basis of these two preliminary findings, provisional duties may be imposed.
5.If neither preliminary finding is made, the case is terminated.
6.The relevant authorities continue their investigations leading to final determinations with respect to the existence of dumping margins and injury.
7. The investigation may be terminated on the basis of voluntary price undertakings from dumping exporters to increase their prices to eliminate the dumping.
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5.2. Anti-dumping
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The mechanics of anti-dumping (3)
8. If suitable voluntary price undertakings are not agreed to, dumping margins are calculated for each exporter found to be dumping.
9. Final dumping duties, the amounts of which are not to exceed the margins of dumping, may be applied.
10. Dumping duties are to remain in force "only so long as and to the extent necessary to counteract dumping which is causing injury." An injury determination expires after five years. Dumping duties may be extended beyond five years only on the basis of a new investigation that confirms continued threat of injury.
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5.2. Anti-dumping
The mechanics of anti-dumping (4)
Each member's anti-dumping regime must include provision for independent judicial review of administrative actions relating to final determinations of dumping and injury and of the final determination.
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5.2. Anti-dumping
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The mechanics of anti-dumping
Under Article VI of GATT 1994, and the Anti Dumping Agreement, WTO Members can impose anti-dumping measures, if, after investigation in accordance with the Agreement, a determination is made (a) that dumping is occurring, (b) (c) that the domestic industry producing the like product in the importing country is suffering material injury, and that there is a causal link between the two 27
5.1. Safeguards
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For an anti-dumping action to be used, two conditions must be met.
There must be dumping.
The dumping must have: caused material injury to an established industry in the importing country threatened to cause such industry or if it materially retarded the establishment of a domestic industry. 28
5.2. Anti-dumping
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Refund or reimbursement Duties have to be collected on a non discriminatory basis on imports from all sources found to be dumped and causing injury, except with respect to sources from which a price undertaking has been accepted The amount of the duty collected may not exceed the dumping margin, although it may be a lesser amount 29
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5.2. Anti-dumping
Refund or reimbursement Individual exporter dumping margins The Agreement requires that, when anti dumping duties are imposed, a dumping margin be calculated for each exporter.
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5.2. Anti-dumping
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Refund or reimbursement New shippers The investigating authorities are required to conduct an expedited review to determine a specific margin of dumping attributable to the exports of such a “new shipper”. While that review is in progress, the authorities may request guarantees or withhold appraisement on imports, but may not actually collect anti-dumping duties on those imports.
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5.2. Anti-dumping
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A WTO
Committee on Anti-Dumping Practices
oversees anti-dumping actions.
Statistics on Anti-dumping : reporting countries 32
5.2. Anti-dumping
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Number of AD measures, by reporting country 400 350 300 250 200 150 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Totals for 01/01/95 - 31/12/08
- 3427 33
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5.3. Subsidies
5.3. Subsidy/Countervail
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Subsidies
are a common instrument of state policy used by all countries for a range of purposes.
There is nothing inherently wrong with subsidies but, in some cases, they may have
trade-distorting effects
.
The GATT, and now the WTO, have sought to restrict the use of subsidies which have such effects while allowing states to subsidize for other purposes (research and development for example).
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5.3. Subsidy/Countervail
Subsidies Export subsidies: to compete with producers on the target market Subsidies to compete on domestic market with imported products Export subsidies: to compete with producers on the third markets 36
5.3. Subsidy/Countervail
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A
subsidy
is defined by the WTO as a financial contribution made by a government or any public body that confers a benefit on the recipient.
Subsidies can be in any form of direct funds transfers, grants, low interest loans, or price supports.
Subsidies also can be offered in the form of government revenue forgone or not collected. 37
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5.3. Subsidy/Countervail
The agreement defines two categories of subsidies: prohibited and actionable. Non-actionable subsidies (end on 31 December 1999)
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5.3. Subsidy/Countervail
Prohibited subsidies:
subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. They are prohibited because they are specifically designed to distort international trade, and are therefore likely to hurt other countries’ trade.
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5.3. Subsidy/Countervail
Actionable subsidies:
in this category the complaining country has to show that the subsidy has an adverse effect on its interests otherwise the subsidy is permitted.
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5.3. Subsidy/Countervail
Actionable subsidies:
three types of damage they can cause.
One country’s subsidies can hurt a domestic industry in an importing country. They can hurt rival exporters from another country when the two compete in third markets Domestic subsidies in one country can hurt exporters trying to compete in the subsidizing country’s domestic market.
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5.3. Subsidy/Countervail
Countervailing duties
are special duties imposed on imports to offset the benefits of government subsidies to producers or exporters in the exporting country. 42
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5.3. Subsidy/Countervail
Conditions to CV: formal investigation there is a subsidy imports of subsidized products are causing injury to domestic industry Period for protection – 5 years Voluntary raise of prices – removal of CV 43
5.3. Subsidy/Countervail
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Number of CV duties, by reporting economy
50 40 30 20 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jan. June 2009
Year
Total for 01/01/95 - 30/06/09 - 226
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5.3. Subsidy/Countervail
Number of CV measures, by reporting member
100 90 80 70 60 50 40 30 20 10 23 48 94 3 10 3 6 1 1 4 1 2 1 1 2 6 4 13 1 Ar ge 0 nti na Au str ali a Br azi Ca l na da Ch Ch ile ina , P Co Eu .R
sta ro .
pe R ica an Eg C yp om t m un ity Ind ia Isr ae l Ja pa n La tvi a Me Ne xico w Ze ala nd So Pe uth ru A frica Tu Un ite rke d y St ate Ve ne s zu ela
Year
2
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5.3. Subsidy/Countervail
Number of CV measures, by exporting member
50 45 40 35 30 25 29 46 20 15 10 7 7 8 5 0 Ar ge nt in a Br azi Ca l na da 3 7 10 7 Ch Ch ile in Ch Eu a, in ro P pe .R
ese an .
T ai C pe om i m un ity Fr an G ce er m an y 3 11 13 17 4 6 3 9 8 In In di a do ne sia Ita Ko re a, ly R ep . o M f al aysi So ut a h Af rica Sp ai Th n ai Un la ite nd d St at es
Year
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4.2. Questions and exercises
Questions
1.
What aspect of the GATT deals with subsidies?
2.
3.
What does serious injury mean?
What is the mechanics of AD?
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4.2. Questions and exercises
Readings
1.
Readings for lecture 4 48