Anti-dumping Policy in the WTO and FTAA

 
Anti-dumping (AD) and countervailing duties (CV) have a long history in international trade, especially as used by the United States and Europe. Both policies are employed as a defense, in the AD case, against foreign companies selling products below their domestic prices and, in the CV case, against subsidies by foreign governments to certain exporters. Some governments criticize these measures as a disguised form of protectionism, but they have enjoyed strong support domestically in the US and eventually were adopted by other countries and the international trading system.

At the recently concluded Fourth Ministerial Conference of the World Trade Organization (WTO) in Doha, one of the hot topics was again anti-dumping and countervailing duties. The US government has traditionally opposed taking up the AD issue because of strong political support for it and the fact that the negotiation to include it as part of the WTO was consistent with US laws on the subject. The US delegation (mainly the US Trade Representative and the Department of Commerce) seem to have skillfully worked out an offensive strategy to ensure transparent and equal treatment and procedure by those countries having AD legislation.

A reasonable compromise seems to have been worked out through a two-phase process of negotiations. The Ministerial Declaration states, "we agree to negotiations aimed at clarifying and improving disciplines under the Agreements on Implementation of Article VI of the GATT of 1994 and on Subsidies and Countervailing Measures, while preserving the basic concepts, principles and effectiveness of these Agreements and their instruments and objectives, taking into account the needs of developing and least developed participants."

In the initial phase, participants will indicate those issues, such as disciplines on trade distorting practices, that will be clarified and improved in the second phase. They will also try to clarify and improve WTO disciplines on fisheries subsidies and provisions applying to Regional Trade Agreements. The latter negotiations will take into account the developmental aspects of RTAs.

Observations
The AD negotiations agreed to at Doha focus on the minutiae of forms, calculations, language and procedures and do not challenge the basic principles that are already imbedded in the ADA, which is part of the WTO agreement. Reportedly, there has been some grumbling from certain congressmen, who have even threatened that the Doha AD negotiation puts at risk approval of Trade Promotion Authority. Cooler heads should prevail and recognize that the Doha negotiation was well constructed and necessary to the general agreement to move ahead with a worldwide trade agenda. In fact, the negotiations to "clarify and improve" AD may benefit US exporters. Increasingly, foreign countries-including some Latin American states-are adopting AD laws which are often based on the US laws. The fair and even application of these laws in different countries may help US exporters avoid discriminatory, uneven and unfair treatment.

The FTAA also has devoted close attention to the question of anti-dumping and countervailing duties. The entire text of the FTAA draft agreement, heavily bracketed, was released to the public and posted on the web sites of the FTAA, USTR and others in the closing days of the Clinton administration. The chapter on subsidies, anti-dumping and countervailing duties is bracketed in its entirety. Some countries want to use this chapter as a bargaining chip to obtain concessions in other areas of the agreement. In any case, a meaningful and forward looking anti-dumping chapter will require hard negotiating.

The WTO approach will almost certainly have an impact on the FTAA negotiations with regard to AD. Many Latin American governments undoubtedly hoped to soften the AD approach in the FTAA context or at least extract some concessions for keeping it. Now, they must realize that the best they can hope for is an improved functioning of AD in both the WTO and FTAA. As some governments have already adopted AD legislation, the trend may be toward seeking increased AD protection.

Anti-dumping Background
Anti-dumping actions have been permitted under international agreements for a long time, starting with Article VI of the GATT which allowed taking actions against imports of a product at an export price below its "normal value." An Anti-dumping Agreement (ADA) was negotiated after the Tokyo Round and later updated during the Uruguay Round. The revision provided for greater clarity and detail in the process for determining that a product is dumped, the criteria to be taken into account in a determination that dumping imports causes injury to domestic industry, the procedures to be followed in initiating and carrying out an anti-dumping investigation, and others. It includes de minimis provisions that stop investigations if the price difference is 2% or less or when the volume is 3% or less of imports into the injured country.

The Uruguay Round ADA was adopted as part of the WTO. This agreement allows governments to take action to protect domestic industry suffering proven damage, usually by imposing offsetting import duties or temporarily limiting imports to "safeguard" the injured domestic industry. It introduced the following modifications: more detailed rules for calculating the amount of dumping, more detailed procedures for initiating and conducting investigations, rules on the implementation and duration (five years) of AD measures, and particular standards for dispute settlement panels to apply in AD disputes. In addition, a Safeguards Committee was established to, according to the WTO, "oversee the operation of the agreement and be responsible for the surveillance of member's commitments."

Anti-dumping and countervailing duty are often referred to as the same thing, but they are different and are subject to separate agreements. Dumping is an action by a company and, as the WTO is an agreement among governments, it has no authority over private companies. In contrast, subsidies are an action taken by a governmental agency or department. Therefore, the ADA refers only to actions taken by governments against dumping by private companies. Countervailing duties are imposed by governments of importing countries to offset subsidies to exports by other governments.

Latin American Reactions
Articles analyzing the results of the WTO meeting were rare in the Latin American media. Perhaps this is due to the complexity and arcaneness of the material and the belief that the agreements reached at Doha do not have an immediate impact on the region's economies.
 

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