Overview ofOverview ofTrade Remedies in WTO SystemTrade Remedies in WTO System
Antidumping, Subsidies, SafeguardsPresented 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
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Willkie Farr & Gallagher LLP
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
Introduction to Willkie Farr & GallagherIntroduction to Willkie Farr & Gallagher
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AgendaAgenda
Introduction to trade remedies Safeguard Measures Anti-dumping Duties Countervailing Duties WTO Dispute Settlement
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What are trade remedies?What are trade remedies?
Permissible import restraints that otherwise would be contrary to WTO principles essentially, exceptions to the bedrock rules of binding tariffs and
MFN (most favored nation) treatment
Designed to allow relief from imports deemed “unfair,” or adjustment from a surge in imports 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 DevelopmentHistorical 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 UseFrequency 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’dFrequency of Use - cont’d
0
50
100
150
200
250
300
350
Trade Remedy Cases Initiated
Antidumping
Subsidies
Safeguard
Antidumping 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
1995 1996 1997 1998 1999 2000 2001 2002
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Frequency of Use - cont’dFrequency 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’dFrequency of Use - cont’d
Country No. Country No. Country No. Country No.
1 US 46 1 US 79 1 India 80 1 US 16
2 Argentina 36 2 India 75 2 US 35 2 India 12
3 India 35 3 Argentina 28 3 China 29 3 China 11
4 EC 31 4 EC 27 4 Thailand 21 4 Canada 6
5 Canada 21 5 Canada 25 5 EC 20 5 Indonesia 6
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
2000 2001 2002Number of Initiations: 2000-June 2003
2003 (6 months)
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DistinctionsDistinctions
Nature of underlying activity 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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DistinctionsDistinctions
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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SimilaritiesSimilarities
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 – OverviewSafeguards – 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 AgreementSafeguards – 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 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 CountriesSafeguards – 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 RoundSafeguards – The Doha Round
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 – OverviewAntidumping – Overview
Definition what it is:
– “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
what it is not:– 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 – rationaleAntidumping – rationale
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 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 competition officials understand anticompetitive nature but politicians love them
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Antidumping – historical developmentAntidumping – historical development
Concept of “dumping” has long history first national AD law adopted in 1904 by Canada many other countries followed 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 wordsTokyo Round: 17 pages, 6,712 wordsUruguay Round: 26 pages, 11,746 words
more recently, dispute over AD Agreement almost derailed new round
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Antidumping – WTO AgreementAntidumping – 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
New rules on how long AD duties can be imposed
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Antidumping – Developing CountriesAntidumping – Developing Countries
No real “breaks” for developing countries Article 15 historically ineffective
De minimis rule applies to all countries Negligibility rule applies to all countries Cumulation largely negates negligibility exception Special rules for “non-market economies”
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Antidumping – the Doha RoundAntidumping – the Doha Round
Bona fide agenda item Carefully negotiated mandate
“improve and clarify” “but preserve “basic concepts and principles” 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 – OverviewSubsidies – Overview
Harder issue than AD because no consensus about the “problem” many believed assisting industry was legitimate function of
government U.S. had strongly held contrary view
1979 Agreement was optional 1995 Agreement binds all WTO members
first time adoption of substantive rules traffic light approach standards for determining countervailability
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Subsidies and CVD MeasuresSubsidies and CVD Measures
Addresses definition of “subsidy” for first time Provides alternative ways to attack subsidies
WTO dispute settlement Countervailing Duties
Provides procedural framework for CVD measures
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Definition of SubsidyDefinition of Subsidy
Financial contribution by government government versus private sector
Benefit conferred 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 AgreementSubsidies – The New Agreement
Framework for possible WTO challenge Prohibited subsidies (“red light”)
export subsidies, import substitution
Actionable subsidies (“yellow light”) government financing; beneficial tax rates but must demonstrate “serious prejudice”
Non-actionable subsidies (“green light”) R&D assistance; facility adaptation for environmental regulations have since expired
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CVD – The New AgreementCVD – 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 CountriesSubsidies – 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 RoundSubsidies – The Doha Round
Bona fide agenda item Same careful mandate More fundamental issues
(e.g. renewing “green light” subsidies)
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Attacking trade remediesAttacking 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 DecisionsWTO Panel Decisions 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 considerDispute Settlement: Issues to consider
Strength of claim. 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 standardSpecial 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 challengesImplementation 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 viewThe 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 negotiationsThe 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.