Nciec trade remedies

Overview ofOverview of
Trade Remedies in WTO SystemTrade 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

March 11, 2004
2
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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 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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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 2002
Number 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 AgreementSafeguards – 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 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 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.

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