TRADE REMEDIES

Additional broad class of deviations from WTO obligations

The term refers to three kinds of trade measures that countries can justifiably use to restrict
imports:

1) Anti-dumping duties: import duties imposed in response to pricing practices of

private firms that are deemed to be ‘unfair’ and that cause or threaten ‘material injury’
to an industry in the importing state.
2) Countervailing measures: import duties imposed in response to certain subsidies
provided to exporters by their governments, when the latter cause or threaten ‘material
injury’ to industries in the importing state.
3) Safeguards: import measures (usually tariffs or quotas) imposed in response to a
surge in import that causes or threatens ‘serious injury’ to a domestic industry.

DUMPING AND ANTI-DUMPING DUTIES

The Uruguay Round included an agreement commonly referred to as the “Anti-Dumping

Agreement” (AD Agreement).

The key rule governing when AD measures can be used are found in Article VI of the GATT.
The AD Agreement includes a variety of related rules and adds considerable procedural
requirements.

Nothing in Article VI or anywhere else in the WTO Agreements prohibits or constrains the
act of dumping. WTO has no way to constrain the behavior of private parties.
Dumping “is to be condemned” if it “causes or threatens material injury” to an industry in the
territory of a contracting party.
Burden of proof: when it comes to demonstrating a violation of the AD Agreement, the
burden is put squarely on the complainant. It is for the exporting country challenging the
duties to convince a WTO panel that those duties violate WTO rules. In this legal or burden of
proof, AD rules are not exceptions or affirmative defenses, but self-standing rules or
obligations.

Three main components of anti-dumping measures are:

1. There must be dumping

2. There must be injury
3. There must be causation

In response to dumping a state is permitted to levy an anti-dumping duty in an amount up to

the margin of dumping.
The key question is whether the product is being dumped and if so, calculation of the amount
of dumping margin.

Try to get the factory gate price. You cannot compare based on the invoice price.

Existence of dumping

A product is considered as being dumped if it is “introduced into the commerce of another

country at less than its normal value.”

Normal value can be established in three different ways:

1. The sales price in the home market of the exporting company [if the sales are
insufficient to determine normal value, two alternative methods #2 and #3]
2. The sales price in an appropriate third country or
3. The cost of production plus a reasonable amount for selling and administrative costs
and profits.
These alternatives are included both in Article VI and Article 2 of the AD Agreement.

The first and preferred method is provided in AD 2.1: compare the product with the price in
the exporting country itself [home-market price].
For the home market price to be used in this way, four requirements must be met:
1. The sale market must be ‘in the ordinary course of trade’
2. They must be of ‘like products’
3. They must be ‘destined for consumption in the exporting country’ and
4. The prices must be ‘comparable’

Calculating dumping margin

The difference between the normal value and the export price is known as the ‘dumping
margin.’ A state may impose anti-dumping duties in an amount up to the dumping margin.

The AD Agreement provides two standard and one exceptional method for comparing these
two sets of prices.
The two standard methods call for either a comparison of the weight average of all normal
values with the weighted average of all export prices (WA-WA) or a comparison of each
individual transaction normal value with each individual export price (T-T).

The exception is for targeted dumping sales if the investigating authorities find that there is a
pattern of export prices that differs significantly between regions, customers or time periods.
In instances of targeted dumping, the comparison can be made between the weighted average
of normal values to individual export prices in order to ensure that the averaging does not
‘mask’ the targeted dumping.

EC – Bed Linen

‘Zeroing’
One single product has different modules. For instance, cheap tiles and expensive tiles.
Article 2.4.2 stating that comparison is based upon all comparable transactions.
This is why the US is willing to end the DSB – steel industry in the US.

US – Byrd Amendment

Takes Anti-Dumping Duties collected and distributes it to the domestic companies that bring
these complains – this is an incentive.

AB decided that this amendment was inconsistent because when you have dumping there are
three things you can do:
Provisional duties
Definitive duties
Price undertaking – promise that they will keep their export price high.
Not an action listed in the options, therefore prohibited.

Non-market economy gives you more discretion – example: China is too distorted due to
government intervention. Here you go to a surrogate analogue country to take sales price and
normal value. There is nothing regulating this, investigating authorities have full discretion.
When China joined, it had to agree that for 15 years it would be considered as a non-market
economy.

Investigating authority will construct a cost benchmark taking into account raw inputs, labor,
etc. If the domestic price doesn’t recover the costs, then it is not in the ordinary course of
trade.

When the IA constructs the cost benchmark it is easier to find dumping, looks at the cost in
other countries.

AR – Biodiesel

Used soybean oil super cheap, because of export duties.

They bumped up the dumping margin for 5%.
Greater domestic supply leads to a price decrease on the domestic market.
 SUBSIDIES

Solution at domestic level: CVD – Solution at WTO Level

What is the injury to the domestic industry? Of course, if the product is imported it will be cheaper
than the domestic product. But also, competition in third countries.

In the first scenario, you can impose CVD, domestic level. For the third market, you go to the WTO in
order to oblige the country to reduce the subsidy.

Components of the subsidy

- Financial contribution: from the government to a company

- Confers a benefit: depends on if something flows back from the company to the government –
the company is BETTER OFF than it would otherwise be in the market

When do state owned enterprises can become public body?

Types of subsidies

Prohibited subsidies: have to be withdrawn (3 months)

 Export contingent: tied to export. The condition for getting the subsidies is to export.

EC – Aircraft: It is OK if a subsidy induces greater export sales, but it will not be de facto export
contingent, unless it has changed the ratio between domestic and export sales. AB says the ratio has to
changed, greater share of export sales than before. The AB was criticized because: Problem: proof.
You do not have to prove the effect. Because you may not have the information of how it was before.
And if the subsidies it has just been established, the complainant would have to wait.

 Local content subsidies: if you use domestic inputs as opposed to imported inputs.

Actionable subsidy: here the economic effect has to be proven. A serious prejudice has to be proven.
US – Cotton: Brazil v US. Favoring domestic cotton.
Displacing or impeding imports.
Airbus – Boeing you should document on sales, lost sales.

You have to show: injury to the domestic industry or threat + causal link

Separate and distinguish effects of other factors (strikes, bad business decisions, increase raw material
prices)

Agreement on agriculture

Different disciplines because of the political nature.

Special rules for export: a number of countries reserved right to provide export subsidies. For 20 years
it was allowed.
Non-export: there is a max amount that has to be observed.

Footnote 1: no export subsidies if you don’t collect the VAT.

Definition of domestic industry: the mismatch between the scope of the product and the scope of the
domestic industry is inconsistent with WTO law.
You can’t allow the investigator authority to go broader. They can exclude the ones that are not
injured. MATCH product and industry.
Standard of review: way a panel looks at the evidence before it. In a trade remedy case, the
investigating authority is the first that looks at the proof. The WTO will review what the investigating
authority report.
 SAFEGUARDS

Safeguards cover all imports from all sources.

They respond to fair trade – unlike anti-dumping or CVD where it is an unfair practice.

You have to compensate – carve-outs

They look exports from everywhere. Anti-dumping only the country alleged to be dumping.

Impose tariff or quotas.

The injury is supposed to be serious. It is defined: “significant overall impairment”. High threshold
because it is fair trade.

Increased imports + Give rise to serious injury or threat thereof + Safeguard measure

Article 19 GATT + Safeguards Agreement

Unforeseen developments + Increased imports + Give rise to serious injury or threat thereof +
Safeguard measure

Panel first said that Art 19 was no longer applicable then AB said that both apply.

General interpretative annex: ONLY IF there is a conflict between the GATT and the other agreement
you don’t apply provisions accumulatively. According to AB there is no conflict.

- Disagreements when is a measure a safeguard measure?

US Steel – they say they are national security measures. Should be an Article 2 violation.

Advantage of arguing that it is a safeguard measure? Likely to be a violation because the legislation
there is no investigation, not the requirements.

Theory that Article 19 carves out Article 21.

Can you say that there is a DE FACTO safeguard?

A safeguard measure must suspend a tariff concession or another obligation.