WTO Panel Rulings on Anti-Dumping: II

Author(s): C. Satapathy
Source: Economic and Political Weekly , Dec. 2-8, 2000, Vol. 35, No. 49 (Dec. 2-8, 2000),
pp. 4298-4300
Published by: Economic and Political Weekly

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A softening of the neo-colonial thrust could not but prove irreparable. Only one of the been replicated in Florida is grossly mis-
effect both a qualitative and a quantitative parties can have its candidate elected as leading. Where corruption is concerned,
change in investment flows from the west, president, followers and supporters of the the US needs no external role model to fall
which might force the poorer nations to other party, their hopes and expectations back on. The world's richest nation has
take a sympathetic look once more at the meanwhile raised to fever heat, will suffer always been steeped in corruption. Teapot
theory of self-reliant economic develop- from an immense sense of deprivation. Dome is a classic instance of financial
ment. Moreover, since a levelling off of The mutual bitterness between the party venality, and, in the matter of electoral
official American hauteur would enhance flocks will not easily subside. The leaders immorality, the Daley machine in Chicago
who might strike the compromising deal and Huey Long in Louisiana, to cite only
the state of general well-being of the global
system, it would contribute to some sortwill possibly be regarded as betrayers of two examples, have been trail-blazers. In
of a Pareto Optimum, of course not takingthe cause. The inter-party fissure, in other fact, many pundits are convinced that John
into account the declining fortune of the words, will threaten to be permanent. Fitzgerald Kennedy won the election in
capitalist class in the richer countries. In some circles the American mess over 1960 because the Daley machine stole
Even were the leaders of the Democratic the election of the 43rd president has been Illinois for him. That is to say, there is no
and Republican parties to reach a compro- considered as vindication of corrupt elec-guru-and-disciple relationship between
mise at some stage and terminate the legal toral practices in the underdeveloped parts Bihar and Florida: they belong together to
proceedings, the damage to the polity can- of the world. But to suggest that Bihar has the same nether region. MS

Commentary

WTO Panel Rulings

porting country's AD legislation before an
exporting country can take recourse to the
dispute settlement proceedings. In fact, in
the Uruguay Round a specific proposal
on Anti-dumping - II from the US in this regard to adopt the
principle of exhaustion of local remedies
was not accepted.
The WTO panel's recent ruling on India's complaint against (ii) All disputes have to go through the
stage of consultation. It has been ruled by
anti-dumping measures by the EC on imports of bed linen from
the GATT panels that a claim must be
India is likely to have serious implications for the working of the properly made at the consultation stage
WTO's anti-dumping regime and deserves to be studied closely. failing which the panels would not take
cognisance of the claim later on. Claims
C SATAPATHY Dire Straits', Journal of World Trade, should also be recorded properly while
Vol 31, No 1, 1997, pp 5-43). Perhaps the requesting for establishment of a disputes
T his essay deals with the recent WTO answer partly lies in the fact that even settlement panel.
panel report on India's complaint though in almost all disputes the GATT (iii) The panels have ruled that they
against anti-dumping (AD) mea- panels had ruled against importing country would not make a de novo assessment
sures by EC on imports of bed linen from administrations, in many cases the latter regarding dumping, injury and causality,
India. A companion article (EPW, Novem- blocked adoption of the panel reports aided but they would review determinations made
ber 25, 2000) dealt with the WTO panel by the positive consensus rules prevailing by the administering authorities.
report ruling against the US AD Act of under the GATT regime. This has now (iv) The panels have refused to give
1916. With the phenomenal growth in the changed under the WTO regime because findings on issues solely raised by inter-
use of AD measures worldwide, it was of the negative consensus rule provided by ested third parties when not raised by the
anticipated that the dispute settlement Article 16:4 of the Dispute Settlement main parties to a dispute.
panels of the WTO would see more AD Understanding (DSU)1 which requires a (v) The importing country administra-
cases than the GATT panels did earlier. consensus not to adopt a panel report. tions must satisfy themselves that the AD
Prior to the WTO regime, when the 1979 The earlier GATT panel decisions relat- complaint has been brought by or on behalf
Tokyo Round AD code was in operation, ing to AD cases are significant for future of the domestic industry prior to initiating
only about a dozen cases were brought up cases as they constitute the GATT juris- proceedings.
under the dispute settlement procedure. prudence which is of relevance under the (vi) Published findings of dumping and
Was this on account of in-built restraints WTO regime also because of the specific injury must have sufficient justification.
on the exporting countries to bring up a provision in Article XVI:1 of the WTO Panels have not considered arguments not
dispute to the GATT, or was this because Agreement.2 Vermulst and Komuro (1997) contained in such findings.
of the inherent complications in bringinglist as many as 76 rulings of GATf AD In addition to these general issues, a
up such a case, or was this on account ofpanels which may have a bearing on the number of technical issues relating to
simple ignorance on the part of the govern-decisions by WTO AD panels. The more determination of dumping, injury and
ments and the exporters about the ps-important ones are: causality are covered by the findings of
sibilities - Vermulst and Komuro wonder (i) The principle of exhaustion of local earlierGATTpanels which would continue
in a detailed paper on AD disputes. (Eremedies does not apply. In other words, to be relevant under the WTO regime.
Vermulst and Komuro, 'Anti-dumping it is not necessary to first approach the There are two major areas of concern
Disputes in the GATT/WTO: Navigating appellate machinery provided in the im- relating to AD disputes. Firstly, the GATT

4298 Economic and Political Weekly December 2, 2000

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AD panels have not ruled clearly that AD lished based on constructed value forhas all recently concluded on October 30,
measures being exception to tariff bind- investigated Indian producers. One 20004 com- that:
ings and most-favoured-nation clause, the pany, Bombay Dyeing, was found to have (i) Two claims (14 and 16) were not
burden of proof should shift to the import- representative domestic sales of cotton- included in the request of India for estab-
ing nations to show justification for taking type bed linen taken as a whole. Five lishment types of the panel and as such, were
such exceptional measures. Secondly, when comparable to those exported to EC outside were the terms of reference of the
the panels find an AD measure to be sold in representative quantities on the These relate to Article 6 of the AD
panel.
inconsistent with Article VI of GATT or domestic market. At the same time,Agreement. they
with the WTO Agreement on Antidump- were not found to be sold in the ordinary (ii) Nine claims (2, 5, 9, 12, 17, 21, 24,
ing3 (AD Agreement), it should not merely course of trade. Therefore, constructed 27 and 30) were withdrawn by India. These
recommend that the importing countryvalues were calculated for all the types relate to the provisional regulation of the
bring the measure into conformity with thesold by Bombay Dyeing. Export price EC which is no longer in force.
WTO discipline'and leave it to the good was established by reference to the prices (iii) On the ground ofjudicial economy, it
sense of the importing country to decideactually paid or payable in theEC market. was neithernecessary norappropriateto give
how and when to do so. In view of the fact The weighted average constructed findings on three claims (13, 18 and 31).
that an illegal AD measure results in illegal normal value by type was compared with (iv) In respect of 13 claims (1, 3, 4, 6,
collection of AD duties apart from restrict- weighted average export price by8,type 10, 19, 20, 22, 23, 25, 26 and 28) and
ing (and in some cases disrupting) trade, and a dumping margin was calculated. partly in respect of claim 15, EC did not
the panel should have the authority to order Similar calculations were done for other act inconsistently with its obligations under
revocation of such AD duties and refund producers. Articles 2.2, 2.22, 3.1, 3.4, 3.5, 5.3, 5.4
of AD duties collected in the past, apart Some of the listed companies in the and 12.2.2 of the AD Agreement.
from granting compensation in some form Eurocotton complaint were excluded and (v) In respect of 3 claims (7, 11, 29) and
for the trade restriction/disruption owingof the remaining 35, 17 were chosen as partly in respect of claim 15, EC acted
to such illegal AD measure. a sample. It was found that they suffered inconsistently with its obligations under
declining and inadequate profitability and Articles 2.4.2, 3.4 and 15 of the AD
EC AD Duty on Bed Linen price depression. As such, it was con- Agreement.
cluded that the EC industry suffered The panel findings in respect of four
EC imposed final AD duty on import of material injury. According to EC, a direct issues in India's favour are of great signi-
cotton-type bed linen from India by its casual link between the increased volume ficance not merely in the context of the
Regulation No 2398/97 of November 28, and the price effects of dumped imports AD case relating to cotton fabrics in
1997. India requested for consultations on and the material injury suffered by ECquestion, but in general. EC is one of the
August3,1998 in terms ofArticle 4 of DSU, industry was demonstrated by the exist- four major traditional users of the AD
Article XXIII of GATT 1994 and Article ence of heavy undercutting resulting in a measures, the others being the US, Canada
17 of the AD Agreement..The consultationssignificant increase in the market of the and Australia, and has a long experience
held on September 18, 1998 and April 15,dumped imports and corresponding nega--of administering AD laws apart from having
1999 at Geneva did not succeed. As such,tive consequences on volumes and prices a well established administrative set-up
on September 7, 1999, India requested for of sales of community producers. Prelimi-and a legal framework. The panel rulings
establishment of a panel to examine thenary affirmative determination was noti-in this case is likely to have serious reper-
matter in terms of Article XXIIII:2 of GATTfied on June 12, 1997 and provisional AD cussions on the working of its AD regime.
1994, Article 6 of DSU and Article 17 ofduties were imposed on June 14, 1997.These findings, therefore, need to be stated
the AD Agreement. The Dispute Settle-Final affirmative determination was noti- in some detail.
ment Body (DSB) of the WTO established fied on November 28, 1997 after giving In the first adverse finding, the panel has
a panel on October 27, 1999. an opportunity for further representation ruled against the EC practice of zeroing
The AD action was initiated on the basis on October 3, 1997. Injury margins werenegative price differences in the calcula-
of a complaint filed by Eurocotton (the established above dumping margins in all tion of dumping margins. Article 2.4.2 of
Committee of the Cotton and Allied Tex- cases and hence AD duties equal to dump- the AD Agreement requires establishment
tile Industries of the European Communi-ing margins were imposed ranging from of the existence of dumping margin by
ties, the EC federation of national produc-2.6% to 24.7% on different exporters. comparison of weighted average normal
ers' associations of cotton textile Certain handloom products were exemptedvalue with weighted average of export
products) on July 30, 1996. The notice subject to providing a certificate ofprices. EC authorities have been excluding
for initiating AD investigation washandloom pub- origin. from their computation cases where export
lished by the EC on September 13, 1996 India's request to the panel listed 31 prices are more than the normal value, i e,
against imports of cotton-type bed separate linen claims with reference to EC's cases of negative dumping by setting it
originating in India (as also in Pakistan violation
and of Articles 2.2, 2.2.2, 2.4.2, 3.1,artificially to zero. As a result of ignoring
Egypt). The investigation period was 3.4,es-
3.5, 6, 6.10; 6.11, 5.3, 5.4, 12.2.1, such instances, the average dumping margin
tablished as July 1, 1995 to June 3,0, 1996and 15 of the AD Agreement andgoes up to'the detriment of the exporter's
12.2.2
and the investigation of dumping covered argued that EC had nullified and impairedinterest. It is of interest that both Egypt and
this period whereas the examination of accruing to India under the WTO Japan supported India's stand before the
benefits
injury'covered the period from 1992Agreement. up to India also asked for immedi- panel, while the US supported the EC
the end of the investigation period. ate withdrawal of AD duties and refund practice of zeroing. The panel finding
In' view of the large number of Indian of AD duties paid so far. After detailed against the zeroing practice would now force
producers and exporters, EC conducted consideration
its of the claims of India as well the prevailing practice in some of the
analysis ofdumping on a sample of Indian as arguments from EC and third parties developed countries to change. The develop-
exporters and a normal value was estab- such as the US, Egypt and Japan, the panel ing countries may find that in many cases,

Economic and Political Weekly December 2, 2000 4299

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the dumping margin may vanish or come
below the de minimis limit requiring no
AD duties once the basis of calculation is
changed.
The second adverse finding against EC
relates to requirement under Article 3.4 of
the AD Agreement that the examination
of the impact of the dumped imports on
the domestic industry shall include the
evaluation of all economic factors having
a bearing on such industry. The Article
also provides an inclusive list of 15 such
factors. The panel has concluded that each
of these factors must be evaluated by the
investigating authorities while examining
to offer price undertakings before impo-
sition of AD duties. By rejecting such an
offer and not responding to it, EC was
found to have failed in its obligation to
explore constructive remedies as provided
under Article 15 of the AD Agreement.
These findings are of great importance
to the exporters from the developing coun-
tries who are often slapped with AD duties
by the developed countries. The panel
findings should put some brakes on indis-
criminate AD determinations in the future.
However, it must be stated that the recom-
mendation of the panel to the DSB to
request the EC to bring its measure into
as it can be appealed to the Appellate Body
within a period of two months and there-
after to be adopted by the DSB. 1E
[The views expressed here are the personal views
of the author.]
Notes
1 Understanding on Rules and Procedures
Governing the Settlement of.Disputes (Annex
2 to the WTO Agreement).
2 Marrakesh Agreement Establishing the World
Trade Organisation.
3 -Agreement on Implementation of Article VI of
the General Agreement on Tariffs and Trade
1994.

the impact of dumped imports. The panel conformity with its obligations under the 4 WTO Panel Report No WT/DS/141/R dated
found that EC did not even collect data October 30, 2000.
AD Agreement has not yet assumed finality
for many of these factors let alone evaluate
them. This finding is also likely to have
an impact on injury determination by AD
authorities in all countries and would Kerala's Decentralised
involve a lot more economic analysis prior
to determining injury to domestic indus-
tries and attributing it to dumping. Some Planning
of the listed factors to be considered are
- actual and potential decline in sales,
profits, output, market share, productivity,
Floundering Experiment
return on investments, utilisation of capac-
ity; factors affecting domestic prices;The ruling Left Front leadership has been quick to claim the resul
magnitude of the margin of dumping; actualof the recent civic elections in Kerala as vindicating its policies in
and potential negative effects of cash flow,
inventories, employment, wages, growth,
general and the people's plan programme in particular. The
Congress-led
ability to raise capital or investments, etc. UDF has, on the other hand, claimed that the
The third finding relates to consideringresults were the people's verdict against the Left Front's misrule
information for producers not part of the
and especially the partisan manner in which the people's plan
domestic industry as defined by the inves-
tigating authority in analysing the state of
has been implemented by the CPI(M). The ground reality,
industry. The panel ruled that havinghowever, is rather more complicated.
defined the domestic industry to consist
M K DAS
of 35 producers, the injury determination early next year. The wailing over the human
should have been confined to information tragedy and the alleged nexus between the
on these producers and not others. The T Wwo setbacks in quick succession CPI(M) and the liquor lobby in the state
US submitted to the panel that EC had will doubtless subside once the promised
can pose serious problems even for
no choice to define domestic industry a seasoned and seemingly tough judicial inquiry gets into the act. There are
by including the complainants alone, as leadership. That precisely is what the other factors as well. There had been worse
Article 4 of the AD Agreement requires CPI(M)-led Left Democratic Front lead- tragedies involving larger number of
human lives with much the same liquor
the entire industry including all EC pro- ership is hard put to cope with in Kerala.
ducers to be taken into account. The panel Hardly had it recovered from the lobbies
un- behind them when the Congress-
noted that the issue raised by the US isexpected drubbing it received at the pollsled United Democratic Front was in power.
And with few exceptions, all political
interesting but declined to rule on it as itto the local bodies early last month when
was not raised by India, the main party toit came under severe attack in the wake parties have at some time or other flirted'
the dispute. of the tragic death of more than a score of with the powerful, cash-rich liquor lobby
The fourth finding of the panel is of men and women following the consumption in the state as the now accused of doing.
significance to all developing countries in The CPI(M) is now being pilloried partly
of illicit liquor. For all its public postures
general. Article 15 of the AD Agreement and private inquisitions, the front leader- because it is in power and hence, well
recognises that special regard must be given ship is clearly on the mat. And for once positioned to decide and distribute patron-
by developed country members to the the battle is being fought single by the age and partly because it has been report-
special situation of developing country CPI(M), the other constituents of the LDF edly a big beneficiary in recent times of
members while considering AD measures. being largely content with providing no the munificence of the liquor lobby. Since
It further states that possibilities of con- more than their silent support. the latter is loath to do anything without
structive remedies should be explored It is however the timing of the twin a quid pro quo, juicy stories of a possible
before applying AD duties. India stated setbacks that is discomforting coming as deal between the two are doing the rounds.
that TEXPROCIL had approached EC on they did so uncomfortably close to the But the results of the just concluded
behalf of the exporters expressing desire crucial elections to the state assembly, duecivic poll do foretell much more than what

4300 Economic and Political Weekly December 2, 2000

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