CHAPTER 18
1.
BACKGROUND
TO
AUTIDUMPING RULES
THE
REVIEW
OF
During the WTO Seattle Ministerial Meeting, Japan, along with many
other members, mostly developing countries, proposed a review of the
Antidumping Agreement. The United States vigorously opposed any review, and
directly prior to the Seattle meeting, US Secretary for Commerce William Daley
published an editorial in the Financial Times. Below is a summary of his
argument.
1)
The US interest in the Seattle Ministerial Meeting is ensuring that US industries
can continue to meet the challenges of the global marketplace and compete on
equal terms with the rest of the world. For that to happen, we need to maintain
strong US trade laws. These laws are not only fair and judicious, but are also
necessary as trade barriers are torn dawn.
2)
Some of America's trading partners, including Japan, which have one of the
largest and most persistent trade surpluses with the US (Dollars 64bn in1998)are aiming to disarm these laws in the new round. While they claim that the
dumping and subsidy laws are used for protectionist purposes, but in point of
fact these laws are reserved for situations in which even the most productive
American workers are harmed by unfair trade.
3)
During the steel crisis of last year, the collapse of markets in Asia and Russia
caused imports reached record revels, and more than ten thousand US
steelworkers lost their jobs. The crisis was quelled by swift enforcement of
antidumping and countervailing measures.
4)
It is not surprising that some of the countries involved in the recent steel cases
including Japan are now pushing the hardest to weaken US dumping laws. These
countries claim that US dumping laws impedes imports, but in 1998, US imports
totaled Dollars 900bn, but only about Dollars 4bn of these were affected by
dumping cases..
5)
The new round should focus on full implementation of the existing procedural
rules in the dumping and subsidy agreements.
6)
Opinion surveys of workers in the United States over the past year indicate that
it is in the US interest to stand firm against review that has the potential to
weaken US trade law.
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Vice Minister for International affairs MITI Hisamitsu Arai responded on
the ministry's behalf in a rebuttal that was also printed in the Financial Times.
Below is an outline of the case he made.
2.
1)
The US would like us to believe that their dumping law are not used for
protectionist purposes, but are reserved for exceptional situations in which truly
serious injury is done to domestic industry. Why then are twenty-five countries
dissatisfied with the current anti-dumping rules and have submitted proposals to
the World Trade Organization for bringing in more disciplines to them? Why are
anti-dumping petitions filed in the US seemingly concentrated in those old
“smokestack” industries such as base metals and chemicals?
2)
What is important in the import volumes is whether trade opportunities are lost,
not the volume of trade actually influenced. It is quite obvious that the
imposition of antidumping duties cause a substantial decline in imports, so it is
not surprising that the affected imports do not represent a large percentage. In
addition, even if the overall percentage is low, as anti-dumping cases are
concentrated in a relatively small number of sectors, they can have a significant
effect in that sector of the economy..
3)
Finally, it is indeed in the US interests to introduce more disciplines in the
conduct of antidumping investigations. There has been a rapid increase in the
number of antidumping measures taken in recent years and in the number of
countries imposing them. The total number of antidumping cases against US
products for the past four years is 64, making the US the second largest target of
antidumping investigations, next to China with 119 cases against it. This makes
me wonder why the US could be so complacent about this alarming trend.
4)
It is not our intention to "weaken" the US trade law. We are trying to improve the
global trade rules. including those applicable in the US We are not seeking
unilateral disarmament of the U.S trade regime. Rather, our initiative is
comparable to multilateral arms reduction talks for the common benefit of
mankind. With more disciplines in the world’s antidumping regimes, we will be
able to have more security and predictability in the multilateral trading system.
This will enhance productivity and welfare in every economy. I sincerely hope
that the US will be able to join in this win-win game in the coming trade round.
During the Seattle Ministerial Meeting, the proposal to review the
Antidumping Agreement was supported by the majority of members and included
in the text of the working committee chairman's draft report. However, no
agreement was reached with the United States, which maintained its hard-line
opposition. For the Ministerial Meeting, Japan created a pamphlet to provide
background, including the debate with the United States summarized above. The
data and materials included in that pamphlet are quite interesting and informative,
so it is reproduced in part here as a supplement to this text.
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1.
Number of Anti-Dumping Cases and the Proposals for Negotiations
Some have argued that there is no need to negotiate about anti-dumping rules in the new
round. Yet the number of anti-dumping measures restricting world trade continues to
increase. Over the past five years, the number of measures has increased 50 percent, to
almost 1,000 anti-dumping orders in place. See Figure 18-1,18-2.
<Figure 18-1>Countries maintaining antidumping measures
As of the end of 1993
Number of AD
COUNTRY
Measures Imposed
1 United States
293
2 EU
126
3 Canada
78
4 Australia
71
5 Brazil
28
6 Mexico
28
7 New Zealand
23
8 South Africa
7
9 Argentina
2
10 Korea
2
Others
2
Total 12 countries
660
(Source: WTO semi-annual reports)
As of the end of 1998
Number of AD
COUNTRY
Measures Imposed
United States
326
EU
139
Mexico
82
Canada
77
South Africa
57
India
43
Australia
42
Argentina
37
Turkey
34
Brazil
33
Others
111
Total 26 countries
981
<Figure 18-2>Affected countries of effective antidumping measures
As of the end of 1993
Number of AD
COUNTRY
Measures Imposed
1 EU
110
2 Japan
81
3 China
70
4 South Korea
46
5 United States
40
6 Chinese Taipei
37
7 Brazil
29
8 Canada
18
9 Thailand
16
10 Singapore
14
Others
199
Total 77 countries
660
(Source: WTO semi-annual reports)
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As of the end of 1998
Number of AD
COUNTRY
Measures Imposed
China
191
EU
148
Japan
76
United States
65
Chinese Taipei
53
South Korea
48
Brazil
45
Russian Federation
35
Thailand
34
India
23
Others
263
Total 73 countries
981
This explains why so many countries (25 in total, ranging from ASEAN to Zimbabwe)
are dissatisfied with the anti-dumping rules as applied today and have submitted proposals to
the WTO for bringing in more disciplines to them. They are concerned about the arbitrary and
artificial calculation of dumping margins. Many of them take the view that injury is
determined without adequate causation analysis. (See Figure 18-3.) It would be quite odd for
the topic that has generated the broadest-based interest to be left off the negotiating agenda.
anti-dumping must be part of the agenda.
<Figure 18-3>List of countries that proposed to review AD rules
at the Seattle Ministerial Conference
Asia
Japan, Korea, India, Pakistan, Sri Lanka, ASEAN (Malaysia,
Singapore, Philippines, Indonesia, Brunei, Thailand)
Oceania
New Zealand
Europe
Romania
Latin America
Brazil, Guatemala, Colombia, Jamaica, Chile,
Africa
Egypt, Zambia, Kenya, Tanzania, Zimbabwe, Uganda
2.
Who Is Bashing Whom?
Increasingly, the United States has become the target of many anti-dumping actions by
its trading partners. It may not be well-known, but the fact is, according to the WTO
statistics, the number of anti-dumping cases against products originating in the United States
for the past four years is 64, making the United States the second largest target of antidumping investigations in the world, following China with 119 cases against it. See Figure
18-4.
<Figure 18-4>Number of anti-dumping investigations initiated in each year,
broken down by target countries (i.e. sources of imports)
1995
1996
20
43
China
12
21
United States
14
10
Korea
5
6
Japan
4
8
Chinese Taipei
7
9
Germany
3
11
India
7
9
Thailand
8
10
Brazil
2
7
Russia
(Source : WTO Semi-annual report)
1997
31
15
16
12
16
14
7
5
5
5
1998
25
16
21
15
10
7
11
10
7
14
Total
119
64
61
38
38
37
32
31
30
28
These developments are worrisome because anti-dumping duties are powerful non-tariff
barriers, as Joseph Stiglitz, Former Senior Vice President and Chief Economist of the World
Bank, explains. See Extract 1.
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Some argue that “full implementation of the existing procedural rules” in the antidumping agreement can sufficiently address this situation, without reviewing the
shortcomings of the existing rules in the negotiations. However, no country can be sure that
the issues are being adequately addressed under the existing Anti-Dumping Agreement.
<Extract 1>*
Today, we recognize that there are many forms of non-tariff barriers to trade
(NTBs), and that these have multiplied in recent decades as tariff barriers have
come down. This is not surprising; after all, the political forces that give rise to
high tariffs do not disappear once tariffs are brought down. Rather, they must
seek protection through other channels. Unfortunately, these NTBs are far more
pernicious than tariffs, precisely because they are so much harder to assess and
quantify, and they can exact even higher costs in efficiency terms.
One notorious form of GATT/WTO-legal NTBs is anti-dumping duties and
countervailing duties. I have already noted that the provisions of dumping laws
do not conform to economic principles concerning fair trade.
*Remarks by Joseph Stiglitz, Former Senior Vice President and Chief Economist of the
World Bank, in “Two Principles for the Next Round or, How to Bring Developing
Countries in from the Cold” (Geneva, September 21, 1999, emphasis added)
[http://www.worldbank.org/knowledge/chiefecon/articles/geneva.htm]
3.
Can Anti-Dumping Measures Reduce Trade Deficits?
The United States has conflicting views about “dumping.” Even while some officials
aggressively attack “unfair trade,” other officials acknowledge the economic reality: that
concern about bilateral trade surpluses is largely misplaced and that anti-dumping measures
can be too easily abused.
Extract 2 is from the report of the Joint Economic Committee of the US Congress
(chaired by Senator Connie Mack), entitled 12 Myths of International Trade (June 1999).
Here, the fallacy of an argument linking bilateral deficits with “unfair trade” is clearly
illustrated.
Extract 3 is taken from a statement by Alan Greenspan, Chairman of the Federal
Reserve Board. He is warning against the dangers of anti-dumping abuse.
<Extract 2>*
Myth 6: A trade surplus is good; a deficit is bad.
The trade deficit does not belong to any individual or institution.
It is a pure statistical aggregate, like the number of eggs laid in the US
or the number of bald-headed men living here. —Herbert Stein
The term “trade deficit” is misleading. “Deficit” generally suggests
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something bad—like excessive spending relative to income or an overdraft at the
bank. A trade deficit occurs when a nation receives more goods and services from
foreigners than it supplies to them. What's bad about that? After all, isn't
consumption the ultimate objective of economic activity? Conversely, a trade
surplus is present when a nation supplies more goods and services for foreigners
to consume than it receives from them. What is so good about that situation? Is
this something that people will want to continue to do?
A trade deficit is the flip side of a capital account surplus. With floating
exchange rates, market forces will bring the American purchases of goods,
services, and assets from foreigners into balance with their sales of these items to
foreigners. Thus, a trade deficit will occur when the US economy is offering
investors such attractive options that foreigners are investing more in the United
States—buying more assets—than Americans are investing abroad. Again, it is
hard to see what is bad about this situation. Would we prefer that our economy to
be in such poor shape that investors—domestic as well as foreign—had better
options elsewhere?
Doesn’t a trade deficit mean greater indebtedness to foreigners? Not
necessarily. Much of the foreign investment involves the purchase of stocks and
physical assets like buildings and business assets. Americans benefit because they
are able to sell these assets to foreigners at more attractive prices than would
otherwise be possible. Foreign investments of this type do not increase American
indebtedness to foreigners. Of course, some foreign investments are in the form of
loans or the purchase of bonds. These transactions mean lower interest rates for
Americans. If the investments are sound, they will generate a future income
stream that is more than sufficient to repay the loans. Even in this case, the loans
are helpful to the US economy.
Myth 8: If trade with another country is fair, our exports to the country
will equal our imports from it.
This statement is totally false. There is no more reason to expect bilateral
trade to balance between nations than between individuals. Rather the predictable
result is (a) trade deficits (purchases that exceed sales) with trading partners that
are low-cost suppliers of goods and services that we import intensely and (b) trade
surpluses (sales that exceed purchases) with trading partners that buy a lot of the
things we supply at a low cost.
Consider the trade “deficits” and “surpluses” of a doctor who likes to golf.
The doctor can be expected to run a trade deficit with sporting goods stores, golf
courses, and favorite suppliers of items like lawn care, plumbing, and auto repairs.
Why? The doctor is highly likely to purchase these items from others. On the
other hand, the doctor can be expected to run trade surpluses with medical
insurers, elderly patients, and those with chronic illnesses. These trading partners
are major purchasers of the services provided by the doctor. Furthermore, if the
doctor has a high rate of saving, the surpluses will substantially exceed the
deficits.
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The same principles are at work across nations. A country can expect to run
sizeable surpluses with trading partners that buy a lot of the things the country
exports, while trade deficits will be present with trading partners that are low-cost
suppliers of the items imported. Table 2 indicates the nations with which the US
ran the largest bilateral trade surpluses and deficits in 1998. The surpluses were
largest with Netherlands, Australia, Belgium-Luxembourg, Brazil, and the United
Kingdom. Do these bilateral trade surpluses indicate that US treats these
countries unfairly? Of course not. The surpluses merely reflect that these
countries import goods that American producers supply cheaply. On the other
hand, the US ran large bilateral trade deficits with Japan, China, Germany, Canada,
and Mexico. Do these countries unfairly discriminate against American goods?
The US will tend to run bilateral trade deficits with countries that are low-cost
suppliers of goods Americans import intensely. This is the major factor at work
here. Interestingly, Canada and Mexico—two countries that are most open to US
products—are among the high-deficit countries.
What about the trade deficit with Japan? Among high-income industrial
countries, Japan's trade practices are perhaps the most restrictive. However, this is
not the major reason for the US trade deficit with Japan. Japan is a major importer
of resources like oil and a major exporter of high-tech manufacturing goods.
Americans import a lot of the latter, but they export very little of the former. If the
US were a low-cost supplier of energy, its trade balance with Japan would look
much different. Major energy exporters—including Indonesia, Oman, Saudi
Arabia, and the United Arab Emirates—all run sizeable trade surpluses with Japan.
In addition, the Japanese saving rate is high and its investment abroad is large. As
we have already noted, an outflow of capital will mean a trade surplus. In
contrast, the US has a low rate of saving. This differential saving rate between the
two countries also contributes to the US-Japanese bilateral trade deficit.
Myth 5: It is sound policy for a country to support a weak industry with
subsidies. A liberal interpretation of "dumping" is necessary
to protect domestic industry.
Similarly, a liberal interpretation of “dumping” in the application of our
anti-dumping laws impedes our country’s economic growth. Current law provides
relief in the form of anti-dumping duties (tariffs) when a domestic industry is
injured as the result of a good being sold in the United States at a price below cost
or lower than that found in the domestic market of the exporting firm. However, it
is not easy to tell whether dumping laws are, in fact, being violated. The prices
charged in the home market generally vary and the cost of the firms charged with
dumping are not directly observable. Some express fear that foreign producers
might attempt to drive domestic firms from the market and then raise their prices
to a high level. This is unlikely to be an effective strategy. After all, the high
prices would soon attract competitors, including other foreign suppliers.
When analyzing the merits of anti-dumping restrictions, it is important to
keep two points in mind. First, price cutting is an integral part of the competitive
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process. When demand is weak and inventories are large, firms will often find it in
their interest to offer goods at prices below the average total cost of production.
Domestic firms are permitted to engage in this practice. Why should foreign firms
be prohibited from doing so? Second, the use of anti-dumping laws to reduce the
competitiveness of domestic markets is sure to be contagious. As a few industries
are protected from the competition of foreign rivals, others will seek similar
treatment. Herein lies the real danger. If we are not careful, anti-dumping actions
will soon become simply another rather thinly veiled mechanism to stifle
competition. Our economy has prospered largely because of our reliance on
market allocations and avoidance of this type of favoritism. We must not allow the
credibility we have earned to be eroded by shortsighted policies.
* 12 Myths of International Trade
(Report by the Joint Economic Committee of the US Congress, June 1999)
[http://www.senate.gov/ ~jec/trade1.html]
<Extract 3>*
While tariffs in industrial countries have come down sharply over the past
half century, other barriers have become more prevalent. Administrative
protection in the form of antidumping suits and countervailing duties is a case in
point. While these forms of protection have often been imposed under the label of
promoting “fair trade,” oftentimes they are just simple guises for inhibiting
competition. Typically, antidumping duties are levied when foreign average prices
are below average cost of production. But that also describes a practice that often
emerges as a wholly appropriate response to a softening in demand. It is the rare
case that prices fall below marginal cost, which would be a more relevant standard.
Antidumping initiatives should be reserved, in the view of many economists, for
those cases where anticompetitive behavior is involved. Contrary to popular
notions about antidumping suits, under US and WTO law, it is not required to
show evidence of predatory behavior, or intention to monopolize, or of any other
intentional efforts to drive competitors out of business.
*Remarks by Alan Greenspan, Chairman of the Federal Reserve Board, “Technology and
Trade: The Pros and Cons to Isolationism” (Dallas, May 1, 1999)
[http://www.bog.frb.fed.us/boarddocs/speeches/1999/19990930.html]
4.
What Is the Effect of Anti-Dumping Measures?
According to US officials, only $4bn out of $900bn imports into the United States were
affected by anti-dumping measures. It is quite obvious that after the imposition of antidumping duty on a certain product, the import of that product will decline significantly or
come to a complete halt. It is not surprising that the affected imports do not represent a large
percentage. In addition, even if the overall percentage is low, as anti-dumping cases are
concentrated in a relatively small number of sectors, they can have a significant effect in that
sector of the economy. Any measure that can essentially stop all exports in a sector represents
a serious impediment to legitimate trade.
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5.
Will Negotiations Weaken US Laws?
Proponents of new negotiations on anti-dumping do not seek to “weaken” the US trade
laws in the new round. We are trying to improve the global trade rules that apply to all
countries including the United States. We are not seeking unilateral disarmament of the US
trade regime. Rather, our initiative is comparable to multilateral arms reduction talks for the
common benefit of all countries. With more disciplines in the world’s anti-dumping regimes,
we will be able to have more security and predictability in the multilateral trading system.
Concessions negotiated in one sector will not be taken away by abusive anti-dumping
measures.
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