China v. U.S. (A/D on Shrimp) (DS 422) (Panel 2012) By: Stephanie Satchell, Eric Stahl, Khamza Sultani 1

United States — Anti-Dumping Measures on Shrimp and Diamond Sawblades from China 2

Background: Dumping If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product. Many governments take action against dumping in order to defend their domestic industries. 3

Background: WTO & Anti-dumping Measures The WTO Agreement does not regulate the actions of companies engaged in "dumping". Its focus is on how governments can or cannot react to dumping — it disciplines anti-dumping actions, and it is often called the “Anti-dumping Agreement”. GATT 1994 (Article 6) allows countries to take action against dumping. 4

Dispute Summary Request for Consultations by China on February 28, 2011 regarding the U.S.'s anti-dumping measures on certain frozen warmwater shrimp from China. The U.S. Department of Commerce's (“U.S.DOC”) use of zeroing practice to calculate dumping margins on shrimp and diamond sawblades. Reliance upon dumping margins calculated with separate rate calculation. 5

Background: U.S. Anti-dumping Measures Zeroing - the U.S. compares the price of the product on the foreign market with the price of the product on the U.S. market, but disregards, by setting at zero, all transactions in which the price of the product on the foreign market is smaller than the price on the U.S. market. Separate rate – Applies to exporters/producers not selected for individual examination but who has demonstrated their independence from de jure and de facto government control over their export activities. 6

Dispute Timeline 02/28/2011 — China requests consultations 03/11/2011 — Japan requests to join consultations 07/22/2011 — China requests consultations on sawblades 10/13/2011 — China requests establishment of panel 10/13/2011 — China, U.S. Agreement on Procedures 10/25/2011 — DSB panel 3rd Parties: EU, Honduras, Japan, Korea, Thailand, Viet Nam 12/21/2011 — Panel composed 06/08/2012 — Panel report circulated to Members 07/23/2012 — DSB accepted Panel report 07/27/2012 — China & U.S. agree to timeframe for U.S. 03/26/2013 — U.S. reports implementation. China disagrees 7

Political/Business Context: U.S. Shrimp Industry Shrimp most popular seafood in U.S. U.S. shrimp industry decline since 1990s Lobbyists, NOAA, academics: “unfair competition” Food safety scares & domestic food supply Relief for U.S. shrimpers: mix of tariffs & subsidies Relief defensible under WTO Agreements? 8 Source:

Political/Business Context: China Fisheries Expansion 9 Source: Stratfor, 2016, destabilizer-south-china-sea

Disputes with U.S. Concerning Shrimp 10 DS58 United States — Import Prohibition of Certain Shrimp and Shrimp Products Complainants: India; Malaysia; Pakistan; Thailand 10/08/1996 DS61 United States — Import Prohibition of Certain Shrimp and Shrimp Products Complainant: Philippines 10/25/1996 DS324 United States — Provisional Anti-Dumping Measures on Shrimp from Thailand Complainant: Thailand 12/09/2004 DS335 United States — Anti-Dumping Measure on Shrimp from Ecuador Complainant: Ecuador 11/17/2005 DS343 United States — Measures Relating to Shrimp from Thailand Complainant: Thailand 04/24/2006 DS345 United States — Customs Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties Complainant: India 06/06/2006 DS404 United States — Anti-dumping Measures on Certain Shrimp from Viet Nam Complainant: Viet Nam 02/01/2010 DS422 United States — Anti-Dumping Measures on Shrimp and Diamond Sawblades from China Complainant: China 02/28/2011 DS429 United States — Anti-Dumping Measures on Certain Shrimp from Viet Nam Complainant: Viet Nam 02/20/2012

Disputes concerning zeroing 16 of 18 are disputes with U.S. practices 11 DS141 European Communities — Anti-Dumping Duties on Imports of Cotton-type Bed Linen from India Complainant: India 08/03/1998 DS179 United States — Anti-Dumping measures on Stainless Steel Plate in Coils & Stainless Steel Sheet & Strip from Korea Complainant: Republic of Korea (South) 07/30/1999 DS219 European Communities — Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil Complainant: Brazil 12/21/2000 DS264 United States — Final Dumping Determination on Softwood Lumber from Canada Complainant: Canada 09/13/2002 DS294 United States — Laws, Regulations and Methodology for Calculating Dumping Margins (Zeroing) Complainant: European Communities 06/12/2003 DS322 United States — Measures Relating to Zeroing and Sunset Reviews Complainant: Japan 11/24/2004 DS335 United States — Anti-Dumping Measure on Shrimp from Ecuador Complainant: Ecuador 11/17/2005 DS343 United States — Measures Relating to Shrimp from Thailand Complainant: Thailand 04/24/2006 DS344 United States — Final Anti-Dumping Measures on Stainless Steel from Mexico Complainant: Mexico 05/26/2006 DS350 United States — Continued Existence and Application of Zeroing Methodology Complainant: European Communities 10/02/2006

Disputes concerning zeroing 12 DS382 United States — Anti-Dumping Administrative Reviews and Other Measures Related to Imports of Certain Orange Juice from Brazil Complainant: Brazil 11/27/2008 DS383 United States — Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand Complainant: Thailand 11/26/2008 DS402 United States — Use of Zeroing in Anti-Dumping Measures Involving Products from Korea Complainant: Republic of Korea (South) 11/24/2009 DS404 United States — Anti-dumping Measures on Certain Shrimp from Viet Nam Complainant: Viet Nam 02/01/2010 DS420 United States — Anti-dumping measures on corrosion-resistant carbon steel flat products from Korea Complainant: Republic of Korea (South) 01/31/2011 DS422 United States — Anti-Dumping Measures on Shrimp and Diamond Sawblades from China Complainant: China 02/28/2011 DS429 United States — Anti-Dumping Measures on Certain Shrimp from Viet Nam Complainant: Viet Nam 02/20/2012 DS471 United States — Certain Methodologies and their Application to Anti-Dumping Proceedings Involving China Complainant: China 12/03/2013

Main WTO ISSUE “Zeroing" practice by the United States Department of Commerce in its anti-dumping measures on certain frozen warmwater shrimp and "Diamond Sawblades" from China. U.S. improperly established anti-dumping measures on Chinese shrimp and diamond sawblades. Rates based on improper calculations of dumping margins. 13

China’s Position U.S. method of “zeroing” led to separate rate tariffs U.S. zeroing inconsistent with GATT 1994 Articles VI:1, VI:2 Anti-Dumping Agreement Articles 1, 2.1, 2.4, 2.4.2, 5.8, 9.2, 9.3, 9.4 Previous disputes found U.S. zeroing methods were inconsistent Separate rates inconsistent with Anti-Dumping Agreement Article

U.S. Position Non-market economies subsidize exports, imbalancing fair competition Market balance with non-market economies achieved through tariffs China is a non-market economy Prices of shrimp imported from China were lower than U.S. prices Lower prices for Chinese shrimp were evidence of China’s dumping China’s dumping required separate rate tariffs for specific companies 15

U.S. Position: “Separate Rate” Tariffs CompanyCategoryInitial 2004 Rate Revised 2005 Revised 2011 (All)“PRC-wide rate”112.81% AlliedDependent (examined)84.93%80.19%5.07% YelinDependent (examined)82.27% 8.45% Red GardenDependent (examined)27.89% Zhanjiang GuolianDependent (examined)0.07% (Others)Independent (not examined)55.23%53.68% 16

Agreements Cited Article of Anti Dumping Agreement Requires that the existence of margins of dumping shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions. “Dumping margin” is whatever the difference in prices is, which means an affected country can impose tariffs to reduce or eliminate the difference 17

Agreements Cited Article VI:1 of the GATT 1994 If the price of the product exported from one country to another is less than the comparable price in the exporting country, the product is to be condemned if it causes or threatens material injury to the domestic industry. Article VI:2 of the GATT 1994 In order to offset or prevent dumping, a contracting party may levy on any dumped product an anti-dumping duty not greater in amount than the margin of dumping in respect of such product. 18

Panel Decision Upheld China’s claim about U.S.’s use of zeroing Noted that U.S. did not contest results of zeroing investigation Affirmed that use of zeroing resulted in separate rates determination Rejected claim that separate rates was distinct issue from zeroing Recommended U.S. bring its anti-dumping measures into conformity 19

Implementation: U.S. Initial Actions Agreed that zeroing calculations occurred Agreed to review its compliance Agreed to complete review within one year U.S. Trade Representative asked U.S. Department of Commerce to review 20

Implementation: U.S. Response U.S. Department of Commerce recalculated dumping margins Calculations used zeroing methods Tariffs for specific, examined companies adjusted Essentially: China is a “non-market economy” requiring separate rates 21

Impressions & Proposals to Resolve Impression:U.S. selectively applied DSU report recommendations without halting its domestic economy protectionism Proposals: U.S. — Halt zeroing U.S. — Halt special rates for “non-market” economies U.S. — Halt interventions (de facto protectionist subsidies) China — Halt protectionist subsidies (“non-market” practices) Is global trade an open market so long as governments impose tariffs and other interventions? 22

References WTO Dispute File Folder: Background information sources: Deale et al. (2008) "Marketing Locally Harvested Shrimp to South Carolina Coastal Visitors: The Development of a Culinary Tourism Supply Chain""Marketing Locally Harvested Shrimp to South Carolina Coastal Visitors: The Development of a Culinary Tourism Supply Chain" European Union, Director of Trade (2012), “What is zeroing?”“What is zeroing?” Greer (2016) “The Diplomat” Southern Shrimp Alliance (2009), “2008 Activities Report”“2008 Activities Report” Stratfor Enterprises (2016), “Fish: The Overlooked Destabilizer in the South China Sea”“Fish: The Overlooked Destabilizer in the South China Sea” Torode (2015), "China to project power from artificial islands in South China Sea", Reuters"China to project power from artificial islands in South China Sea" United States, Dept of Commerce, International Trade Administration, Enforcement & Compliance Antidumping Manual, Chapter 10, "Non-Market Economies"Enforcement & Compliance Antidumping Manual, Chapter 10, "Non-Market Economies" United States, Dept of Commerce, Natl Oceanic and Atmos Admin, Natl Marine Fisheries Service (2008), “An Overview of the Commercial Shrimp Harvesting Industry in the Gulf of Mexico and South Atlantic Region““An Overview of the Commercial Shrimp Harvesting Industry in the Gulf of Mexico and South Atlantic Region“ 23