FORM of REMEDY MEASURES • Anti-Dumping - Additional import duties • Countervailing - Additional import duties • Safeguards - Additional import duties or quotas 12/5/2018 Nisha Malhotra

Antidumping Legislation What is dumping? AD legislation under the WTO agreement Spread of AD legislation AD law in the United States Softwood lumber AD law in Canada AD law in India (brief)-India has the largest AD complaints in the world. 12/5/2018 Nisha Malhotra

Dumping is defined as When an exporter sells a product for export to the importing country at a lower price than the price at which the same (or similar) product is sold in its own domestic market Domestic price of exporter > Export price Dumping = Price discrimination between national markets 12/5/2018 Nisha Malhotra

AD and CVD legislation Dumping Injury to the domestic market How is domestic market defined? Relation between dumping and injury to the domestic market Subsidy Relation between subsidy and injury to the domestic market 12/5/2018 Nisha Malhotra

SUMMARY OF AD source : WTO Year initiation Final measures 1995 156 77 1996 224 136 1997 243 131 1998 250 173 1999 356 239 2000 260 30 Total 1489 780 NOTE: The two columns do not balance due to time periods to complete investigations Initiations Final measures 12/5/2018 Nisha Malhotra

Source: “The economic and Strategic motives for antidumping filing” by Thomas prusa and susan skeath 12/5/2018 Nisha Malhotra

US-Antidumping law If a U.S. industry believes that it is being injured by unfair competition through dumping or subsidization of a foreign product, it may request the imposition of antidumping or countervailing duties by filing a petition with Import Administration (department of commerce) United States International Trade Commission 12/5/2018 Nisha Malhotra

US-Antidumping law Steps undertaken in an AD investigation Petition filed by the firm/firms on behalf of the industry (petitioners must represent at least 25% of domestic production ) ITC preliminary finding ITA preliminary finding ITA final finding ITC final finding The duties are assessed as a percentage of the value of the imports and are equivalent to the dumping and subsidy margins. For example, if Commerce finds a dumping margin of 35%, the U.S. Customs Service will collect a 35% duty on the product at the time of importation into the United States in order to offset the amount of dumping or subsidy. 12/5/2018 Nisha Malhotra

Some Statistics ITC received a total of 1,430 petitions for AD and CVD during fiscal year 1980-2001 These cases involved 54 billion dollars in trade from countries subject to investigations. 12/5/2018 Nisha Malhotra

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Softwood lumber dispute US Claim Artificially low stumpage fees (With lumber, the U.S. contends that provincial stumpage and, more recently, B.C.’s log export restrictions, provide a subsidy to lumber producers. Other provincial programs may also be alleged to provide subsidies. ) Countervailable subsidies. Softwood Lumber I: 1982 US authorities decided no subsidy Softwood Lumber II: 1986 15% provisional duty Replaced by 15% export tax in MOU Softwood Lumber III: 1991 Canada unilaterally terminates MOU Countervailing case filed: Interim bonding requirement Canada wins appeal against countervailing duty in CUSTA (1993 and 1994) US revokes duties against Canadian lumber (Aug 1994) Bilateral consultation process for softwood established 12/5/2018 Nisha Malhotra

Softwood Lumber April 1996-Softwood Lumber Agreement finalized. First 14.7 Billion Board Feet (BBF) of softwood lumber exports from Alberta, British Columbia, Ontario, and Quebec would enter the US market duty free. The first 650 million board feet over 14.7 BBF -tax of $50 per thousand board feet. Any further exports were subject to a tax of $100 per thousand board feet. Other provinces- Unrestricted access to the US market. 12/5/2018 Nisha Malhotra

“Estimating Export Response in Canadian Provinces to the US-Canada Softwood Lumber Agreement” by Sumeet Gulati & Nisha Malhotra Provincial effect Provinces paying tariff (SLA) Alberta British Columbia Ontario Quebec Export Growth Rates All Years (1990-2002) Before SLA (1990-1995) After SLA (1996-2002 SLA Provinces 147% 119% -8% Non-SLA Provinces 513% 155% 56% 12/5/2018 Nisha Malhotra

Preliminary Test: A Gravity Model A cross-section ‘gravity’ equation xit is log exports from province i to the US (annual) yit and yUSt are logs of GDP province and in US disti is the log of distance from province i to the US RUSt is the US rate of interest SLA is dummy for SLA provinces - 1996-2001 NSLA is a dummy for non-SLA provinces - 1996-2001, Ext is the US-Canada exchange rate Annual data used from 1990-2002. 12/5/2018 Nisha Malhotra

Table 1: Gravity Model for Softwood Lumber Exports (Canadian provinces to the US) (1) (2) Log Exports Exchange 5.1427 4.3930 (1.27) (1.06) US r.o.i 0.0402 - 0.0488 (0.42) (0.35) ln(US GDP) 0.8144 17.6712 (0.27) (0.86) ln(Prov. GDP) 1.1038 1.1052 (9.14)** ln(distance) 1.1820 1.1823 (7.02)** (7.02) ** SLA 0.1096 0.0820 (0.23) (0.16) NSLA 1.4264 1.2422 (3.48)** (2.72)** Year 0.9331 (0.90) Observations 145 R squared 0.83 12/5/2018 Nisha Malhotra

Users of Lumber and the US-Canada Softwood Lumber Agreement Objective The effect of protection for the US softwood lumber industry on users of lumber Restrictions on Canadian lumber exports Lumber using (or downstream) industries and consumers bear the burden The U.S. Census Bureau : Fees on additional shipments through the SLA amount to more than US$1,000 for the lumber in an average new home. For every $50 increase in the price of 1,000 board feet of framing lumber, 300,000 potential homeowners are priced out of the housing market. An event study is used to examine the reaction of investors to positive or negative news (also called events). A simple event study involves the following steps: Identifying the event of interest and defining an event window Selecting a set of firms to include in the analysis Predicting a "normal" return during the event window in the absence of the event Estimating the cumulative abnormal return within the event window, where the cumulative abnormal return is defined as the difference between the actual and predicted returns during the event window Testing whether the cumulative abnormal return is statistically different from zero. 12/5/2018 Nisha Malhotra

The Current Softwood Lumber Dispute (Lumber IV) Following the expiration of the Softwood Lumber Agreement, on April 2, 2001, the U.S. Coalition for Fair Lumber Imports filed a countervailing duty petition and its first anti-dumping petition against Canadian softwood lumber. Forest Renewal BC grants and assistance under the Job Protection Commission (JPC) to lumber producers were found to be countervailable. On April 25, 2002, Commerce :The final subsidy rate was determined to be 18.79%. Individual company dumping rates were set as follows: Abitibi 12.44%; Weyerhaeuser 12.39%; Tembec 10.21%; Slocan 7.71%; Canfor 5.96%; West Fraser 2.18%. All other companies will pay the average dumping rate of 8.43%. The combined CVD/AD rate is now set at 27.22%. On May 2, (ITC): US producers are only threatened with material injury by Canadian lumber shipments to the U.S. Consequently, U.S. Customs are required to refund the bonds and cash deposits posted by Canadian softwood lumber companies prior to May 16, 2002. On May 22, 2002, Commerce published its final orders in the countervailing duty and anti-dumping case. As a result, the U.S. Customs requires cash deposits for duties on all softwood lumber imported from Canada since May 22, 2002. 12/5/2018 Nisha Malhotra

WTO and NAFTA Challenges The federal government, the provinces and industry have launched a number of challenges related to the lumber cases. Challenges at the World Trade Organization (WTO) consider whether the U.S. has breached its obligations under the WTO. North American Free Trade Agreement challenges consider whether the U.S. has applied its own trade laws correctly. 12/5/2018 Nisha Malhotra