WORKSHOP ON TRADE REMEDIES - ANTIDUMPING Professor David A. Gantz University of Arizona, James E. Rogers College of Law Ho Chi Minh City, August 2004 gantz@law.arizona.edu Sponsored by The U.S.-Vietnam Trade Council Education Forum usvtc@usvtc.org

I. Trade Remedies - Safeguards GATT, Art. XIX contains “escape clause” permitting reimposition of tariffs or quotas as a result of increasing imports causing serious injury to domestic producers Such language found in GATT 1947 and most other trade agreements

I. Safeguards, cont’d. Another requirement is “unforeseen circumstances,” unexpected surges as a result of tariff concessions, which is difficult to prove. WTO Agreement on Safeguards provides detailed procedural and substantive requirements for initiation of safeguard measures

I. Safeguards, cont’d. Many countries, such as US, exempt FTA partners from global safeguards, although WTO Appellate Body has made this very difficult. Developing country exports are exempted if a country represents under 3% of total exports, or developing countries in the aggregate, under 9%

I. Safeguards, cont’d. US – Steel Safeguards confirmed that only increased imports throughout the period of investigation would be sufficient justification for safeguards. FTA members who were major producers– Mexico and Canada– could not be excluded if their imports were covered in the investigation

I. Safeguards, cont’d. Difficulties with regard to showing that imports were cause of serious injury, FTA issues, unforeseen circumstances, makes a WTO legal safeguards action by Member nations unlikely. U.S. has special safeguards for “market disruption” for NMEs; lower standard

II. Trade Remedies - Dumping Dumping most common of trade remedies; over 100 WTO Members have AD laws, as does Vietnam Most common users are US, India, EU, Australia and Argentina To impose AD duty, domestic industry needs to show dumping, and material injury

II. Dumping, cont’d. WTO AD Agreement defines dumping as price discrimination between foreign and domestic markets More logical focus on sales below production cost, or predatory pricing, is not used AD laws best seen as a safety valve for freer trade worldwide

II. Dumping, cont’d. Normal Value (NV) (usually price in home market) compared to Export Price (EP) If EP is lower than NV, difference is dumping margin, with de minimis level of 2% AD Agreement provides detailed procedural protections and substantive rules for national investigating authorities

II. Dumping, cont’d. Under AD Agreement and national laws, various adjustments are to be made to NV and EP so as to provide a “fair comparison.” Adjustment for freight, circumstances of sale, differences in merchandise are designed to result in a fair comparison at the “ex factory” level

II. Dumping, cont’d. Non-Market economy countries, such as Vietnam and China, are treated differently US, EU assume that various materials and production costs (input data) are not set by market forces, but through government decisions, and are therefore untrustworthy

II. Dumping, cont’d. Instead, Commerce (or the Commission) uses a “surrogate,” normally a market economy country such as India or Bangladesh that is a significant producer of the product, and is at a similar level of development In theory this seems reasonable, but the lack of detailed public data from producers in the surrogate country permit Commerce to make many assumptions or adjustments that may be adverse to NME country producers.

II. Dumping, cont’d. China, in its Accession Agreement with the United States, accepted the concept of NME treatment for 15 years! US and China had recent discussions as to how China can become a market economy for AD purposes (like Russia) but it likely will take many years to change

II. Dumping, cont’d. Commerce initially determined that Vietnam would be given NME treatment as part of Basa/Catfish, based on: Government intervention in economy Non-convertibility of dong Controls on foreign investment and investors Use of government pricing committees Discriminatory treatment of SOEs Restrictions on private land ownership Weak rule of law

II. Dumping, cont’d. While the surrogate approach is used for NV, Vietnamese (and most Chinese), exporters have been given “separate rates” for determining EP This is based on Commerce determination that the exporters determine selling prices without government direction or interference.

II. Dumping, cont’d. In BASA/Catfish, Commerce used input data from India and Bangladesh, and found margins of approximately 36-64% The US International Trade Commission found material injury, based on the significant increases in Vietnamese imports over three years, and lower prices in the U.S. market

II. Dumping, cont’d. While small producer countries are exempt from AD injury findings if they have imports which are less than 3% individually or less than 7% in the aggregate (Art. 5.8), Vietnam was responsible for a far larger share of total U.S. imports.

II. Dumping, cont’d. In Shrimp, Commerce found preliminary AD margins of 12.11% to 19.60% for most Vietnamese producers, although a group of others received 93.13% margins A Bangladeshi company was used as the surrogate for most input prices

II. Dumping, cont’d. Final AD determination could result in higher or lower margins, after verification in Vietnam and a hearing in Washington If final AD margins are found, likely that USITC will find material injury, as Vietnam source imports (and those from five others, China, Brazil, Ecuador, India, Thailand) are rapidly increasing, while the U.S. domestic producer market share is decreasing.

III. Trade Remedies – Subsidies US doesn’t bring countervailing duty (CVD) actions against NMEs US may nevertheless bring WTO actions against Vietnam (once Vietnam is a member) in WTO DSB against Vietnam’s prohibited or actionable subsides under Parts II and III of SCM Agreement

III. Subsidies Subsidy defined (Art. 1 of SCM Agreement) as financial contribution that confers a benefit on recipient Actionable or “yellow light” subsidies are domestic subsidies that are “specific” and cause injury, “nullification or impairment” or serious prejudice. (Arts. 5,6)

III. Subsidies Export (“Red Light”) subsidies are prohibited under Art. 3 except for least developed developing countries. Certain subsidies (Art. 8) were from 1995-2000 specifically excluded; “Green Light” subsidies were certain environmental, regional and R&D subsidies.

III. Subsidies Developing countries, including Vietnam once Vietnam is a member and no longer treated as an NME, receive certain benefits: Excluded if their exports are 4% or less of import value, 9% or less in aggregate 2% de minimis level instead of 1% Grace periods for export subsidies (now expired)