Looming Shrimp Trade Restraints Motivations, Biases and Politics of the U.S. Antidumping Law Kenneth J. Pierce Willkie Farr & Gallagher LLP The Royal Thai Embassy The U.S.-Thailand & U.S.-Vietnam Committees of the U.S. –ASEAN Business Council February 10, 2004

The Continued Dumping and Subsidy Offset Act of 2000 “The Byrd Amendment”

The Antidumping Law From Protection to Greed... The Effect of the Byrd Amendment:  The Lure of Big Cash Awards  Attorney Contingency Arrangements

The Lure of Big Payouts Byrd Money Fosters Antidumping Actions... Hundreds of millions of dollars in Byrd disbursements have been made each year Examples of “Big Winners”  Ball Bearings from Japan $51 million (2001)  Crawfish from China $7 million (2002)  Pipe and Tube from Thailand $4 million (2002)  Wax Candles from China $69 million (2002) 2004 – hundreds of millions (Canadian lumber CVD)

The Lure of Big Payouts Byrd Money Fosters Anti-dumping Actions... About $2.5 billion in shrimp imports enter the United States from countries subject to the antidumping investigation Hypothetical:  $2.5 billion X 10% AD = $250 million in cash rewards SSA Petition Support Survey letter to shrimpers:  “You must register to participate in any monetary benefits that may accrue through duties levied on imported shrimp if the domestic industry prevails.”

Byrd Amendment is Illegal Under WTO Rules, But Difficult to Repeal WTO Appellate Body declared the Byrd Amendment inconsistent under both the WTO Anti-dumping and SCM Agreements as an impermissible action against dumping and subsidies U.S. already beyond reasonable period of time to implement; complainants seeking to retaliate U.S. politics, need for Act of Congress, make repeal difficult:  Bush FY2004 softly supports repeal  Strong anti-WTO sentiment on Capitol Hill; a February 2003 letter from 68 Senators to the President expressed opposition to repeal  Election year politics

What is Dumping and How Does Antidumping Work Rhetoric and Reality

Theoretical Rationale for Antidumping Not a Good Fit for Shrimp Proponents of antidumping claim:  Sanctuary home markets and subsidy rents finance lower prices or below cost sales to U.S. market Many cases do not match the paradigm:  Cost Test: No profit sanctuary possible where sales in home market below cost  SHRIMP  No protected home market  No “viable” home market for “frozen shrimp”; DOC must look to third-country market to compare prices – Europe and Japan (why should U.S. object if it gets a better price on Asian or South American shrimp than do France or Japan?)  Methodology always requires a finding of dumping somewhere

Biases Inherent in the Law Examples:  Only antidumping plaintiffs (petitioner) win tie votes (ITC)  Exporter must always prove the negative (e.g., no hidden discounts) and bases for all favorable adjustments, while petitioners’ allegations assumed true unless disproven by exporter  Third country comparisons – deduct from U.S. price all related U.S. importer’s profit and expenses, but no profit and only limited expenses deducted from third country related importer’s prices

Politics Engrained in Administration of the Law The 1979 transfer from Treasury to Commerce: “The move reflected a Congressional desire for more zealous enforcement of AD/CVD laws and for less concern about their being used in a protectionist manner. Its significance goes beyond the difference in institutional sympathies. One of DOC’s functions is to serve as an advocate for U.S. firms. Thus, the move placed responsibility for deciding AD/CVD cases in the hands of an advocate of U.S. parties to those cases.” - U.S. Congressional Budget Office (1994)

Politics Inherent in the Details DOC makes political decisions on technical issues that affect the outcome  Example: Model Matching – what is the proper criteria for grouping products for ME price and cost comparisons?  Example: Surrogates – in NME, what surrogate values get used for determining antidumping margins?  Example: DOC verifications – demands the impossible and then penalizes party for not meeting demands

Managing the Politics of the Antidumping Law’s Administration

Working the Process Department of Commerce. Because the law’s administration is political, DOC makes choices on technical matters that dramatically affect the margin calculation. Must have pressure on DOC to make fair choices. USTR – State – Treasury – White House – Congress. International Trade Commission. More objective, but also politically sensitive. Budgets and staff are threatened by lawmakers. Must make it politically safe for the ITC to consider the merits. Press and American interests (jobs).