1. 1 CONTINGENT TRADE REMEDIES BASIC PRINCIPLES and RULES April 2014 Judith Czako Counsellor, Rules Division WTO Secretariat

2. 2 Fundamental WTO principle – mutual opening- up of Members to increased international trade Why?  economic benefits of trade How?  Market access (tariff bindings)  Ban on quantitative restrictions  Non-discrimination (MFN and national treatment)

3. 3 Potential problems for domestic competitors Allow, under certain circumstances, the application of «contingent trade remedy measures» to imports Allows Members to depart from the fundamental principles of the GATT system

4. 4 What are the measures? ANTI-DUMPING measures COUNTERVAILING measures SAFEGUARD measures

5. BASIC PRINCIPLES IN WTO AGREEMENTS Procedural rules  Especially for AD and CVD – fewer specific rules for Safeguard investigations 5

6. BASIC PRINCIPLES IN WTO AGREEMENTS Substantive rules for Determinations  Existence of contingency: dumping, subsidy, or increased imports  Injury degree and type of injury  Causal link 6

7. DETERMINATIONS NECESSARY FOR ACTION Dumped imports cause injury to domestic industry Subsidized imports cause injury to domestic industry Increased imports cause serious injury or threat thereof to domestic industry 7

8. 8 The conditions governing the application contingent trade remedy measures are not discretionary. ALL of the rules and principles set out in the relevant WTO Agreements must be respected in each case

9. 9 Domestic legal basis Measures taken unilaterally by the government of the importing Member, and applied at the border AD/CVD - Not required to have national law  BUT, must respect Agreements  almost impossible without domestic legislation Safeguards - must have previously published procedures before taking action

10. 10 Anti-dumping measures Anti-dumping duties on future imports concerned  general rule: different rate for each exporter Price undertakings  exporters individually undertake to raise prices to eliminate dumping or injury

11. 11 Countervailing measures Countervailing duties on imports concerned  general rule: different rate for each exporter benefitting from subsidies Price undertakings  exporters individually undertake to raise prices to eliminate subsidy benefit or injury Exporting government undertaking  eliminate or limit subsidy, or take measures concerning effects of subsidy

12. Safeguard measures Form unspecified  Tariff increase above bound rate  Quota  Tariff quota  Other possibilities? Must choose most suitable measure 12

13. Safeguard measures Applied to whom?  MFN – measures apply to all imports irrespective of source limited exception for small developing suppliers 13

14. 14 Definitions – Dumping Introduction of a product into the commerce of another country at less than its «normal value»  international price discrimination

15. Definitions – Subsidy A financial contribution By a government or any public body That confers a benefit That is specific 15

16. 16 AD/CVD Definitions – Like Product  Domestic product identical to the imported product under investigation OR, if no identical product,  Domestic product having characteristics closely resembling those of the imported product under investigation

17. SAFEGUARDS Definitions – Like or Directly Competitive Product Undefined in text Generally accepted to be broader definition than in AD and CVD cases 17

18. 18 AD/CVD Definitions – Domestic industry  Domestic producers as a whole of the product that is like the product concerned OR  Producers whose collective output constitutes a major proportion of the total production of the like product

19. 19 SAFEGUARDS Definitions – Domestic industry  Domestic producers as a whole of the like or directly competitive products operating within the territory, OR  those whose collective output of the like or directly competitive products constitutes a major proportion of the total production of those products

20. DOMESTIC INDUSTRY Determination of who is in the domestic industry determination controls: Who may request AD/CVD investigation Whose data are considered in injury analysis 20

21. 21 AD/CVD Definitions – Three forms of injury « material injury »: Present/existing injury to a domestic industry « threat of material injury »: Injury that has not taken place yet but is imminent; and « material retardation » of the establishment of a domestic industry

22. AD/CVD Definitions – Threat of Material Injury Clearly imminent Based on facts: not allegation conjecture or “remote possibility” 22

23. AD/CVD Definitions – Material Retardation NO factors, criteria, or other guidance in text regarding determination of material retardation of the establishment of a domestic industry 23

24. SAFEGUARDS Definitions – Two forms of injury Serious injury  defined as significant overall impairment in the position of the domestic industry serious injury generally accepted to be worse than material injury in AD and CVD cases 24

25. SAFEGUARDS Definitions – Two forms of injury 25 Threat of serious injury  defined as serious injury that is clearly imminent Based on facts, not allegation, conjecture or remote possibility

26. SAFEGUARDS  material retardation is NOT a form of injury that can be the basis for a safeguard measure 26

27. 27 Definitions – Causal link Causal link between imports AND injury  a genuine and substantial relationship of cause and effect between imports and injury, based on objective examination of evidence  injury caused by factors other than the imports must not be attributed to the imports

28. Determination of Dumping Normal value Generally, price of like product when sold in the exporting country  i.e., exporting country domestic market price 28

29. NORMAL VALUE the comparable price in the ordinary course of trade for the like product when destined for consumption in the exporting country 29

30. EXCEPTIONS TO USE OF DOMESTIC PRICE no sales of the like product in the ordinary course of trade, OR sales do not permit a proper comparison  a particular market situation  low volume of sales in the exporting country (<5% of investigated imports) 30

31. NO DOMESTIC PRICE? Two alternatives: Export price to a third country Constructed value in the exporting country no hierarchy between these two 31

32. EXPORT PRICE TO THIRD COUNTRY the comparable price of the like product when exported to an appropriate third country provided that this price is representative 32

33. CONSTRUCTED NORMAL VALUE constructed substitute for domestic market price in exporting country Cost of production in country of origin plus reasonable amount for administrative, selling and general costs and reasonable amount for profits 33

34. EXPORT PRICE The price of the exported product in the market of the importing country 34

35. ALTERNATIVES If no export price OR export price unreliable due to  association or  compensatory arrangement between the exporter and the importer 35

36. CONSTRUCTED EXPORT PRICE BASIS:  Price of first sale to an independent buyer OR  other reasonable basis 36

37. 37 Establishing the existence of dumping Compare the normal value and export price  Dumping exists where export price is less than normal value E.g.: Normal value: €25 per kg less export price: __€20 per kg Difference (positive) € 5 per kg Dumping margin of 25% (on basis of EP)

38. 38 Fair comparison Compare prices at the same level of trade, normally ex-factory as nearly as possible at the same time Differences which affect price comparability must be accounted for – “adjustments” of “allowances” :  E.g., Conditions/terms of sale, quantities, physical characteristics, taxation, and any others demonstrated to affect price comparability

39. NON-MARKET ECONOMY Special case: where Government role  in setting prices results in prices in exporting country that do not reflect market situation  in establishing input prices precludes constructing a normal value 39

40. NON-MARKET ECONOMY No methodology provided Broad discretion 40

41. 41 Many sales, one dumping margin Weighted average normal value of all transactions to weighted average export price of all transactions Transaction normal value to transaction export price weighted average normal value of all transactions to transaction export price

42. 42 Establishing the existence of subsidy Examine individual government programmes/actions alleged to be subsidies, under definition in Agreement

43. FINANCIAL CONTRIBUTION Direct transfer of funds, e.g.  Grants  Loans  Equity infusions 43

44. FINANCIAL CONTRIBUTION Potential direct transfer of funds, e.g.  Loan guarantees 44

45. FINANCIAL CONTRIBUTION Foregone or uncollected Government revenue, e.g.  tax credits or  import duty exemption on machinery 45

46. FINANCIAL CONTRIBUTION Provision of goods or services other than general infrastructure Purchase of goods Income or price support 46

47. GOVERNMENT OR PUBLIC BODY government or public body makes financial contribution OR entrusts or directs a private body to make financial contribution within the territory of the Member 47

48. BENEFIT Advantage to recipient Compared to obtaining same financial contribution in marketplace 48

49. SPECIFICITY Principle - Specific financial contribution distorts resource allocation which can lead to trade distortion 49

50. 50 Determine amount of subsidy Little guidance  benefit to recipient, not cost to government  method of calculating benefit in national legislation or regulations  application must be explained in each case

51. AMOUNT OF SUBSIDY Determine total amount of subsidy provided to/received by each company investigated under each subsidy programme investigated  programme-by-programme/subsidy-by-subsidy determination 51

52. AMOUNT OF SUBSIDY Calculate ad valorem, per/unit rate of subsidization during period of investigation: Subsidy amount / relevant sales (volume or value)  Allocated to product concerned per unit  Allocated over time, if necessary 52

53. 53 AD/CVD Level of duty The duty rate cannot exceed the calculated dumping margin or per unit amount of subsidization for each exporter

54. 54 AD/CVD Level of duty Lesser duty  Members are encouraged to apply duty rates lower than the calculated dumping margin or subsidy rate where these would be sufficient to remedy the injury caused by imports

55. SAFEGUARDS Determination of increased imports Absolute or Relative to domestic production 55

56. HOW MUCH INCREASE? “sufficiently” recent, sudden, sharp and significant 56

57. SAFEGUARDS LEVEL OF MEASURE Little guidance  Only to the extent necessary to prevent injury and facilitate adjustment Specific rules for quotas 57

58. SAFEGUARDS LEVEL OF QUOTA  Historical basis - average level last 3 years  UNLESS  clear justification for different level 58

59. SAFEGUARDS ALLOCATION OF QUOTA  agreement on shares with interested Members OR  based on past market shares of suppliers 59

60. SAFEGUARDS QUOTA “MODULATION” IF  Imports from certain Members increased at disproportionate rate  Departure from historical levels justified  Result is equitable  Consult with interested Members  Allocate quota on a different basis 60

61. DETERMINATION OF INJURY specified criteria objective examination of positive evidence regarding the relevant criteria 61

62. SAFEGUARDS: INJURY FACTORS  Rate of increase of imports  Market share of imports  Changes in level of sales  Production  Productivity  Capacity utilization  Profits and losses  Employment 62

63. AD / CVD – BASIC ELEMENTS volume of dumped/subsidized imports effect of dumped/subsidized imports on prices in the domestic market for like products, and consequent impact of dumped/subsidized imports on domestic producers of like products 63

64. VOLUME significant increase in dumped/subsidized imports ?  absolute or  relative to production or consumption in the importing country 64

65. PRICES  significant price undercutting or  significant price depression or  significant price suppression 65

66. IMPACT evaluate all relevant economic factors and indices having a bearing on the state of the domestic industry 66

67. AD/CVD INJURY FACTORS Actual and potential decline in: – Sales- Productivity – Profits- Return on investment – Output- Utilisation of capacity – Market share 67

68. AD/CVD INJURY FACTORS Factors affecting domestic prices 68

69. AD/CVD INJURY FACTORS Actual and potential negative effects on: – Cash flow- Growth – Inventories- Ability to raise capital – Employment- Ability to raise investment – Wages 69

70. AD INJURY FACTORS The magnitude of the margin of dumping 70

71. CVD INJURY FACTORS In agriculture cases, consider whether increased burden on government support programmes 71

72. INJURY ANALYSIS Must consider, and address, each of the listed factors Must also consider and address any other relevant factors No one factor is determinative 72

73. CAUSATION Genuine and substantial relationship of cause and effect between imports and injury, based on objective examination of evidence No specific tests, methodology or criteria Injury caused by other factors must not be attributed to investigated imports 73

74. 74 AD/CVD – Provisional measures  Purpose - to prevent further injury during the investigation  Form - duty or security  Basis - preliminary determination of dumped imports causing injury  Amount - < dumping margin provisionally estimated (minimum period – 60 days after initiation)  When / duration – no less than 60 days after initiation; normally 4 months, possibly up to 6

75. 75 SAFEGUARDS – Provisional measures When - In critical circumstances, where delay would cause damage difficult to repair Basis - preliminary determination of clear evidence of serious injury or threat caused by increased imports Form - Refundable tariff increase ONLY Duration – Maximum 200 days Investigation must continue

76. 76 While AD/CVD measure is in place Exporters or producers can request recalculation, if think excess duties have been paid Overpayment must be refunded New exporters can request individual determination of duty rate

77. AD / CVD DURATION OF MEASURES General rule: duties and undertakings terminate five years after imposition UNLESS  a review covering both dumping and injury is initiated before the deadline, AND  there is a determination that termination of duty would lead to continuation or recurrence of dumping or subsidization and injury Measure may be continued 77

78. 78 While Safeguard measure is in place If duration longer than one year, reduce impact of measure at regular intervals (progressive liberalization) If duration longer than three years, mid-term review  Withdraw or adjust pace of liberalization

79. SAFEGUARDS DURATION OF MEASURES General rule: four years May be extended if determination that  Measure necessary to prevent or remedy serious injury AND  Evidence that the industry is adjusting May not exceed a total of eight years May not reapply for same period as measure was in place 79

80. SAFEGUARDS DURATION OF MEASURES Special rule for developing Members  May extend measure for additional two years  May reapply measure after shorter period 80

81. 81 AD/CVD Procedures – Initiation Application by/on behalf of the domestic industry Representativeness (standing) of the applicants Adequate evidence in the application of:  The existence of dumping or subsidization  the existence of injury  causal link

82. 82 AD/CVD Procedures – T ime-limit for investigation (normally 12 months)

83. AD/CVD Procedures – Questionnaires  Dumping margins - normally calculated on the basis of exporters’ replies to questionnaire  Subsidization – normally determined on the basis of government replies to questionnaire and exporters’ replies for specific amount  Injury - normally determined on the basis of domestic producers’ and importers’ replies to questionnaire 83

84. 84 AD/CVD Procedures – Due Process Right of defence  Interested parties (including exporters and their governments) have the right to present evidence and arguments to the authorities  Hearings Transparency  Parties: Right to see evidence, arguments; authorities’ calculations and bases for determinations  Authorities: published determinations at every stage (initiation, preliminary determination, final determination)

85. Safeguards Procedures – Similar principles to AD/CVD, less detail specified in Agreement  Public notice, public hearings, opportunity to present views, published report of findings and conclusions, confidential information 85

86. SAFEGUARDS: COMPENSATION Principle Members must “pay” for safeguard by compensating exporting Members affected  Rarely agreed 86

87. SAFEGUARDS RETALIATION Principle exporting Member can retaliate if compensation not agreed LIMITED: No retaliation allowed for 3 years after imposition, IF:  measure based on an absolute increase in imports  measure consistent with Agreement 87

88. SAFEGUARDS CONSULTATIONS PRIOR to applying final measure IMMEDIATELY AFTER taking provisional measure 88

89. 89 Procedures – Multilateral level Notifications to the WTO  Relevant laws, procedures, authorities  Initiations  Preliminary determinations, provisional measures  Final determinations, definitive measures  AD/CVD - Semi-annual report to the WTO  Safeguards – additional notifications

90. 90 What happens if the rules are not followed? domestic judicial proceedings and/or WTO dispute settlement

91. AD / CVD JUDICIAL REVIEW Members must provide for review of final determinations before independent judicial, arbitral or administrative tribunals or procedures 91

92. DISPUTE SETTLEMENT WTO dispute settlement available with respect to all aspects of AD, CVD and Safeguard measures imposed, both substantive and procedural elements 92

93. 93