1. Overview of Trade Remedies in WTO System
Antidumping, Subsidies, Safeguards
Presented by Kenneth J. Pierce and Matthew R. Nicely
Willkie Farr & Gallagher
for the Georgetown University Law Center
NCIEC WTO Conference
sponsored by the U.S. – Vietnam Trade Council
11 March 2004

2. Introduction to Willkie Farr & Gallagher
New York-based law firm with more than 500 attorneys in offices around the world
Washington DC office houses our international trade practice – one of the largest and most prominent in the United States
Practice includes 18 lawyers and 5 trade analysts with decades of experience in the field
Focus of practice is international trade remedies, particularly antidumping and countervailing duties and safeguard measures
Our successes span all aspects of the litigation, from work before U.S. agencies to appeals before U.S. courts and the WTO
Currently representing Vietnam in shrimp antidumping case
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3. Introduction to trade remedies Safeguard Measures Anti-dumping Duties
Agenda
Introduction to trade remedies
Safeguard Measures
Anti-dumping Duties
Countervailing Duties
WTO Dispute Settlement
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4. What are trade remedies?
Permissible import restraints that otherwise would be contrary to WTO principles
essentially, exceptions to the bedrock rules of binding tariffs and MFN (most favored nation) treatment
Designed to allow relief from imports deemed “unfair,” or adjustment from a surge in imports
often called the “safety valve” to allow further trade liberalization
WTO identifies three primary types:
safeguards (temporary relief from import surges)
countervailing duties (counteracting subsidies)
antidumping (counteracting unfairly low prices)
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5. Historical Development
In early years, little attention paid to trade remedies
original GATT: Article VI covered anti-dumping measures; Article XVI covered subsidy practices and Article XIX dealt with safeguards
focus of GATT was reducing tariffs
Over time, focus on trade remedy measures
Kennedy Round (1969) produced first rules on antidumping duties; but only agreed to by a limited number of countries
Tokyo Round (1979) expanded Anti-Dumping Code; produced Subsidies and Countervailing Duties Agreement, but did not really address substance of subsidy practices
Uruguay Round produced first agreement on application of safeguard measures; addressed substance of subsidies
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6. Frequency of Use
As tariffs are reduced or eliminated, more countries are invoking WTO trade remedies to assist domestic industries
From 1995 through June 30, 2003:
259 safeguard proceedings were initiated (huge increase in 2002 due to steel measures)
2,156 antidumping proceedings were initiated
160 CVD proceedings were initiated
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7. Frequency of Use - cont’d
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8. Frequency of Use - cont’d
Historically, relatively few users of trade remedies; recently, more and more countries have utilized
Countries Initiating AD Investigations
Argentina
Australia
Brazil
Canada
China
Colombia EC
Egypt
India
Indonesia
Israel
Jamaica
Japan
Korea
Malaysia
Mexico
New Zealand
South Africa
Taiwan
Thailand
Turkey
Uruguay
Venezuela
USA
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9. Frequency of Use - cont’d
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10. Distinctions Nature of underlying activity Nature of injury varies
AD and CVD counteract “unfair” trade practices
unfairly priced (AD) and government subsidized (CVD) imports
the added tariff is intended to offset the improper dumping or subsidy
allegation of unfairness means must target individual country
In safeguard cases, there is no issue of unfairness
by law, all imports examined in a safeguards case are considered fairly traded
since fairly traded, all sources should be included (though exceptions apply for developing country exclusions, country-specific safeguards (China and Vietnam), and possibly FTA partners)
Nature of injury varies
AD and CVD require only material injury
Safeguards require serious injury
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11. Distinctions Nature of remedy Duration of remedy
AD and CVD limited to the amount of dumping or subsidization
Safeguard remedies more flexible
Duration of remedy
AD and CVD can last forever, although there are reevaluations every five years
Safeguard measures usually shorter in duration – often three years to avoid need to compensate
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12. Similarities
Cases usually brought by domestic industries struggling to compete with imports
Usually triggered by an increase in imports
Some degree of injury to domestic industry must be demonstrated
regardless of dumping or subsidy margin (or size of import surge), no import relief unless finding of injury and causation
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13. Safeguards – Overview
Intended to “safeguard” domestic industries from consequences of trade concessions made through GATT/WTO process
Allows countries to temporarily suspend tariff concessions to give domestic industry “breathing room” necessary to adjust to increased import competition
Belief is that having such a “safety valve” makes it easier for countries to maintain the political resolve to negotiate trade concessions
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14. Safeguards – The New Agreement
Before WTO Agreement, countries often imposed “gray measures”, such as “voluntary export restraints”
U.S. demanded VERs on imported steel, autos and semiconductors during 1980s
EU demanded strict VERs on cars
New WTO Agreement prohibits gray measures
Detailed mechanism for addressing import surges that cause serious injury
New agreement applies to all WTO members
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15. Safeguards – The New Agreement
Under WTO Agreement three conditions must be satisfied before imposing safeguard measures
(1) must find a recent increase in import volume that was unforeseen and the result of trade concessions
(2) must find that the increased imports have caused (or threatened to cause) the domestic industry to suffer serious injury
(3) must craft appropriate remedy that is no more restrictive than necessary to eliminate the serious injury caused by the imports
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16. Safeguards – Developing Countries
Developing countries are accorded some favorable treatment under Agreement
safeguard measures may not be applied against developing countries that account for less than 3% of total imports of the like product, UNLESS total share of all developing countries is more than 9%
Example of U.S. steel case
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17. Safeguards – The Doha Round
Safeguards agreement not currently on agenda; however, very well could become “sleeper” issue
Recent Appellate Body decisions have interpreted Safeguards Agreement to make it difficult to impose import restraints
In particular, U.S. has lost every safeguard decision that was challenged
Adverse domestic reaction to WTO rulings could make U.S. willing to seek to revise Agreement
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18. Antidumping – Overview
Definition
what it is:
“dumping” refers to situation when an exporter sells goods in an export market at prices lower than those same goods are sold in its home market
what it is not:
dumping has nothing to do with actions of a foreign government;
dumping does not involve predatory pricing
antidumping remedy consists of additional tariff equal to the amount of injurious dumping (discuss “lesser duty rule”)
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19. Antidumping – rationale
Economic theory is that it is unfair for foreign companies to use profits earned from a closed market to capture export markets
Rationale not reflected in AD Agreement or, in turn, national laws
law does not require showing that home market is closed
law does not even require showing of excess profits in home market
Competition authorities dislike AD laws
competition officials understand anticompetitive nature
but politicians love them
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20. Antidumping – historical development
Concept of “dumping” has long history
first national AD law adopted in 1904 by Canada
many other countries followed
GATT 1947 recognized problem of dumping - Article VI
Increased use of AD laws, combined with lack of specificity in GATT, led to attention during trade negotiations
refining AD rules became part of each round of negotiations
Kennedy Round: 11 pages, 4,613 words Tokyo Round: 17 pages, 6,712 words Uruguay Round: 26 pages, 11,746 words
more recently, dispute over AD Agreement almost derailed new round
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21. Antidumping – WTO Agreement
Primary purpose of WTO AD Agreement is to establish disciplines for imposition of AD duties
Detailed rules on how to determine the magnitude of any dumping
General rules on how to analyze whether the domestic industry is suffering material injury
New rules on how long AD duties can be imposed
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22. Antidumping – Developing Countries
No real “breaks” for developing countries
Article 15 historically ineffective
De minimis rule applies to all countries
Negligibility rule applies to all countries
Cumulation largely negates negligibility exception
Special rules for “non-market economies”
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23. Antidumping – the Doha Round
Bona fide agenda item
Carefully negotiated mandate
“improve and clarify”
“but preserve “basic concepts and principles”
U.S. agenda to strengthen anti-dumping measures, avoid new disciplines.
Developing countries want better rules on negligibility, make Article 15 real
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24. Subsidies – Overview
Harder issue than AD because no consensus about the “problem”
many believed assisting industry was legitimate function of government
U.S. had strongly held contrary view
1979 Agreement was optional
1995 Agreement binds all WTO members
first time adoption of substantive rules
traffic light approach
standards for determining countervailability
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25. Subsidies and CVD Measures
Addresses definition of “subsidy” for first time
Provides alternative ways to attack subsidies
WTO dispute settlement
Countervailing Duties
Provides procedural framework for CVD measures
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26. Definition of Subsidy Financial contribution by government
government versus private sector
Benefit conferred
use of market benchmarks
Specific to some industry
certain companies or industries
all export subsidies
de jure versus de facto
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27. Subsidies – The New Agreement
Framework for possible WTO challenge
Prohibited subsidies (“red light”)
export subsidies, import substitution
Actionable subsidies (“yellow light”)
government financing; beneficial tax rates
but must demonstrate “serious prejudice”
Non-actionable subsidies (“green light”)
R&D assistance; facility adaptation for environmental regulations
have since expired
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28. CVD – The New Agreement Can attack red light or yellow light subsidies
Common theme: use of market benchmark to evaluate subsidy
Must be “specific,” which is often a major issue to be debated
Procedural framework largely mirrors Antidumping Agreement
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29. Subsidies – Developing Countries
Developing and least-developed countries given time to comply with new anti-subsidy rules
least developed countries (less than $1,000 per capita) are exempted from disciplines on prohibited subsidies
other developing countries have until 2003 to eliminate export subsidies
least developed countries to eliminate import substitution policies by 2003
More favorable de minimis and negligibility rules
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30. Subsidies – The Doha Round
Bona fide agenda item
Same careful mandate
More fundamental issues (e.g. renewing “green light” subsidies)
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31. Attacking trade remedies
As more countries use trade remedies, more countries are turning to the WTO.
Binding dispute settlement makes WTO alternative more attractive.
The trend will accelerate as developing countries rush to use trade remedies.
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32. WTO Panel Decisions
The WTO has adopted 84 panel reports. Of those 84 reports, 54 (or 64%) covered AD/CVD or Safeguard Measures:
AD - 21 (or 25%) (includes 2 regarding Mexico's High Fructose Corn Syrup, 2 regarding EC Bed Linen, 2 regarding Korean DRAMs, and 2 regarding Guatemala cement)
Subsidies/CVD - 25 (or 30%) (includes 2 regarding Australian leather, 3 regarding Brazilian aircraft, 2 regarding Canadian aircraft, 3 regarding Canadian milk/dairy and 2 regarding US-FSC)
Safeguards - 8 (or 10%)
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33. Dispute Settlement: Issues to consider
Strength of claim.
Authorities often make many mistakes; attack the weakest parts of the decision.
Special standard of review for antidumping; others subject to DSU Article 11 standard.
Alternatives under domestic law may be faster and more effective
Commercial stakes: Need to balance governmental systemic concerns with commercial stakes.
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34. Special antidumping standard
Unique standard of review
accept any “permissible” legal interpretation
accept any “unbiased” and “objective” factual findings
Uncertain future for this special rule
Panels have been deferential, but not excessively
Can succeed in challenge anti-dumping measures
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35. Implementation challenges
WTO process takes months.
“Reasonable period of time” adds another months.
National authority may repeat its decision.
Overall pattern is mixed; authorities sometimes implement
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36. The longer term view WTO review takes time, and outcome uncertain.
But can influence how authorities handle future cases under that particular trade remedy.
Can also influence how authorities handle other cases involving the complaining country.
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37. The role of new negotiations
Some changes are better pursued in negotiations rather than litigation.
Ongoing negotiations for antidumping and countervailing duties.
Possibility of safeguard issues being added directly or indirectly.
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