General Council on Clarification of the Anti-Dumping Agreement
Anti-Dumping Issues at the Upcoming Cancun WTO Ministerial
Andrew Plowman, State Department Official on Sabbatical
Andrew Nutter, Trade Advisor to George Blair
Amidst concern that Anti-Dumping (AD) actions, both in developed and developing nations, is being
excessively used to restrict competition and close markets which earlier rounds of multilateral trade
negotiations had opened, reform of the Anti-Dumping Agreement (ADA) is promising to be a critical and
contentious issue on the Cancun Ministerial agenda. Our committee has set out first to identify the
underlying trends and predicament of AD actions. Second, to provide an overview of the proposals and
concerns explicitly brought up by member states and some of the broader set of underlying issues that may
come to affect the course of the negotiations. Lastly, we provide recommendations for the Cancun
Ministerial and tentatively provide a set of predictions as to how the negotiations will evolve, with an
emphasis on the political economy aspect of the negotiations rather than the underlying economic purpose
of the ADA.
I. Underlying Tensions
Concern about the fast growing number of Anti-Dumping (AD) actions and the dramatic spread of their use
throughout the world is driving WTO members to review the rules for AD cases and, potentially, the
fundamental purpose of the ADA. A measure of the interest in the issue is that, according to the
International Centre for Trade and Sustainable Development, more proposals and comments have been
tabled on the AD issue in the lead-up to the Cancun WTO ministerial than on any other issue.i
Trends
A review of WTO statistics gives an idea of the scope of the issue. The number of AD investigations grew
from 157 in 1995 to 347 in 2001. These cases, in turn, led to an increase in the number of actual AD
measures imposed on imports from 118 cases in 1995 to 159 cases in 2001. Imposition of AD measures
peaked in 2000 at 235 cases. Moreover, the composition of AD users has changed significantly over the last
decade with developing country AD cases, whilst initially limited to a negligible proportion of AD cases,
now accounting for almost half of worldwide petitionsii. Thus Argentina initiated 17 petitions and India 21
during the first half of 2002, versus 14 for the EU and 16 for the U.S. AD measures worldwide targeted 42
different countries during that period. The most frequent target was China, subject to such measures in 18
cases.iii
These trends led to agreement, as part of the Doha Development Round, to “clarify and improve
disciplines” in the application of AD actions.iv
Concerns
The Uruguay round achieved little consensus on the purpose of AD policy and the result was, broadly
speaking, a codification by negotiators of existing US and EU practices v. Since the Uruguay round,
members wanting to reform the ADA have struggled to get antidumping on the negotiating agenda and
aspects open to negotiation have been restricted to parametric changes, rather than structural changes.
From an academic viewpoint, AD is a blunt and costly instrument. The Japanese Foreign Ministry
estimates there are currently over 900 AD measures still in effect vi. Prussa (1999) documents two of the
key costs of AD protection:
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- Once AD legislation has been adopted, the flexibility and ease of use of AD to policy makers, coupled
with the dynamic effects and incentives of petitions being brought forward by domestic industry,
means that countries have little incentive to restrain its use.
- The bulk of Prussa’s analysis highlights the following tangible cost of AD action on trade flows. In the
US, trade can decrease even before a final ruling has been issued, reflecting the arrangement that if the
ITC rules in favor of an AD petition, the duties are calculated from the day of the initial proceeding
and must be paid in full. The paper calculates that the average AD case causes the value of imports to
fall by 30-50%, irrespective of whether the case is settled or lost. Furthermore, Prussa comes to the
surprising conclusion that even for those cases that are rejected, imports fall. Hence the combination of
the threat of prolific AD action in a country, coupled with the risks to the exporting firm once
proceedings have begun, are a considerable damper to free trade.
Although developing countries are becoming leading users of AD measures, they are also increasingly
concerned that the developed world is using AD measures as a form of backdoor protectionism. Fourteen
developing and industrialized countries (Brazil, Chile, Colombia, Costa Rica, Hong Kong, China, Israel,
Japan, Korea, Norway, Taiwan, Penghu, Kinmen and Matsu, Singapore, Switzerland and Thailand) have
banded together and formed a group called the “Friends of Anti-Dumping Negotiations” to push for
changes to the rules. Some of their proposals have at least some support from the EU. Their goals are to:
“clarify and improve AD rules (1) to prevent abusive and excessive AD measures; (2) to avoid excessive
burden on respondents; and (3) to enhance the transparency, the predictability and fairness of the system.” vii
The U.S., which favors retaining a strong AD mechanism, has also been concerned by abuses of AD
mechanisms committed against its exports. The U.S. position was recently articulated by U.S. Trade
Representative (USTR) Robert Zoellick, in testimony to the U.S. congress. “The international rules that
govern unfair trade practices should be improved, not weakened. (…) Inappropriate and non-transparent
application of these laws can damage the legitimate commercial interests of U.S. exporters.”viii While
more flexible, the EU also is concerned that AD remain a strong tool, and has called for the negotiations to
include discussion of measures to stop circumvention of AD margins.ix
II. Proposed Rules Changes before the Ministerial
The GATT Agreement, article XI, and the Uruguay Round Agreement on its implementation, known as the
Anti-Dumping Agreement (ADA), define dumping as the sale of a product below its “normal” price. The
ADA states “…a product is to be considered as being dumped, i.e. introduced into the commerce of another
country at less than its normal value, if the export price of the product exported from one country to another
is less than the comparable price, in the ordinary course of trade, for the like product when destined for
consumption in the exporting country.”x While this definition may seem relatively straightforward, the
methodology for determining whether dumping has been taking place can be quite convoluted. And the
devil, as always, is in the details of implementation. The high percentage of investigations that actually
lead to anti-dumping margins being imposed led Michael Knoll of the vehemently pro-free trade Cato
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Institute to charge that “In enforcing the anti-dumping law, the U.S. Department of Commerce employs a
methodology that is biased against imports.”xi
In a useful paper, the Canadian WTO delegation grouped the set of rules changes being considered into
three broad categories: 1) Transparency and Procedural Fairness; 2) Clarification; and, 3) Improvement.xii
1. Transparency and Procedural Fairness: This category of actions is the principal U.S. focus. USTR
Robert Zoellick recently told Congress that “The WTO negotiations will help us address significant
shortcomings in foreign anti-dumping and countervailing duty procedures by more clearly defining the
specific circumstances that give rise to unfair trade, improving transparency in how anti-dumping laws are
applied, and strengthening due process.”xiii The initial U.S. proposal called for, among others, discussion
of: 1) agreement on how to ensure timely access by all interested parties to all non-confidential
information; 2) promoting public accountability by making all non-confidential information on AD
decisions publicly available in sufficient detail to allow an understanding of the methodology; 3) that
governments verify the information submitted by the parties and make public reports of that verification;
and, 4) rules for judicial review of AD decisions.xiv In a similar vein, Canada has suggested improving
information disclosure to the parties under investigation, consideration of public hearings as part of the
investigation process and better explanations for decisions. xv The EC and the fourteen countries known as
the Friends have also endorsed transparency actions.
2. Clarification: The Friends have proposed clarification of key concepts and definitions, with a view to
reducing the number of anti-dumping margins imposed as well as reducing their scope. The most
prominent of these proposals, made by the Friends and endorsed by EU and known as the “lesser duty”
rule, is for mandatory implementation of what is currently a voluntary provision of Article 9.1 calling for
countries to impose a duty lesser than that of the dumping margin if that would be sufficient to remove
injury.xvi Making the lesser duty rule mandatory would also require that a consensus methodology for
determining the appropriate margin be agreed. The Friends also propose clarification of a broad range of
definitions and concepts in the ADA. Among many others, the Friends raise: 1) ‘like product,’ a broad
definition of which can lead to imposition of duties on similar products that nevertheless compete in
different markets; 2) Tightening of the definition of “major part of an industry,” to ensure that producers
representing at least 50% of domestic production must support a petition for an AD investigation; 3)
clarification in the evaluation of factors for determining whether injury to domestic industry has occurred;
4) clarification of the methodology for constructing an export price and the conditions under which
construction is allowed in place of using the actual export price; 5) accounting for the role of price
fluctuations in cyclical markets; and, 6) lack of a clear and universal methodology for determining whether
the imports under investigation are the source of injury for the domestic industry.xvii
3. Improvement: Among the proposals for improving the function of AD mechanisms, India has proposed
raising the de minimus level for differences in price levels, (currently 2%), under which dumping is not
viewed as having occurred. In the area of standards for initiating an investigation, India has proposed
amending the rules so that an anti-dumping investigation cannot be initiated if there has been a negative
finding involving the same good within the previous 365 days.xviii The EU has proposed a public interest
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test, so that AD investigations consider the broader impact on consumers and other actors in the country.xix
In a similar vein, Canada has proposed broader period of public comment on the impact of AD margins on
consumers, competition policy and secure supplies of goods. Other proposals in this category include
examination of underlying trade distortions that may cause repeated instances of dumping of the same
production and mandating the refund of duties collected before the Dispute Settlement Board rules against
an AD finding. xx
Broader Concerns
Competition Policy. Effective monitoring of antidumping policies at the multilateral level may not be
feasible until there is broad consensus on competition policy. Since the only economic justification of AD
is as a response to predatory pricing and thus anticompetitive behavior, the first best option is to deal with
dumping claims through national competition policyxxi. The concern then becomes to bring competition
firmly within the WTO mandate and take steps towards harmonizing competition policy amongst member
states.
With competing interests and sometimes incompatible demands for reforming the ADA, we put forward the
possibility that member countries could agree to trade concessions and consent to linking competition
policy to AD; i.e. more fundamental changes in addition to the parametric changes being proposed by the
Friends. Ultimately, this would have the subtle result of shifting from the effects of dumping on domestic
industries (material injury) to the intent of exporting country and foreign industry.
Inequitable costs of AD. A number of developing countries have expressed their concern over the costs of
initiating and defending AD cases. The resources required to initiate a petition and effectively pass
judgment over AD cases are predominantly located in developed countries, prompting such claims of
competitive advantage in AD to be leveled.
III. Recommendations and Predictions
The political economy of AD mechanisms, which have strong support from beleaguered industries – steel
in the U.S. and textiles in the EU, for example – will make it difficult for the governments in those key
countries to support the thrust of the clarifications advanced by the Friends. Some of their proposals may
be taken up, but significant debate over details is to be expected, leading in the end to a watering-down of
the original ideas. Addressing all of the concerns advanced by the Friends would require extensive
reworking of the ADA, or elaboration of a companion document with understandings on implementation.
The most attractive idea advanced so far to increase discipline is making mandatory the lesser margin.
Significant effort will be necessary to come up with an agreeable methodology for calculating the margin.
A second attractive idea, increasing the de minimis margin, may also make some headway. Combined,
these two measures could reduce the number of AD margins imposed and reduce their scope. Everyone
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agrees that the transparency of the AD process should be improved, making it likely that new requirements
for disclosure of information and methodology will be agreed. However, there is concern on the behalf of
developing countries that the transparency proposals pushed forward by the US are both a smokescreen, to
avoid tackling more fundamental issues, and a means to bring the AD petition and judgment process up to
current US standards with little cost to the US and a greater hurdle for developing countries.
Lastly, we do not believe Competition Policy will be blended into or replace the ADA. The domestic
political constraints are too great and the value of such a concession would be too large to trade with other
concessions amongst disagreeing parties.
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References
De C. Grey, Rodney. The Relationship between Anti-Dumping Policy and Competition Policy, UNCTAD.
May 1999
Doha Round Briefing Series, published by The International Centre for Trade and Sustainable
Development (ICTSD) and the International Institute for Sustainable Development (IISD), February
2003 issue.
General Agreement on Tariffs and Trade, Article VI.
Hoekman, Bernard and Kostecki Michael, The Political Economy of the World Trading System; The WTO
and Beyond, Oxford University Press, 2001.
Knoll, Michael S. Dump Our Anti-Dumping Law. Cato Institute Foreign Policy Briefing No. 11 July 25,
1991. Retrieved from the Internet at: http://www.cato.org/pubs/fpbriefs/fpb-011.html on March 6,
2003.
Lindsey, Brink and Ikenson, Dan, Reforming the Antidumping Agreement: A Road Map for WTO
negotiations, CATO institute Trade Policy Analysis No. 21, December 2002
Prussa, Thomas J. (1999) On the Spread and Impact of Antidumping, NBER Working Paper No. 7404, JEL
No. F13
Uruguay Round Agreement on Implementation of Article VI of the General Agreement on Tariffs and
Trade 1994. Retrieved from the Internet at::
http://www.wto.org/english/docs_e/legal_e/19-adp_01_e.htm on March 6, 2003.
US Trade Representative Robert Zoellick Testimony to Congress, retrieved from the Internet at:
http://www.ustr.gov/speech-test/zoellick/2003-03-05-testimony-finance.PDF on March 5, 2003.
World Trade Organization Document TN/RL/W/13, Submission from the European Communities
Concerning the Agreement on Implementation of Article VI of the GATT 1994. July 8, 2002.
Retrieved from the Internet at http://docsonline.wto.org/ on March 6, 2003.
World Trade Organization Document TN/RL/W/47, Investigatory Procedures Under the Anti-Dumping and
Subsidies Agreement, Submission of the United States. Negotiating Group on Rules. December 3,
2002. Retrieved from the Internet at: http://docsonline.wto.org/ on March 6, 2003.
World Trade Organization Document TN/RL/W/47, Submission from Canada Respecting the Agreement
on Implementation of Article VI of the GATT 1994. Negotiating Group on Rules. January 28, 2003.
Retrieved from the Internet at http://docsonline.wto.org/ on March 6, 2003.
World Trade Organization Document TN/RL/W/65, Korea's Comments On Canada's Submission on the
Anti-Dumping Agreement (TN/Rl/W/47) (21 February 2003 (03-1127), Negotiating Group on Rules.
Retrieved from the Internet at: http://docsonline.wto.org/ on March 6, 2003.
World Trade Organization Statistics, retrieved from the Internet at
http://www.wto.org/english/tratop_e/adp_e/adp_e.htm on 3/5/03.
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Endnotes
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i
Doha Round Briefing Series, February 2003 issue, page 2.
ii
Prussa (1999) p2
iii
WTO Statistics.
iv
Doha Declaration, Paragraph 28.
v
Lindsey and Ikenson, p38.
vi
From the Japanese Foreign Ministry website at http://www.mofa.go.jp/policy/economy/wto/min99/anti-dump.html.
Accessed on 03/07/03
vii
WTO Document TN/RL/W/65, Korea’s Comments…
viii
USTR Robert Zoellick March 5, 2003,Testimony to Congress page 17.
ix
WTO Document TN/RL/W/13, Submission of the European Communities…July 8, 2002.
x
GATT Article VI and ADA Agreement Article 2.1
xi
Knoll (1991).
xii
WTO Document TN/RL/W/47, Submission from Canada… January 28, 2003.
xiii
USTR Robert Zoellick Testimony to Congress, March 5, 2003. Page 17.
xiv
WTO Document TN/RL/W/35, Investigatory Procedures… December 3, 2002.
xv
WTO Document TN/RL/W/47, Submission from Canada… January 28, 2003.
xvi
Doha Round Briefing Series, February 2003 issue.
xvii
Doha Round Briefing Series, February 2003 issue and WTO Document RN/RL/W/6, Submission from the Friends,
April 26, 2002.
xviii
Doha Round Briefing Series, February 2003 issue.
xix
WTO Document TN/RL/W/13, Submission of the European Communities…July 8, 2002.
xx
WTO Document TN/RL/W/47, Submission from Canada… January 28, 2003.
xxi
Hoekman and Kostecki, p434
