Trade Remedies - Outline.docx

Trade Remedies - Outline AD CVD Safeguards UNFAIR UNFAIR FAIR Applied direct [not to all] Most invoked remedy - Largest players = India, USA, EU, Canada Anti Dumping Ag. - Article VI Applied Direct [not to all] Agreement on Subsidies and Countervailing Measures (“SCM”). (Annex 3.) Applied to all - M...

Trade Remedies - Outline AD CVD Safeguards UNFAIR UNFAIR FAIR Applied direct [not to all] Most invoked remedy - Largest players = India, USA, EU, Canada Anti Dumping Ag. - Article VI Applied Direct [not to all] Agreement on Subsidies and Countervailing Measures (“SCM”). (Annex 3.) Applied to all - MFN Least Invoked Agreement on Safeguards AD: “Unfair Trade Remedy” 1) Show that there are dumped imports (Example of substantive requirements) - WTO says Domestic Administrative Authority country has to decide whether there are dumped imports - Investigative authority in the US; Department of Commerce 2) Material Injury 3) Causation - Investigative authority = USITC CVD: 3 Step Analysis = ‘offset’ imports that are being subsidized by foreign governments Counter-vail the effect of subsidies 1. Subsidized Imports [Existence of a Counter Valuable Subsidy] 2. Material Injury 3. Causation Article VI is NOT a roadmap, and leaves ample room for interpretation: [Look to DL] How to calculate the “amount” of the bounty or subsidy? What is meant by material injury? Article XIX permits members to restrict imports where the following conditions are met: o 1) Imports are increasing as a result of unforeseen developments o 2) Imports are increasing as a result of the effect of obligations incurred by the Members under GATT [CAUSATION] o 3) Imports are increasing in such quantities as to cause or threaten serious injury to domestic producers of “like or directly competitive products” ITA - DOC Is there dumping How much? [Dumping Margin] ITC- Is there material injury Impacting the domestic industry Commerce - Often affirmative Dumping Margin NV - EP = DM Petitioner wants high NV and Low EP - M’s more $ NV - Section 773, US Law Home Country Method [Price at home vs. selling abroad] Third Country Method “De Minimis” De Minimis US law and Art. 5.8 of ADA provides that the investigation will be dismissed as to any importer where the margin of dumping is below 2% NME Dumping [Vietnam, China, Russia] “Subsidy” Financial Contribution State Attribution - The financial contribution is “by a government or public body within the territory of a Member,” or a private body that is entrusted or directed by the government to provide a financial contribution A benefit thereby conferred DOC - Is there are a subsidy? What type? Is it countervailable? ITC- Material Injury, by reason of the counter vailable subsidy + the industry “Like Product” - [ITC Injury Analysis] What is the product that is being identified What is the competing American Product Industry: First issue is to define the industry. The U.S. statute – like Article 2.1 of the Safeguards Agreement – defines the industry as the producers of “like” or “directly competitive” products. In Wheat Gluten the ITC noted that “like” means “substantially identical” and “directly competitive” means commercially competitive. In other words, a product can be “unlike” but still directly competitive. (In reality, the ITC focuses on “like” rather than “directly competitive”) Directly Competitive has to do with price elasticity/ the market Criteria for “like” determinations the ITC considers: [CUP-WM] § Physical properties § Customs treatment – what are the tariff classifications? § Where and how the product is made § Uses of the product § Marketing channels “Unforeseen Developments” Have to show the unforeseen developments resulted in increased imports The alleged unforeseen development must result in increased imports of the specific product INJURY - AD + CVD =ITC Article VI does not define injury per se. Neither does the AD Agreement nor the SCM Agreement. Domestic free to define as long as they take Article 15 of SCM into account U.S. Law Requirements “Harm which is not inconsequential, immaterial, or unimportant!” § The same definition applies to AD and CVD investigations. Beyond this definition, the US statute describes the factors that are to be examined: Volume and the impact of unfairly traded imports Prices: is there “underselling” or “price suppression” o What has been the impact on the industry over a recent period? Both the GATT agreements and US law spell out the factors to be considered – but none of them spell out HOW to evaluate these factors - Concept under US law is to show that imports are “a” cause of material injury to the domestic industry o Though doesn’t have to be primary or major cause “Effect of Obligations” Looking at the causation between the implementation of your GATT obligations and the increased imports Eg. There is a case where a country has opened its market and M’s are increasing to a point that it is causing serious injury; severity caused from unseen developments Imposition to deal with a circumstance where your negotiators have miscalculated, entered into obligations and it’s having adverse effects due to the open market “Like product” = STEP 1 Definition of the “industry” that produces products “like” those that are imported. ITC is not bound by the petitioner’s selection of “like product.” How to prove like product? Here are the criteria that the ITC will consider o Physical characteristics and use o Interchangeability o Channels of distribution o Customer perceptions o Common manufacturing o Price comparability o NOTE: no single factor is dispositive “Serious Injury” Significant overall impairment in the position of the domestic injury Must analyze specific factors Rate of increase of imports, Market share, change in levels of sales, Production, Productivity, Capacity, Profits and losses, Employment - Under and Umep. Threat of serious injury- must be “clearly imminent” by the facts, decline in sales [202(c)] POI = 5yrs US Law Under 201- §201 requires that the increased imports be a substantial cause of serious injury, with "substantial cause" defined as an important cause that is not less important than any other cause. MATERIAL INJURY + CAUSATION = #2 Evaluate whether that industry is materially injured by reason of subject imports. POI for Commission = 3yrs + any partial year for an AD or CVD case, Analysis of injury data by ITC: AD Agreement requires the Commission to examine “all relevant economic factors.” US law reflects this requirement by listing a number of criteria: Actual and potential changes in output, sales, market share, profits, productivity, return on investment, capacity utilization Factors affecting domestic prices Actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital, and investment. AD margins Based on these criteria, the ITC will then determine whether the industry is injured. Agency is allowed to ignore any improvement to industry after filing of petition if it can be shown that the filing of the petition caused the improvement Causation ITC two-step process: Is the industry injured?, and if so Was the injury caused by imports? - The ITC would look at alternative causes (such as technological change, bad management), but would find causation if the subject imports were a cause. - TODAY: Coincidence of trends – the “magic X” – imports up v. prices, profits down “Imported in Increased Quantities” Can be an absolute or relative increase. No standard Case Precedent Argentina Footware “recent enough, sudden enough, sharp enough, and significant enough” to cause or threaten serious injury. Steel The increase must show a “certain degree of recentness, suddenness, sharpness and significance.” [no absolute standard- case by case basis] Article 2.1 does not impose restrictions or obligations in respect of the origin of the increased imports that can or must be taken into account in an injury determination. Hence, the Member wanting to impose a safeguard could either take account of all imports (and check whether they cause serious injury) or examine only imports coming from third parties, thereby excluding regional imports Cumulation: - Commission must cumulate injury for all countries covered in the same petition (filed on the same day) - Countries who are less than 3% of all imports cannot be cumulated unless all of them together represent more than 7% of all imports. Causation - Increase M causing SI “Substantial Cause” [202(h)(b)] Lower labor standards/ lower regulation can not be a more important cause [CP] Generally, the ITC looks at whether there is a cause in the US - Strikes, defective products FTAs and Customs Unions Length of Time Length of Time Dumping and CVD are the only thing under the WTO that you can impose UNILATERALLY CASE LAW Georgetown Steel Urea Safeguards - Steel, Solar Parts, Roses, Footwear Fair Unfair §201 of Trade act 1974 art. XIX of GATT Agreement on Safeguards CVD - Subsidy Adjust assistance Dumping: Agency responsible ITC (International trade commission ) ITC and ITA (commerce) Requirements for remedy Increased imports There is a domestic industry Serious injury or threat Causation “substantial cause” Domestic industry Materially injured or threatened By reason of subsidy Domestic industry Materially injured or threatened By reason of subsidy LTFV-LTNV) Remedy Tariff Tariff/Quota OMA Countervailing duty (CVD) Anti-dumping duty GATT ARTICLE: Article I Article III Article XXI Article II NAME OF MAIN PRINCIPLE: MFN NT QR Limitation on Tariffs APPLICABLE TO: Customs duties and charges; respect to all formalities in connection with importation and exportation Internal taxes and other internal charges NO Quotas, import or export license or other charges… All tariffs MAIN FUNCTION OF ARTICLE: Any advantage…given to any contracting party shall be given to all contracting parties… Imported products will be treated the same as directly competitive or like domestic products Provides for the general elimination of quantitative restrictions Contracting members agree to be bound by WTO tariff concessions POLICY