More litigation practise

Talking about litigation practice, it seems Indonesia has filed another case. This time it is against Pakistan over anti-dumping measures taken by it against writing and printing paper from Indonesia. The case (DS470) is reported here.

Talking about WTO disputes, the big one this week was the Seals dispute between Norway and EU that I have  blogged about here earlier. 

The panel concluded that the IC exception under the EU Seal Regime violates Article I:1 of the GATT 1994 because an advantage granted by the European Union to seal products originating in Greenland (specifically, its Inuit population) is not accorded immediately and unconditionally to the like products originating in Norway. With respect to the MRM exception, the panel found that it violates Article III:4 of the GATT 1994 because it accords imported seal products treatment less favourable than that accorded to like domestic seal products. The panel also found that the IC exception and the MRM exception are not justified under Article XX(a) of the GATT 1994 (“necessary to protect public morals”) because they fail to meet the requirements under the chapeau of Article XX (“not applied in a manner that would constitute arbitrary or unjustified discrimination where the same conditions prevail or a disguised restriction on international trade”). The panel additionally found that the European Union failed to make a prima facie case that the EU Seal Regime is justified under Article XX(b) of the GATT 1994 (“necessary to protect … animal … life or health”).

Need to get down to reading the Panel report and commenting on it soon.

Trade remedies - Are they protectionist measures?

Trade remedies like anti-dumping, safeguard measures or countervailing duties are often the subject matter of intense debate in the context of being protectionist and hindering the growth of trade. Are they a legitimate tool to balance national policy objectives with excessive free trade? Should they be construed positively?

Stewart and Stewart carried this piece on how to view trade remedies in the context of the overal multilateral system. View in the overall context, it suggested that trade remedies are not bad after all and need not be construed as being protectionist as suggested by many.

"Resort to internationally agreed trade remedies is not a sign of protectionism in the sense of something that undermines the international trading system. Rather, trade remedies are an integral part of the trading system and can help member nations expand their liberalization. Of course, trade remedies should be pursued in a manner consistent with international obligations and should be challenged when they are not. While there are learning curve issues for new users, technical assistance from established users and challenges where appropriate will help new users bring their systems into conformance. A more serious problem exists where any member, whether on a one-off basis or as a matter of practice uses trade remedies for purposes of retaliation against a trading partner’s use of WTO rights. There should be a zero tolerance approach for such actions."

I had blogged about this aspect in an earlier post commenting on Mark Wu's article in the Harvard International Law Journal on the use of anti-dumping by India and China. Another piece about which I had blogged here considered antidumping co-operation rather than a protectionist measure.

Made in China and coffins

The "Made in China" syndrome pervades life generally. One need not look too far and wide to find that toy or shirt that is made in China. Signs of a globalized world or ineffective antidumping measures? I had blogged about this issue here.

Came across this interesting piece in the Deccan Herald, a local newspaper in India about Chinese made coffins coming into the market in the State of Kerala:

"A variety of products have flooded Indian market after the liberalisation process was initiated two decades ago and the latest one to make its entry is 'made in China' coffins. 

A consignment containing 170 coffins have arrived in Kerala with a Alappuzha district-based company entering into a tie-up with a firm in Shanghai."

Just could not resist the irony of the "death" of local manufacturing and the importation of Chinese coffins. Trade does tell us a story. 

Dumping chicken - South Africa takes on Brazil

The BRICS has been a strong interest group in espousing the developing countries cause at international fora. It signifies a coming together of emerging economies to strengthen economic cooperation. I had blogged about BRICs and their resolve against protectionism here.


(Courtesy:BBC)

Now BBC has reported  a dispute over chicken between two of the member countries threatens the interest group. South Africa has alleged that Brazil is dumping chicken into South Africa which is leading to unfair competition and loss of domestic jobs.

"South Africa proudly joined the Bric nations of major emerging economies last year, hoping it would boost its economy and give it far greater diplomatic clout. 

But the ink has barely dried on the paper and South Africa is already involved in a murky trade row with one of its new-found friends, Brazil. 

South Africa's poultry industry is accusing Brazil of dumping chickens on its market and farmers say they are now forced to cut jobs because they cannot compete with Brazil's "unfairly low" prices. 

Brazil has denied this and has taken the matter to the World Trade Organization (WTO)."

Earlier in June Brazil filed a case in the WTO against the imposition of provisional antidumping duties by South Africa on frozen meat from fowl from Brazil.

This case highlights that while trading bloc or interest groups do have some significance in international economic relations, ultimately a country's national, domestic interests play a dominant role in deciding trade policy. South Africa was threatened by a loss of local jobs by alleged dumping and it took the measure of imposing antidumping duties. Whether the imposition was legitimate will be decided by the dispute settlement mechanism. While countries do constitute trading blocs and espouse causes of the developing world in international fora, it is fortified by a keen protection of national interest. The existence of the BRICS would not deter South Africa to protect its local poultry industry against a fellow BRICS member. Whether the action is legitimate or globalization produces its losers is all together another question.

Chinese solar panels - EU takes on China

News of the EU planning to initiate antidumping investigation against Chinese solar manufacturers is doing the rounds here, here and here. Considering the sensitivity of the issue, reports of a Chinese delegation rushing for negotiations is reported here.Renewable energy and subsidies provided to it has been a contentious area in international trade relations.

Brussels Blog of the FT reported on the impending trade war here. The EU is essentially contending that Chinese made solar panels are being "dumped" in the EU at a price much lower than what it is in China  causing harm to EU solar panel manufacturers.

Some thoughts on stakeholders, interests and realities of subsidies in the renewable sector:

1. The price of Chinese solar panels being less, benefits the EU consumer. It also enhances adoption of renewable energy technology and assists in climate mitigation efforts.

2. The antidumping investigation essentially seeks to protect the local EU industry.

3. Subsidies in the renewable energy sector are a common phenomenon across geographies. While the Chinese State might be supporting its manufacturers, EU and its member states too provide subsidies in various forms to its manufacturers. While the fact that this is a reality may not be relevant in an antidumping investigation, it surely useful in countering a high moral position taken by country that challenge subsidies.The recent investigation by China against state level subsidies in the U.S. is a trend in this direction.

4. Climate change activists claim that the proliferation of cheap, affordable technology has benefitted the adoption of clean energy technologies. Thus, the goals of an environmentally sustainable world and trade rules that frown upon subsidization of renewable energy seem to be incompatible. Of course, this discussion does not take place in an antidumping investigation.

The EU investigation and subsequent Chinese response at the WTO would have a bearing on how countries react to subsidies in the renewable energy sector. Till now no case in the dispute settlement mechanism deals with this issue. The Ontario Feed-in Tariff case is the first. Would a Chinese challenge to an EU finding of dumping be the next big renewable energy case at the WTO?

Antidumping - good, bad or ugly?

Anti-dumping duties are a common tool used by both developed and developing countries to protect local industry from a surge in cheap imports. It is viewed as an inevitable policy choice in a free trade environment when countries tend to  protect their industries. What motivates the imposition of anti-dumping duties? Is it a protectionist weapon in the hands of countries that undermines free trade with reduced barriers? Should it be discouraged? Is it a word in the WTO lexicon that needs to be gradually shunned? Or is it a legitimate domestic policy choice for countries to protect their local industries from unfair imports? This post does not go into the rationale of antidumping or the relevant rules but discusses two commentaries on the use and misuse of antidumping in international trade.

Mark Wu argued in his detailed piece "Antidumping in Asia's Emerging Giants" that this tool will be increasingly used by China and India in the coming years.

"Scholars and policymakers have assumed that India and China’s recent rising use is a fleeting anomaly, triggered by historic tariff cuts and a need to retaliate against other countries that are targeting them. In fact, this is not fully correct. Many industries in India and China have yet to discover the utility of antidumping laws. China has not yet fully embraced a strategy of using antidumping sanctions as a retaliatory instrument. And retaliation does not explain why India continues to use antidumping sanctions aggressively, even after others have ratcheted down their use of antidumping sanctions against India. These signs suggest that India and China’s use of antidumping sanctions as a protectionist instrument will not level off in the years to come. Instead, as their domestic markets grow, American and European exporters will likely incur larger costs from antidumping duties imposed by India and China."

Mark Wu essentially argued that the rules of antidumping need to be reformed with the U.S. and E.U. at the forefront so that it is not misused as a tool of "protectionism"' by developing economies. I had blogged about this article here with some questions.

More recently, Vox carried an interesting piece titled "Antidumping as cooperation" where two economists Chad P Bown and Meredith Crowley have argued that antidumping need not necessarily viewed negatively. They argue that it is sometimes a necessary component of a free trade regime which ensures imposition of a tariff above a county's bound rates. They aver that the underlying motivations for the use of the measure needs to be fully understood in order to strategize a stand at the WTO with respect to the antidumping rules. They conclude that understanding the motivations of the use of these measures will ensure that necessary rules can be crafted to ensure that the limits of these rules can be set properly set.

" If future research shows that trade volume shocks in sectors with relatively inelastic import demand and export supply are an important determinant of antidumping use for a large set of countries, the current WTO rules – which are not written so as to be sympathetic to economic logic – might be re-examined. Recognition that unexpected events in the turbulent global economy trigger tariff hikes might result in a more informed set of negotiations over what constitutes an appropriate versus inappropriate use of the exceptions to the liberal trade policy rules of the WTO. This could better inform the discussion about potential limits and boundaries to cooperation in the WTO system."

The multilateral trading system often faces the uncomfortable questions of impinging upon the sovereignty of national policy space. Critics in developing countries argue that it restricts domestic policy choices to protect legitimate national interest. Antidumping is an exception which provides this flexibility within trade rules to protect one's domestic interests. It is like a safety valve that can be used effectively within the contours of the multilateral agreement. To shun it would be to legitimize that view that multilateral rules do in effect restrict policy space. Developing countries are increasingly using the tool to protect their local industries. Whether the imposition is in consonance with multilateral trade rules depends on the facts and circumstances of each instance. An improper use of antidumping duties can be challenged at the DSM of the WTO. There is a need to balance the legitimate use antidumping has in world trade with the dangers of it's misuse. The above study probably would provide some answers to tread that line.

Committee on Antidumping - Some interesting insights

The WTO website had this report recently about the Committee on Antidumping practises reviewing the various reports of antidumping actions taken by WTO members in the second half of 2011. I had earlier blogged about an article on China and India's antidumping steps here.

The summary of the conclusions of the Committee are found here:

"During the review, the following concerns were raised:

• Japan complained that Australia’s anti-dumping duty from Japan had been in place for 20 years, and that Japan’s share in the Australian market had decreased to 0.5 per cent. It urged the revocation of the measure. Australia invited Japan to bilateral talks on this issue.

• Turkey expressed concerns about Brazil’s on-going investigation on viscose yarn from Turkey, and reserved all its rights. Brazil said it was willing to talk about this issue with Turkey.

• The United States said it was deeply troubled by what it described as lack of due process in China’s anti-dumping actions, and in particular the imposition last December of anti-dumping measures on imports of some $3 billion worth of US automobiles. Separately, Japan and the European Union expressed concerns over China’s anti-dumping investigations on photographic paper and paper board, and on certain high-performance stainless steel seamless tubes, respectively. 

                  ...

• Turkey said that because of deficiencies in the investigation, the Dominican Republic should revoke its anti-dumping measure on steel rods and beams from Turkey.

• China said that 20 years of EU anti-dumping duty on bicycles from China was a case of overprotection, adding that Chinese bicycle exports to the EU had decreased considerably. It also expressed concern that the EU’s anti-dumping investigation on ironing boards was targeting only one Chinese company, which it said was in violation of the Agreement.  The EU said that the measures in question were consistent with the WTO.

• Turkey expressed concern about the Indian anti-dumping measure on soda ash from Turkey, adding that such measures should not be used as disguised protectionism. Norway said that India’s anti-dumping action on caustic soda from Norway was the first time India has initiated such an action against Norway. It maintained that Norwegian companies did not export caustic soda to India during the period under investigation. India said that its anti-dumping procedures were consistent with the WTO.

• China expressed concerns regarding Mexico’s anti-dumping investigations on graphite electrodes and coaxial cables, respectively. The United States said that its companies have communicated serious concerns regarding the dumping margin calculations by the Mexican authorities on chicken legs and thighs from the US. Mexico said its measures were fully in line with WTO rules.

• Turkey said that Ukraine did not meet the WTO criteria in its investigation on float glass from Turkey, and urged termination of the anti-dumping measure.

• Japan said that while it welcomed the United States’ revocation of anti-dumping duty on steel plate from Japan early this year, it continued to be concerned about four US measures on Japanese products that were more than 20 years old. The United States said the situation could be explained by the lack of participation of Japanese companies in US sunset reviews. Japan said that there was little interest from Japanese companies because they believe there was little chance the US measures in question would be allowed to lapse." 

 A tabular analysis of the origin of the country's and the respondent reveals the following:

Sl.No.	Complainant (Exporting country)	Country alleged to have used antidumping measure (Importing country)	Item
1.	Japan	Australia	General
2.	Turkey	Brazil	Viscose Yarn
3.	US	China	Automobiles
4.	Japan and EU	China	Photographic paper and boards, stainless steel seamless tubes
5.	Turkey	Dominican Republic	Steel rods and beams
6.	China	EU	Bicycles, ironing boards
7.	Turkey	India	Soda ash
8.	Norway	India	Caustic Soda
9.	China	Mexico	Graphite electrodes and coaxial cables
10.	US	Mexico	Chicken legs and thighs
11	Turkey	Ukraine	Float glass
12.	Japan	US	General

It is noticed that both the developed countries (Australia, EU, US) as well as developing countries (Mexico, India, China, Ukraine) use antidumping measures as well as face the brunt of it. Hence, it is not a case where antidumping measures are employed only by the developing or developed world against the other. Turkey is an active complainant in these matters alleging that antidumping measures have been unjustifiably deployed against it by Brazil, Dominican Republic, India and Ukraine. The use of antidumping measures is per se not considered protectionist due to the provisions of the WTO Agreement that permits it under certain conditions. The concern is that the actual use of the measures are a disguised form of protectionism which is increasingly being used by both the developed and developing worlds. It is undoubtedly a thin line to distinguish when it is a genuine trade measure and when it is actually an unreasonable barrier.

India, China and Antidumping - A few thoughts

The Harvard International Law Journal recently had an incisive and scholarly piece titled 'Antidumping in Asia's Emerging Giants"  on the antidumping measures adopted by China and India. In this article Mark Wu explains that the increasing adoption of antidumping measures by China and India was a sign of "protectionism" and the U.S and EU should consider spearheading the reform of antidumping law within the WTO.

"Therefore, if we are to reform the international law on antidumping, now is the time to do so. The United States and EU are understandably reluctant, as the existing antidumping rules work to their producers’ advantage today. But this study cautions that, without reforms, this will unlikely be true in the long-run as India and China expand their use of antidumping sanctions against the United States and EU. Instead of being myopically focused on near-term interests, as Congress has been, U.S. policymakers need to recognize that U.S. long-term interests are best served by a less-permissive international legal standard governing the imposition of antidumping sanctions. Moreover, from a negotiating standpoint, it makes sense to seek reforms now. While the rules are perceived to be to their advantage, the United States and EU can extract concessions in other areas in return for agreeing to reforms. And in negotiating from a position of strength, the United States and EU will be better able to dictate the outcome of the reform proposals.

The case for reform becomes even more convincing once one considers national welfare, more fully defined, as well as general global welfare. Antidumping, as an economically-inefficient instrument, is not welfare-maximizing, either at the national or global level. On the domestic front, public choice theory explains why antidumping trade policy has been captured by producers. But if consumer welfare is brought back into the picture, then enacting reforms that further restrict countries’ ability to levy antidumping sanctions becomes a welfare-enhancing move, even today, when the existing standard works to U.S. producers’ advantage. From a global standpoint, antidumping duties trigger welfare-distorting effects that are often most harmful to developing countries. Frequently, the sanctions result in not only overall welfare loss, but welfare transfers from producers in developing countries to those in developed countries. Even countries not directly targeted are affected by trade-distortion effects. Reforms serve to minimize such distortions, increase global welfare, and increase distributive justice."

Making a detailed analysis of antidumping measures adopted by China and India, Mark Wu indicates that there is cause for concern in the use of these measures and an urgent need of reform in rules of trade concerning antidumping.

"In shaping the international law on antidumping, the United States and EU embraced a permissive legal standard, divorced from economic theory, which legitimized their own protectionist use of antidumping laws. Until recently, that standard served their industries well, albeit often at the expense of consumers. The rules legitimized their efforts to protect domestic industries from increased foreign competition when there was not necessarily an economic basis for doing so. However, others have learned to play this harmful game. Over the course of a decade, China and India—two longstanding targets of antidumping sanctions—have rapidly emerged as antidumping powerhouses. These two countries are now the source of more antidumping cases than the United States and EU combined. To date, the United States and EU have not treated this shift as cause for alarm. I suggest that this is a mistake. True, there may not be an immediate cause for concern. India and China are playing within the bounds of international law, and the current global antidumping rules continue to work in favor of American and European producers. But there is reason to believe that, contrary to the prevailing view, India and China’s use of antidumping measures will continue to grow and outpace the United States and EU’s use in the years ahead.

Scholars and policymakers have assumed that India and China’s recent rising use is a fleeting anomaly, triggered by historic tariff cuts and a need to retaliate against other countries that are targeting them. In fact, this is not fully correct. Many industries in India and China have yet to discover the utility of antidumping laws. China has not yet fully embraced a strategy of using antidumping sanctions as a retaliatory instrument. And retaliation does not explain why India continues to use antidumping sanctions aggressively, even after others have ratcheted down their use of antidumping sanctions against India. These signs suggest that India and China’s use of antidumping sanctions as a protectionist instrument will not level off in the years to come. Instead, as their domestic markets grow, American and European exporters will likely incur larger costs from antidumping duties imposed by India and China. 

For the United States and EU, if the current rules remain unchanged, then one day in the not-too-distant future, the net advantage that they currently enjoy will disappear. Therefore, while India and China still remain supportive of the notion of antidumping reform, the United States and EU should work to reshape the rules governing the imposition of antidumping sanctions. Rather than blocking reform efforts, as they have done, the United States and EU should be actively championing proposals in the Doha Round negotiations that will make it more difficult to enact antidumping duties for protectionist purposes. In other words, the United States and EU should be dismantling the permissive legal standard that they helped put in place. If they do not, they risk the danger that the standard will soon come to serve other countries’ protectionist interests more than their own."

Opinio Juris carried a response from Scott Kennedy on this piece as well as a rebuttal from Mark Wu.

I am not an expert in international law nor antidumping jurisprudence. However, several questions come to my mind:


1. Is the use of antidumping measures perse "protectionist" if they are within the limits of WTO law? Is not the legitimate use of antidumping measures within international law? Is the legal utilisation of antidumping rules in the WTO a "protectionist" tool?


2. While the western world has earlier extensively used antidumping measures to protect domestic industry, is it illegal or unethical now for the developing world to do so? Is protecting one's domestic interest (albeit producer's interest) as per permissible multilateral rules being "protectionist"?


3. Is it not legitimate to use trade rules within permissible boundaries to ensure domestic interests are protected? Why is there a need for reform when developing countries begin to understand and use the system while the rules are "fair" when the developed world uses it?


4. As long as India and China are playing by the rules of the game, should it not be perfectly legal to use these measures? After all the WTO Agreements permit such actions. This is not to suggest that the developing world never misuses antidumping measures to unfairly protect its domestic industry. However, does this justify the rethink to the rules themselves?


5. While there may be an economic rationale against the use of antidumping measures or the methodology involved in coming to a conclusion about dumping, should this be a ground for challenging the rules only when the developing world begins using the measures?


6. Reform of the rules may be a requirement. However, is it justified to attribute the need for reform to the extensive use of antidumping measures by the developing world?


7. While the developed world has used the same standards in the past why is it alarming now when the same standards are being used by the developing world. Are international trade rules only for the developed world to further their national interest?

8. I had earlier blogged about Alvaros Santos' article on domestic policy autonomy and the developing countries exercising their rights within the WTO. Does the reliance on antidumping within the limits of WTO rules signify the legitimate use of domestic policy space by India and China? is it not effective use of legal strategy to meet "developement goals"?

Seeking answers.