Anti-dumping - WTO at work

The proceedings of the Committee on Anti-Dumping Practices of the WTO makes for a fascinating read. 

See below an extract that is available on the WTO website:

Japan expressed concerns about anti-dumping investigations by China on certain high-performance stainless steel seamless tubes and on m-dihydroxybenzene or resorcinol, by India on melamine and on aniline and by Indonesia on cold rolled coil/sheet. It also complained that the United States continues to maintain five anti-dumping measures against Japan that are more than 30 years old. 

Chile said it is following closely Argentina’s anti-dumping investigations on steel drums and on self-adhesive plates, sheets, film, foil, tape and strip of plastics, not printed, and Mexico’s investigation on  mushrooms of the genus Agaricus. 

The United States expressed concerns about China’s investigation into thylene glycol monobutyl ether and  diethylene glycol monobutyl ether, and India’s investigation into stainless steel cold rolled flat products.

It looks like many country uses anti-dumping as a tool to protect domestic industry.They are often reported in the Global Trade Alert website like this case. Anti-dumping measures are often challenged at the WTO ether at the Committee stage or in dispute settlement. Transparency in undertaking these measures, as in all other cases of the WTO, is often insisted upon.It also indicates that apart from negotiation and dispute settlement, the role of the Committees in monitoring practices of countries is also crucial for the functioning of the multilateral system.

Globalization retreats?

(http://wiki.triastelematica.org/index.php/Protectionism)

Trends of a rise in protectionist measures by countries is considered a serious threat to an increasingly globalized world. While the world is getting connected and "flattened" by global supply chains and mobility, inward looking policies also have made their mark challenging the presumption that globalization is a given. Of course, Pankaj Ghemawat still believes that a large part of economic activity is still "national" or "local" rather than truly global. Parag Khanna,on the other hand believes that the world is moving towards more globalization.

I came across an interesting piece on globalization here. Titled "The Retreat of Globalization" Kevin M. Warsh and Scott Davis posit that the trend of globalization characterized by cross national investments and increased trade is on the decline.

"Trade is the glue that connects the global economy. Trade has grown much faster than economic growth for most of the last few decades, thanks largely to the globalization wave. Only twice since 1982 has global trade growth trailed economic growth. 

But trade has weakened over recent quarters. According to the International Monetary Fund, trade growth volume is projected to slump to 3.2% this year, down from 5.8% last year and 12.6% in 2010. The World Trade Organization recently cut its forecasts for global trade by more than a full percentage point for this year and next. Absent fundamental policy changes, these data mean that the IMF's global GDP forecasts for this year (3.3%) and next (3.6%) are challenging to meet. 

Yet even this cyclical weakness is not the gravest concern. What if the cyclical has become structural, and economic potential is falling? What if the world is getting more fragmented and the gains from globalization are being forgone and forgotten? What happens if policy makers remain preoccupied with short-term urgencies to the exclusion of long-term priorities?"

Protectionism is not the preserve of only a few countries. It is exercised by both the developed and developing worlds in times of economic crisis to protect domestic interests. Whether it actually protects domestic interests in the long run is an entirely debatable issue. Further, whose interests are actually protected is also open to scrutiny. Nevertheless, the increasing trend of "buy local" in France or aggressive "import licensing requirements" in Argentina is only symptomatic of a reaction of countries to address issues of economic crisis in a global world. As long as trade exists, there would be measures of protectionism. To what extent they spread and to what degree they violate trade agreements is the crucial factor.

Domestic policy space, trade agreements and protectionism - A balance required?

The Tobacco Plain Packaging dispute has reached the doorstep of the WTO. An Australian legislation that mandates that both imported and locally made tobacco products must not have any kind of advertising on the package has been challenged as a violation of Australia's obligations under the WTO. I have blogged about the issue here, here, here and here.

Simon Lester in a recent piece in the Jurist has brilliantly discussed the issue in the context of protectionism, non-discrimination, domestic policy space and international trade. While curbing protectionism (treating imported goods less favorably than local goods) remains the main focus of international trade agreements, it is clear now that trade rules go much beyond it. It impacts not only discriminatory treatment but also whether a measure is an unreasonable restriction on international trade. This has a major impact on domestic policy space since the interpretation of what constitutes a "reasonable restriction" becomes debatable. It has the potential to lead to international trade agreements treading on sovereign decisions disturbing the delicate balance between international law and domestic sovereignty. This often leads to calls for rejecting multilateralism and pursuing unilateral policies in "national interest".

"Complaints about a purely domestic regulation in these international fora may seem odd, but they are a direct consequence of the expanding scope of trade agreements and provide a good illustration of the difficulties for domestic policy-making caused by this broad scope. The complaints highlight an important, but often overlooked, question regarding today's trade agreements: what is free trade? Traditionally, practicing free trade simply meant not being protectionist. However, today's trade agreements go beyond anti-protectionism in a number of ways, which leads to the potential conflict between trade agreements and domestic regulation that we see with the plain packaging cases."

The implementation and interpretation of international trade agreements will constantly face this challenge of balancing competing interests of national, domestic policy making with the imperatives of international trade. Often the line will be blurred and domestic policy choice will be challenged. To what extent this will be accepted by the WTO members is a crucial question. WIth the negotiations reaching a stalemate at Doha, the dispute settlement mechanism will face serious strain trying to balance these competing interests. Should the interpretation limit itself to non-discrimination and be more liberal in allowing domestic space in other cases? Will such an approach ease the tensions and promote international trade? Or should the Panels and Appellate Bodies take a proactive role in ensuring that free trade is not restricted in anyway - whether based on national treatment or otherwise. As Simon correctly points out it is a delicate balance to be treaded very carefully.

"Existing international trade rules are a balancing of competing concerns and interests, developed over the years through a complex negotiating process. Questioning particular aspects after the fact is not without its dangers. Trade liberalization over the past few decades has benefited the world greatly. At the same time, challenges to laws like the plain packaging one risk undermining support for the broader push for such liberalization. It may not be a coincidence that multilateral trade liberalization has stalled in recent years, just as the scope of these agreements has expanded. No matter what the resolution of the plain packaging cases in international courts, they may be a chance to examine just what the goal of trade agreements should be.  

Fighting protectionism is not without its own controversy, but a focus on protectionism, with rules narrowly tailored for that purpose, may avoid sensitive issues relating to health and other social policy regulation, and thus make further trade liberalization, with its accompanying benefits, possible."

Apart from the tobacco legislation, would the stand of Canada in the Canadian Seal dispute also fall under the category of exercise of legitimate domestic policy space? 

Joseph Stiglitz on trade wars

Joseph Stiglitz writing in the Project Syndicate has shed light on the tension between China and the U.S. on the issue of currency misalignment or manipulation. The U.S. has over the years accused China of deliberately undervaluing its currency in order to boost exports and create a trade surplus. There is a plethora of literature on the issue of currency manipulation and WTO law about which I am not discussing here. Stiglitz's piece titled "No Time for a Trade War" touches upon two aspects that I found relevant: the role of the WTO in curbing the rise of protectionism and the futility of trade wars.

"When the Great Recession began, many worried that protectionism would rear its ugly head. True, G-20 leaders promised that they had learned the lessons of the Great Depression. But 17 of the G-20’s members introduced protectionist measures just months after the first summit in November 2008. The “Buy American” provision in the United States’ stimulus bill got the most attention. Still, protectionism was contained, partly due to the World Trade Organization."

Raising the issue of the futility of a trade war by labeling China as a currency manipulator and risking retaliatory trade measures, he feels that a trade war serves nobody's interests.

"No one wins from a trade war. So America should be wary of igniting one in the midst of an uncertain global recovery – as popular as it might be with politicians whose constituents are justly concerned about high unemployment, and as easy as it is to look for blame elsewhere. Unfortunately, this global crisis was made in America, and America must look inward, not only to revive its economy, but also to prevent a recurrence."

I guess these are points that are quite evident but coming from Stiglitz it definitely requires a mention.

Compliance in Boeing - A legal quagmire

I had blogged here about the recourse to Article 21.5 of the DSU by the EU against the U.S. in relation to the issue of compliance in the Boeing dispute here. More submissions dated 12th October by the EU here.

 The gist of the legal claim is here:

"28. The European Union considers that, after the end of the implementation period, the United States maintains a series of subsidies, within the meaning of Article 1.1 of the SCM Agreement through each of the measures listed in Section I, above. Each of those measures provides a financial contribution within the meaning of Article 1.1(a)(1), as detailed further in Section I, and confers a "benefit" within the meaning of Article 1.1(b) by providing the financial contribution on terms more favourable than would be available on the commercial market. Those subsidies are specific, within the meaning of Articles 1.2 and 2 of the SCM Agreement, as detailed further in Section I. 

29. Those specific subsidies presently benefit the development, production and sale of Boeing’s 737NG, 737 Max, 747, 767, 777 and 787 families of LCA, as well as any other future derivatives of these LCA families, including of the 777. Collectively, and under the conditions of competition present in the LCA markets, the subsidies listed in items I.A to G cause present adverse effects, in the form of serious prejudice, and threat thereof, to EU interests, inconsistently with Articles 5(c), 6.3(a), 6.3(b) and 6.3(c), including Articles 6.4 and 6.5, of the SCM Agreement. The effects of those subsidies adversely impact sales, market shares and prices of Airbus’ A320, A320neo, A330, A350XWB and A380 families of LCA. Specifically, the subsidies cause present serious prejudice, or threat thereof, to EU interests, in the form of: (i) displacement and impedance of EU imports into the United States, within the meaning of Article 6.3(a) of the SCM Agreement; (ii) displacement and impedance of EU exports to other third country markets, within the meaning of Article 6.3(b) of the SCM Agreement (including on the basis of Article 6.4 of the SCM Agreement); and, (iii) significant price undercutting, price suppression, price depression, and lost sales, within the meaning of Article 6.3(c) of the SCM Agreement (including on the basis of Article 6.5 of the SCM Agreement).  

30. In addition, the subsidies provided through the measures listed in items I.A to G are contingent, in law or in fact, on actual or anticipated export performance, and accordingly, are inconsistent with Articles 3.1(a) (including footnote 4) and 3.2 of the SCM Agreement. 

31. Moreover, the subsidy measures listed in items I.A to G are contingent, in law or in fact, on the use of domestic over imported goods, such that they are, accordingly, inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement.  

32. Through those same measures listed in items I.A to G above, the United States accords treatment less favourable to imported products than that accorded to like products of US origin, in law or in fact, inconsistently with Articles III:4 of the GATT 1994, and maintains internal quantitative regulations that require, directly or indirectly, that specified amounts or proportions of products be supplied from domestic sources, in law or in fact, inconsistent with Article III:5 of the GATT 1994. Moreover, the United States otherwise applies such regulations in a manner contrary to the principles set forth in paragraph 1 of Article III, including the principle that such laws, regulations and requirements and internal quantitative regulations should not be applied to imported or domestic products so as to afford protection to domestic production. 

Both the disputes (Airbus and Boeing) offer an opportunity for rich juriprudential churning in the area of subsidies under the WTO. It also highlights the complexity of claims, the intertwining of fact and law as well as the extent to which domestic policy is impacted by international law. From local city measures to national subsidy policy, the entire gamut of subsidy measures have been challenged by the EU. This dispute also tests the efficacy of the dispute settlement mechanism. WIll the U.S. comply with the Appellate Body order? What constitutes compliance? If nothing else, the complex quagmire of legalese is an international lawyers goldmine.

Feels even better at 30k

Crossed the 30k mark of hits today! It has been almost a year of serious blogging and I have not regretted even a second of it. Blogging has opened the doors to new thoughts and ideas. Thanks to all those who read the blog! Special thanks to Gulzar who was the prime motivator!

Marking this stage as I did with the 10k and 20k ones!

Protectionism - is it inevitable?

The Knowledge@Wharton website had an engaging piece about Argentina's rising protectionism. Argentina's protectionism has been on my blog here, here and here. Titled "The Risks and Rewards of Argentina's Growing Protectionism" the piece highlights the trend, both int he developed and developing world, towards inward looking policies. Is multilateralism and reduction of trade barriers under serious threat? Is the dispute settlement mechanism going to be over burdened with cases challenging protectionist measures across the world. 

Detailing the steps Argentina has taken to turn "inward" over the last few months the pice notes:

"In Argentina, this reality is reflected in a long list of measures imposed over the past year, notes Ernesto O’Connor, a professor of economics at Argentine Catholic University (ACA). These include quotas; non-automatic import licensing, which control imports by linking them to compliance with specific criteria; applications for compensation for tariffs paid by importers who also export other goods with a value that at least equals the value of their imports, and increases in the common external tariffs imposed on 100 industrial products covered by the rules of Mercosur, the economic and political agreement that includes full members Argentina, Brazil, Paraguay, Uruguay and, as of July 31, Venezuela. Beyond this, there are some restrictions on exports of meat, dairy products, wheat and corn that have been in force for five years, aimed at increasing their supply in the domestic market. 

Beginning this year, the Argentine government has also imposed what some call a “foreign exchange trap”, a restriction that makes it impossible for Argentines to buy foreign currency. This policy is also a mechanism for closing the Argentine economy, experts say, because, as a result, it has become more and more expensive for Argentines to travel to foreign countries and for Argentine students to save money in dollars, a practice that has long been common in the country. During the final week of August, the government also imposed on its citizens a 15% tax on their use of credit cards in foreign countries, which makes consumption overseas more expensive for Argentines and encourages them to spend in their own country."

Is this going to be a long term trend across countries - be it Brazil, India, Argentina, the EU or the U.S.? What are the implications of this strategy for multilateral trade? Will it result in further hardening of stands at the negotiating table and heighten tensions at the dispute settlement mechanism? Would it lead to more FTAs and bilateral agreements based on mutual convenience and power equations? Can the WTO intervene at all in this situation? While there have been growing signs of countries taking protectionist steps, are they short term measures which would blow away with the global economic crisis or is it part of a larger national strategy to look at domestic industries and shun international markets. Is it economically feasible or tuned to the international reality of global supply chains and comparative advantage?