EU Dumping Determinations and WTO Law - Essay Example

? International Trade and Financial Markets: Anti-Dumping in the WTO, the EU and China Strictly speaking, dumping refers to the sale of goods at a relatively low price in the global market (Raju 2008). From a legal perspective, the Anti-Dumping Agreement contained in the General Agreement on Trade and Tariffs (GATT) 1995, dumping refers to the sale of goods at a price below its “normal value” (GATT 1995, Article VI). The normal value refers to the price at which goods are sold domestically (GATT 1995, Article VI). The WTO’s Anti-dumping Agreement allows for unilateral measures to be taken by the importing country in instances where the product is causing damages to the national industry’s similar product (Cook et al 2004). Anti-dumping measures provide a trade remedy for WTO members and thus have important commercial value (Durling, 2003). This paper demonstrates the use of the WTO’s anti-dumping agreement by reference to the EU’s anti-dumping policies and to a lesser extent by reference to China’s anti-dumping policies. The EU’s antidumping policies are rationalized on the basis that they are necessary for removing harmful dumping on the part of foreign businesses and for maintaining fair competition in trade (Davis 2009). Since China’s ascension to the WTO in 2001, it has become the fifth most frequent use of the WTO’s anti-dumping agreement (Bown 2007). Although the WTO’s anti-dumping agreement is intended to allow member states to safeguard the interest of local producers and to ensure fair trade competition, both China and the EU have been known to use the WTO’s anti-dumping agreement for excessive protectionism and for retaliatory measures (Davis 2009; Bolton 2011). Bolton (2011) informs that in February 2010, China, the EU and the US, the three largest trading countries in the world were “directly involved in anti-dumping disputes before the WTO” (p. 66). China complained that the EU had “improperly imposed anti-dumping duties on China’s footwear exports” (Bolton 2011, p. 66). Around the same time in February 2010, Vietnam complained that the US was imposing an anti-dumping duty as a “protectionist” tariff on imported shrimp (Bolton 2011, p. 66). This is not an uncommon occurrence because anti-dumping complaints pursuant to Article VI of GATT 1995 occur on a daily basis. The main question is whether or not these complaints are legitimate attempts to protect local producers and to promote fair trade competition. An examination of an anti-dumping dispute lodged by China against the US illustrates why the frequency of anti-dumping complaints may be suspect. Recently, the US stated that it would place tariffs on automobile tires imported from China. Within two days of the US’s announcement China stated that it was going to start an anti-dumping investigation relative to determining whether or not US exporters were “dumping automobile and chicken products into China” (Bolton 2011, p. 67). Bolton (2011) expressed the view that: The timing of the announcement was no accident. The anti-dumping investigation was clearly intended to counter the tariffs placed on Chinese products. Its initiation indicated the type of retaliatory intent and protectionist sentiment that is precisely what the WTO was formed to prevent (p. 67). Andersen (2006) observes that the use of the WTO’s Anti-dumping Agreement has a legitimate basis in that it is intended to protect competition in the country importing goods from the incidents of unfair competition in trade it is obvious that local authorities frequently exploit the anti-dumping agreement for the protection of domestic interests. It is also likely that industries in the importing economy put pressure on local authorities to “impose anti-dumping duties on imported products” as a means of fortifying “market power” (Andersen 2006, p. 9). Moreover, if a member country to the WTO wishes to protect and promote an underperforming local industry from foreign competition, anti-dumping duties may be imposed to minimize outside competition (Andersen 2006). According to Andersen (2006) the abuse of the WTO’s anti-dumping agreement is ironic since: Article VI of GATT 1947 was introduced as a rule to permit the use of anti-dumping duties on one hand, but on the other hand also to limit possible abuse of anti-dumping duties by national authorities (p. 9). In the event a WTO member state uses the anti-dumping agreement excessively, the WTO’s intent is virtually defeated and economic prosperity is compromised (Andersen 2006). The EU, like China is a frequent user of the WTO’s anti-dumping agreement. Between 1995 and 2006, the EU initiated 231 anti-dumping measures against WTO member states with the WTO’s Committee on Anti-dumping Practices. For the period between 1995 and 2006, the EU ranked third among WTO members using the anti-dumping agreement. India was first with 331 anti-dumping measures and the US was second with 239 anti-dumping measures (Andersen 2006). The EU’s anti-dumping measures are typically directed at low-priced goods origination from Asia. The EU has expressed a concern that EU markets will become saturated with low-priced products from Asia and its primary focus has always been China (Andersen 2006). An anti-dumping complaint lodged by China against the EU with the WTO Dispute Settlement Board in 2009 was finally resolved by the WTO’s Appellate Body on 21st September 2011 (China v the EU Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WTO Dispute, DS397, 2011). The dispute lodged by China was initiated in July 2009 in which China complained that the EU’s decision in January 2009 to impose “a definitive anti-dumping order on Chinese exporters of Chinese fasteners” were inconsistent with obligations to the WTO and the Anti-dumping agreement (China v the EU Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WTO Dispute, DS397, 2011). Two companies involved were Chinese firms but were European subsidiaries and were not caught by the EU’s anti-dumping duty order. The tariffs applicable to the duty order were between 26.5% to just below 80% and applied to all Chinese exporters of Chinese fasteners except for the two European subsidiaries (China v the EU Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WTO Dispute, DS397, 2011). The EU’s duty order against Chinese exporters of Chinese fasteners was facilitated by EU Council Regulation 384/96 of 1995 which permitted protection relative to imports originating from non-EU member states. As such, the EU was at liberty to impose a country-wide duty order as opposed to a company directed duty order (EU Council Regulation 384/96 of 1995). China challenged EU Council Regulation 384/96 of 1995 on the grounds that it was inconsistent with Article VI of GATT 1995 in that the latter did not permit country wide anti-dumping measures. Moreover, the EU’s commitments under the WTO did not permit discriminatory treatment for the purposes of trade and the imposition of tariffs. The WTO’s Dispute Settlement Board agreed with China and the Appellate Body adopted the findings of the Dispute Settlement Board and recommended that the EU bring its anti-dumping regulation into conformity with Article VI of GATT 1995 (China v the EU Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WTO Dispute, DS397, 2011). Article 9(5) of EU Council Regulation 384/96 of 1995 was the enabling statutory provision giving rise to China’s claim against the EU. Article 9(5) of Article 9(5) of EU Council Regulation 384/96 of 1995 provides that an anti-dumping duty shall be imposed on “imports of a product from all sources found to be dumped and causing injury” and the: Regulation imposing the duty shall specify the duty for each supplier or, if that is impracticable, and in general where Article 2(7)(a) applies, the supplying country concerned (EU Council Regulation 384/96 of 1995, Article 9(5)). Article 2(7) (a) of EU Council Regulation 384/96 of 1995 defines and refers to nonmarket economies and Article 2 goes further to identify China as a nonmarket economy (EU Council Regulation 384/96 of 1995, Article 2(7)(a). In other words, the EU Council Regulation 384/95 of 1995 permits the EU to impose country wide duties against nonmarket economies such as China in a way that is not only discriminatory but also inconsistent with the anti-dumping agreement contained in Article VI of GATT 1995. More recently, anti-dumping in the EU is now regulated by Article 207 of the Treaty on the Functioning of the Antidumping Regulation – Council Regulation (EC) No. 1225/2009. Investigations are conducted by the Trade Directorate of the European Commission at the behest of producers within the EU. The Commission evaluates the findings of the Directorate to determine whether or not there has been dumping by comparing the relevant product pricing. Next the Commission determines whether or not there is evidence substantiating actual harm to producers within the EU (Council Regulation (EC) No. 1225/2009). Thus far, the EU’s most recent anti-dumping regulations appear to be straightforward. However, there is a practical difficulty in reconciling the EU’s anti-dumping regulatory process with Article VI of GATT. The EU, in determining whether or not anti-dumping has caused harm to producers, the Commission is required to take account of community interests. The reality is, the GATT VI provides only that member states take account of the interests of the producers of competitive goods (Rovegno and Vandenbussche 2011). This means that the EU unlike other WTO members may take account of the entire collection of states within the EU thus making it more difficult for outside states to avoid anti-dumping duty orders from the EU. Despite the WTO’s ruling in the case filed by China in 2009, the EU’s practices remain substantially the same. In the EU although investigations target specific business firms, the EU’s practice continues to contravene Article VI of GATT 1995. Rovegno and Vandenbussche (2011) explained that: Imports from other firms in the same country are also subject to a duty even if those firms have not committed “dumping”. In the EU, this duty is the highest duty of among those imposed to firms named in the investigation (p. 5). Thus the EU’s continued discriminatory and unlawful anti-dumping practices speak to both the lack of authority behind the WTO’s dispute settlement process and the vagaries of Article VI of GATT 1995. In the final analysis, the EU has demonstrated by its regulatory anti-dumping framework and practices that compliance with the WTO’s various agreements are entirely voluntary and virtually unenforceable. The EU’s anti-dumping practices and laws inform that WTO members are at liberty to exploit the anti-dumping agreement contained in Article VI of GATT 1995 for excessive protectionism and for discriminating against goods associated with specific countries and by doing so, discriminate against other WTO member states. China has also demonstrated the WTO’s anti-dumping agreement can be abused for retaliatory strategies. Works Cited Andersen, H. (2006). EU Dumping Determinations and WTO Law. The Netherlands: Kluwer Law International. Bolton, R. M. (2011). “Anti-Dumping and Distrust: Reducing Anti-Dumping Duties Under the WTO Through Heightened Scrutiny”. Berkeley Journal of International Law, Vol. 29(1) 66-93. Bown, C. P. (August 2007). “China’s WTO Entry: Antidumping, Safeguards, and Dispute Settlement.” National Bureau of Economic Research, Working Paper 13349: 1-65. China v the EU Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WTO Dispute, DS397, 2011. Cook, T. A.; Alston, R. and Raia, K. (2004). Mastering Import & Export Management, Vol. 1. New York, NY: AMACOM Books. Council Regulation (EC) No. 1225/2009. Davis, L. (2009). “Ten Years of Anti-Dumping in the EU: Economic and Political Targeting.” ECIPE Working Paper, No. 02/2009: 1-23. Durling, J. P. (2003). “Deference, But Only When Due: WTO Review of Anti-Dumping Measures.” Journal of International Economic Law, Vol. 6(1): 125-153. EU Council Regulation 384/96 of 1995. GATT 1995. Raju, K. D. (2008). World Trade Organization Agreement on Anti-Dumping. The Netherlands: Kluwer Law International. Rovegno, L. and Vandenbussche, H. (2011). “A Comparative Analysis of EU Antidumping Rules and Application.” Institut de Recherches Economiques et Sociates de L’Universite Catholique de Louvain, IRES Discussion Paper 2011-23: 1-24. Read More