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RULES NEGOTIATIONS: WAY FORWARD

ICRIER 6 April 2006

Abhijit Das,

Senior Trade Officer, UNCTAD India Programme

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Rules Negotiations: What is cooking

• Procedural improvements in anti-dumping investigation • More precision in dumping margin determination• Improvements in injury analysis and causality• Tightening of disciplines on reviews• Expeditious dispute resolution• Expand prohibited subsidies• Acceptance of specific methodologies for determination of benefit• Harmonise anti-dumping and cvd investigation procedures• Improvements in cvd investigation procedure• Improvements in definition of de facto export subsidy• Disciplines on fisheries subsidies• Will the final dish be delicious for all or even for any one

country?

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Overall balance in Rules negotiations

• Australia, Canada, EU, Egypt, FANs, India, New Zealand and US are active in Rules negotiations.

• But, US and Japan likely to be the key players in determining the ambition level and overall balance in the Rules Negotiations: their position would be crucial in deciding the way forward

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US interests in ADA negotiations

• Overwhelmingly defensive interest

• A few issues in which it has a positive interest include:

Rules on anti-circumventionImprovements in the provision on New

Shipper ReviewImprovement in the standard of review

provision

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Japan (FANs) interest in ADA negotiations

• Offensive interest in almost all provisions of the ADA• Detailed proposals made on increasing precision and

predictability in initiation dumping margin determination defining material injury injury evaluation causality mandatory application of lesser duty rule public interest reviews, particularly sunset reviews due process and investigation procedure• Defensive interest mainly in anti-circumvention and NSR

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ADA negotiations: can interests be balanced

• Given the extensive interest of Japan (FANs) in amendments to the ADA, US may have to give up more than what it is likely to gain in ADA negotiations

• In ADA negotiations difficult to achieve balance between interest of Japan (FANs) and US

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ADA- US interests: Anti-circumvention

• US seeks to address two situations of circumvention which undermine effectiveness of trade remedy rules through :

minor alteration in the product replacement of trade in the product by trade in

its sub-components which are assembled in the importing country or in a third country

• US proposal – impose anti-dumping duty / cvd on a product not subject to original investigation if any of the above two situations of anti-circumvention arises

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Anti- circumvention: How do others view it

• FANs - Anti-Circumvention is a complex issue and the Informal Group was not able to reach a conclusion even on the basic question of what constitutes circumvention

Legitimate right of business to change their source of supply. Difficult to differentiate between the real circumvention and

legitimate business behavior. With increasing globalization, fast development of products using

new technology, new products can be developed very fast. Need to exercise caution, otherwise anti-circumvention provision

could lead to further abuse of anti-dumping measures • Canada and EU have a nuanced position and look

forward to the issue being addressed by NGR.• India has faced problems relating to circumvention, but

has opposed rules

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Anti- circumvention: Way forward

• US and EU already apply anti-circumvention provision – not challenged so far under DSU

• To ensure predictability and more fair rules, may be better to include anti-circumvention provision in the ADA

Need to clearly define the rights and obligations under anti-circumvention proceedings

Need to be more precise on when anti-circumvention provision can be invoked

Limited duration for anti-circumvention duty remaining in place

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ADA- US interests : NSR

• US envisages a two-step approach for NSR• New concept of threshold determination

requiring the parties to establish that: they are not related to any of the parties

currently subject to duties. they are engaged in bona fide sales to the

importing country. • If positive threshold determination, then no duty

would be levied during the review• NSR would not be on an accelerated basis

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NSR: How do others view it

• Most of the countries opposed to US proposal

• ‘bona fide commercial sales’ will be subject to higher and strict standards

• deletion of the need for accelerated review against the interest of genuine NSRs

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NSR: Way forward

• In certain cases India has also faced problems similar to that faced by US

• Need to retain the requirement of accelerated review

• The requirement of ‘bona fide commercial sales’ could be made more precise for preventing abuse and protecting the rights of exporters

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ADA – Japan (FANs) interests: Sunset reviews

• Initial proposal of FANs sought termination of anti-dumping duties at the end of the 5-year period.

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Sunset reviews: How do others view it

• Other countries have underscored the need for strengthening disciplines on SSR

• Illustrative list of parameters suggested for the ‘likelihood’ test

• Major users opposed to automatic termination of anti-dumping duties at the end of the 5-year period

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Sunset Reviews: Way forward

• ‘Likelihood’ test is extremely subjective, if not outright speculative

• Suggested list of parameters for the ‘likelihood’ test has limited scope for improving the situation.

• Recent proposal from Japan provides the middle ground- Automatic termination of anti-dumping duties after x no.

of years Initiate SSR before the end of 5th year on receipt of a well

documented petition by or on behalf of the domestic industry

Clearer standards for ‘likelihood’ test

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ADA- Japan (FANs) interests: LDR

• India has joined the FANs on this issue• Mandatory application of LDR proposed• NIP to be calculated using one of the following: Current price of the like product produced by domestic

producers The price of the domestic like product during a period

prior to being affected by dumping Price of non-dumped imports of the product under

investigation Constructed price method

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LDR: How do others view it

• Following strong objections by US and Egypt : Article 9:1 allows Members discretion to impose duty up

to dumping margin How to quantify injury margin on the basis of one injury

factor (price) Imposition of LDR may lead to duty absorption Implementing LDR will be resource intensive Implementing LDR will be complex

• Other countries implementing LDR appear keen only to preserve their existing practise

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LDR: Way Forward

• Limit mandatory application of LDR to original investigation

• Provide flexibility to the country to notify a preferred methodology to be followed, with reasoned explanations in cases of deviation

• If need be, expand the category of permitted methodology to include other practices not covered

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Subsidies Issues – US interest: Expanding Prohibited Subsidies

• US has proposed expanding the list of prohibited subsidies to include ‘intrusive govt. interference in the marketplace’

Art. 6.1 subsidiesSubsidies which have forestalled industry

restructuringCreation and maintenance subsidies – steel

sector specified.

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Expanding Prohibited Subsidies: How do others view it

• Nuanced support from certain developed countries

• Generally opposed by developing countries as it would severely restrict policy space

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Expanding Prohibited Subsidies: Way Forward

• As the US proposal is not well developed, is it a mere straw man to be demolished after concessions have been extracted?

• Would introduce disciplines on capacity – new element in the ASCM context

• Clear definition of creation and maintenance subsidies needed.

• Prohibition should not apply to developing countries

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Fisheries Subsidies: Important element for overall balance in Rules Negotiations

• Disciplines on fisheries subsidies appear essential for achieving overall balance in Rules Negotiations- US on the offensive and some of the FANs (Japan, Chinese Taipei and Korea) on the defensive.

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Fisheries Subsidies: Who has what interest

• US, New Zealand, Australia etc are seeking general prohibition on fisheries subsidies – top down approach

• Japan, Korea etc. resisted negotiations. Appear willing to live with bottoms up approach

• Brazil has sought to link disciplines with fisheries patently at risk

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Rules negotiations: India’s interest

• Need to tread a finely balanced path in ADA negotiations with tilt towards export interest

• In subsidies need to seek improvements in provisions on:

export competitiveness reasonable and effective verification system for

duty concessions• In fisheries subsidies protect: Interests of small fishermen Support for deep sea fishing Inland fishing

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Rules Negotiations

• No overall winner• Most countries would have to give up some

issues of their crucial interest• Domestic industry and DGAD need to be

prepared to implement improved procedural and transparency requirements

• There could be some surprises towards the end.• Need to visualise end game and be adequately

prepared for it

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THANK YOU