International and Regional Trade Law:

The Law of the World Trade Organization

J.H.H. Weiler

University Professor, NYU Joseph Straus Professor of Law and European Union Jean Monnet Chair,

NYU School of Law

AND

Sungjoon Cho

Assistant Professor Chicago-Kent College of Law

Illinois Institute of Technology

Unit XII: Anti-Dumping and Subsidies

J.H.H. Weiler & S. Cho 2006

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The Law of World Trade Organization

Unit XII: Anti-Dumping and Subsidies

Table of Contents

Guiding Questions .......................................................................................................................... 1 1. Introduction ............................................................................................................................. 2

1-1. Anti-Dumping Actions......................................................................................................... 2 Overview ................................................................................................................................. 2 Relevant Provisions ................................................................................................................. 4 Antidumping Annual Report 2003 .......................................................................................... 5 The US Antidumping Procedure ............................................................................................. 7 Standard of Review ............................................................................................................... 10 Byrd Amendment .................................................................................................................. 13 Current Debates (Friends of Anti-Dumping)......................................................................... 15

1-2. Subsidies and Countervailing Measures ............................................................................ 17 Overview: .............................................................................................................................. 17 Relevant Provisions ............................................................................................................... 19 The Concept of Benefit ...................................................................................................... 20 Peace Clause .......................................................................................................................... 24 Subsidies Annual Report (2003)............................................................................................ 26 Agricultural Subsidies Found Illegal..................................................................................... 28

1-3. The Doha Agenda on Antidumping and Subsidies............................................................ 29 2. Mexican HFCS (2000)........................................................................................................... 30 3. Foreign Sales Corporations (FSC) (2000) ............................................................................. 48 4. Recent Developments ........................................................................................................ 71

4-1. Boeing Airbus Dispute (2005) ........................................................................................ 71 4-2. U.S. Cotton Subsidies (2005).......................................................................................... 74 4-3. EU Sugar Subsidies (2005)............................................................................................. 77 4-4. U.S. Zeroing (2006) ........................................................................................................ 79

Optional Reading .......................................................................................................................... 82 US Steel (2001) ...................................................................................................................... 82 FSC II (2002) ............................................................................................................................ 92 US - URAA Section 129 (2002) ............................................................................................... 97 Canada Diary Products (2002) ............................................................................................. 107 EU Zeroing (2001) ............................................................................................................... 119 References ............................................................................................................................... 129

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Guiding Questions

1. Antidumping / Subsidies in General

a. Is the rationale (prevention of predatory pricing) behind the antidumping law plausible? Should the antidumping law be replaced by the anti-competition law? Why should price differentiation be penalized?

b. Who would win or lose as a result of the commencement and proceeding of antidumping

investigations as well as the final imposition of antidumping duties?

c. Would the standard of review enshrined in Article 17.6 of the WTO Antidumping Agreement be similar with the one that is found in the Chevron doctrine in the US?

d. Would the government cost play a decisive role in determining a subsidy together with the

benefit that recipients enjoy?

e. Note both conceptual and remedial differences among the three types of subsidies (prohibited, actionable and permtted) under the WTO Subsidies Agreement.

2. Mexican HFCS a. Did the panel apply a more lenient interpretive stance to the issue of initiation of antidumping

investigation than in the issue of determination of injury or a threat of injury? See para. 7.97 of the Panel Report.

b. Is this case law in general sovereignty-preserving or sovereignty-containing? Could you envisage

a decline of the use of domestic antidumping law thanks to the WTO Antidumping Agreement and its jurisprudence? See Antidumping Activities (1-1) in this Unit. See also the main findings of US-Steel (2002).

3. FSC

a. Note that the US adopts a unique universal system in the federal income / corporation tax law,

which produces deferral or anti-deferral rules. This is the root of this dispute. b. The predecessor of this case is the DISC (Domestic International Sales Corporation) under the

old GATT, which choked the then GATT dispute settlement system for a quite long period of time. Would such case be the so-called wrong case which had better not be filed before the WTO dispute settlement system on account of its political sensitivity? (Cf. the emergence of FSC II) Should Members self-limit the filing of such hot potatoes to protect the stability of the WTO system as a whole? Should an intergovernmental cooperation be a better solution of such dispute?

c. Would the outcome in this case have been different had the US avoided taxing all the relevant

foreign economic processes in question, rather than exempting a certain portion of them as being contingent of the export performance?

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1. Introduction 1-1. ANTI-DUMPING ACTIONS

Overview

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm

If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be "dumping" the product. Is this unfair competition? Opinions differ, but many governments take action against dumping in order to defend their domestic industries. The WTO agreement does not pass judgement. Its focus is on how governments can or cannot react to dumping - it disciplines anti-dumping actions, and it is often called the "Anti-Dumping Agreement". (This focus only on the reaction to dumping contrasts with the approach of the Subsidies and Countervailing Measures Agreement.) The legal definitions are more precise, but broadly speaking the WTO agreement allows governments to act against dumping where there is genuine ("material") injury to the competing domestic industry. In order to do that the government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter's home market price), and show that the dumping is causing injury. GATT (Article 6) allows countries to take action against dumping. The Anti-Dumping Agreement clarifies and expands Article 6, and the two operate together. They allow countries to act in a way that would normally break the GATT principles of binding a tariff and not discriminating between trading partners - typically anti-dumping action means charging extra import duty on the particular product from the particular exporting country in order to bring its price closer to the "normal value" or to remove the injury to domestic industry in the importing country. There are many different ways of calculating whether a particular product is being dumped heavily or only lightly. The agreement narrows down the range of possible options. It provides three methods to calculate a product's "normal value". The main one is based on the price in the exporter's domestic market. When this cannot be used, two alternatives are available - the price charged by the exporter in another country, or a calculation based on the combination of the exporter's production costs, other expenses and normal profit margins. And the agreement also specifies how a fair comparison can be made between the export price and what would be a normal price. Calculating the extent of dumping on a product is not enough. Anti-dumping measures can only be applied if the dumping is hurting the industry in the importing country. Therefore, a detailed investigation has to be conducted according to specified rules first. The investigation must evaluate all relevant economic factors that have a bearing on the state of the industry in question. If the investigation shows dumping is taking place and domestic industry is being hurt, the exporting company can undertake to raise its price to an agreed level in order to avoid anti-dumping import duty.

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The present rules revise the Tokyo Round (1973-79) code on anti-dumping measures and are a result of the Uruguay Round (1986-94) negotiations. The Tokyo Round code was not signed by all GATT members; the Uruguay Round version is part of the WTO agreement and applies to all members.

The WTO Anti-Dumping Agreement introduced these modifications: more detailed rules for calculating the amount of dumping, more detailed procedures for initiating and conducting anti-dumping investigations, rules on the implementation and duration (normally five years) of anti-dumping measures, particular standards for dispute settlement panels to apply in anti-dumping disputes. Detailed procedures are set out on how anti-dumping cases are to be initiated, how the investigations are to be conducted, and the conditions for ensuring that all interested parties are given an opportunity to present evidence. Anti-dumping measures must expire five years after the date of imposition, unless an investigation shows that ending the measure would lead to injury. Anti-dumping investigations are to end immediately in cases where the authorities determine that the margin of dumping is insignificantly small (defined as less than 2% of the export price of the product). Other conditions are also set. For example, the investigations also have to end if the volume of dumped imports is negligible (i.e. if the volume from one country is less than 3% of total imports of that product - although investigations can proceed if several countries, each supplying less than 3% of the imports, together account for 7% or more of total imports). The agreement says member countries must inform the Committee on Anti-Dumping Practices about all preliminary and final anti-dumping actions, promptly and in detail. They must also report on all investigations twice a year. When differences arise, members are encouraged to consult each other. They can also use the WTO's dispute settlement procedure. Data on use of anti-dumping measures can be found in the 1997 annual report

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Relevant Provisions Read in Primary Sources : GATT Article VI, Ad Article VI (Interpretive Note) Antidumping Code (Agreement on Implementation of Article VI of the GATT 1994) Articles 1-5, 7-11, 13-14, 17 Decision on Review of Article 17.6 of Agreement on Implementation of Article VI of the GATT 1994

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Antidumping Annual Report 2003

Antidumping Annual Report (2003) http://www.wto.org/english/tratop_e/adp_e/adp_e.htm (emphasis added)

REPORT (2003) OF THE COMMITTEE ON ANTI-DUMPING PRACTICES

() II.NOTIFICATION AND EXAMINATION OF ANTI-DUMPING LAWS AND/OR REGULATIONS OF MEMBERS 5.Article 18.5 of the Agreement provides that "Each Member shall inform the Committee of any changes in its laws and regulations relevant to this Agreement and in the administration of such laws and regulations". Pursuant to a decision of the Committee in February 1995, all Members having new or existing legislation and/or regulations which apply in whole or in part to anti-dumping duty investigations or reviews covered by the Agreement are requested to notify the full and integrated text of such legislation and/or regulations to the Committee. Changes in a Member's legislation and/or regulations are to be notified to the Committee as well. Pursuant to that same decision of the Committee, if a Member has no such legislation or regulations, the Member is to inform the Committee of this fact. The Committee also decided that Observer governments should comply with these notification obligations.

6.As of 24 October 2003, 104 Members had notified the Committee regarding their domestic anti-dumping legislation.1 Of these 104 Members, 29 had notified the Committee that they had no anti-dumping legislation. Members' communications in this regard can be found in document series G/ADP/N/1/... . 26 Members had not, as yet, made any notification of anti-dumping legislation and/or regulations. Annex A sets out the status of notifications concerning legislation under Article 18.5 of the Agreement, and sets out the reference symbol of the document(s) containing each Member's current notification in this regard. ()

III.SEMI-ANNUAL REPORTS ON ANTI-DUMPING ACTIONS TAKEN BY MEMBERS 9.Semi-annual reports for the period 1 July-31 December 2002. As of 24 October 2003, semi-annual reports of actions taken during this period had been submitted by 32 Members. 35 Members had notified the Committee that they had not taken any anti-dumping actions during this period. The remaining Members required to do so had not submitted a notification in this regard. The semi-annual reports were circulated in document series G/ADP/N/98/... . At the Committee's regular meeting in May 2003, the 1In this report, the EC is counted as one Member.

WORLD TRADE

ORGANIZATION G/L/653 28 October 2003

(03-5702)

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Chairperson reported that it appeared that most Members taking actions had submitted semi-annual reports in a timely fashion. Members who had not submitted reports, including Nil returns were strongly urged to submit these reports. The Chairperson reminded Members that the Secretariat was available to assist with the reporting format, and urged Members to bring problems with each others' reports to the Committee. The Chairperson also urged Members to follow the guidelines for reports adopted by the Committee and set out in document G/ADP/1. The status of semi-annual reports is set out in Annex B.

10.Semi-annual reports for the period 1 January-30 June 2003. As of 24 October 2003, semi-annual reports of actions taken during this period had been submitted by 27 Members. 26 Members had notified the Committee that they had not taken any anti-dumping actions during this period. The remaining Members required to do so had not submitted a notification in this regard. The semi-annual reports were circulated in document series G/ADP/N/105/... . At the Committee's regular meeting in October, the Chairman reported that, although there continued to be some problems in the form of reports, Members had clearly made an effort to submit reports in the format established by the Committee. The Chairman reminded Members that guidelines for the format of semi-annual reports are set out in document G/ADP/1, and that the Secretariat was available to assist Members with questions about the form of reports. The Chairman strongly urged all Members to comply with the requirement to submit semi-annual reports in a timely fashion in the future. The status of semi-annual reports is set out in Annex B. ()

IV.REPORTS ON ALL PRELIMINARY OR FINAL ANTI-DUMPING ACTIONS 12.Pursuant to Article 16.4 of the Agreement, Members are to report without delay to the Committee all preliminary and final anti-dumping actions taken. Reports of preliminary and final anti-dumping actions during the period under consideration were received from Argentina, Australia, Canada, China, Egypt, the European Communities, India, Korea, Malaysia, Mexico, New Zealand, Pakistan, Peru, Poland, Singapore, South Africa, Chinese Taipei, Trinidad and Tobago, Turkey, the United States, Uruguay, and Venezuela, as indicated in documents G/ADP/N/96, G/ADP/N/97, G/ADP/N/99, G/ADP/N/101, G/ADP/N/102, G/ADP/N/103, G/ADP/N/104, G/ADP/N/106, G/ADP/N/107, G/ADP/N/108 and G/ADP/N/109.

13.The Committee reviewed the notifications of preliminary and final actions at its regular meetings in May and October 2003. At the Committee's meeting in May 2003, the Chairperson noted that there continued to be a lack of full compliance in this area and highlighted the importance of this notification in the Committee's role in monitoring and discussing actions taken by Members. At the Committee's meeting in October 2003, the Chairman noted that there still continued to be a lack of full compliance in this area, as some Members who submitted semi-annual reports indicating preliminary and/or final measures had not submitted reports of preliminary or final actions taken, as reflected in Annex D of this report. The Chairman pointed out that if the Committee was to carry out its role in monitoring and discussing actions taken by Members, it was extremely important that Members notify their preliminary and final actions, as required by the Agreement, and he strongly urged Members to do so.

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The US Antidumping Procedure

An Introduction to U.S. Trade Remedies

From the U.S. Department of Commerce Unfair foreign pricing and government subsidies distort the free flow of goods and adversely affect American business in the global marketplace. Import Administration, within the International Trade Administration of the Department of Commerce, enforces laws and agreements to protect U.S. businesses from unfair competition within the U.S. resulting from unfair pricing by foreign companies and unfair subsidies to foreign companies by their governments.

What is Dumping?

Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer's sales price in the country of origin ("home market"), or at a price that is lower than the cost of production. The difference between the price (or cost) in the foreign market and the price in the U.S. market is called the dumping margin. Unless the conduct falls within the legal definition of dumping as specified in U.S. law, a foreign producer selling imports at prices below those of American products is not necessarily dumping.

What is a Countervailable Subsidy?

Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions. The statute and regulations establish standards for determining when an unfair subsidy has been conferred. The amount of subsidies the foreign producer receives from the government is the basis for the subsidy rate by which the subsidy is offset, or "countervailed," through higher import duties.

How is Dumping or Subsidization Remedied?

If a U.S. industry believes that it is being injured by unfair competition through dumping or subsidization of a foreign product, it may request the imposition of antidumping or countervailing duties by filing a petition with both Import Administration and the United States International Trade Commission. Import Administration investigates foreign producers and governments to determine whether dumping or subsidization has occurred and calculates the amount of dumping or subsidies.

What is the role of the International Trade Commission

The International Trade Commission determines whether the domestic industry is suffering material injury as a result of the imports of the dumped or subsidized products. The International Trade Commission considers all relevant economic factors, including the domestic industry's

http://ia.ita.doc.gov/intro/

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output, sales, market share, employment, and profits. For further information on the International Trade Commission's injury investigation, see http://www.usitc.gov. Both the International Trade Commission and Import Administration must make affirmative preliminary determinations for an investigation to go forward.

What relief is the end result of an Antidumping or Countervailing Duty Investigation?

If both Commerce and the International Trade Commission make affirmative findings of dumping and injury, Commerce instructs the U.S. Customs Service to assess duties against imports of that product into the United States. The duties are assessed as a percentage of the value of the imports and are equivalent to the dumping and subsidy margins, described above. For example, if Commerce finds a dumping margin of 35%, the U.S. Customs Service will collect a 35% duty on the product at the time of importation into the United States in order to offset the amount of dumping. Information on the U.S. Customs Service may be found at http://www.customs.ustreas.gov.

How long does it take for Antidumping or Countervailing Duty Orders to be issued?

If both the International Trade Commission and Import Administration make affirmative preliminary determinations (within 190 days of initiation of the antidumping investigation, or 130 days for countervailing duty investigation) importers are required to post a bond or cash to cover an estimated amount for the duties which would be collected in the event that an AD or CVD order is issued upon the completion of the investigations. Typically, the final phases of the investigations by Import Administration and the International Trade Commission are completed within 12 to 18 months of initiation.

What are the requirements for filing an Antidumping or Countervailing Duty Petition?

Petitions may be filed by a domestic interested party, including a manufacturer or a union within the domestic industry producing the product which competes with the imports to be investigated. To ensure that there is sufficient support by domestic industry for the investigation, the law requires that the petitioners must represent at least 25% of domestic production. The statute requires the petition to contain certain information, including data about conditions of the U.S. market and the domestic industry, as well as evidence of dumping or unfair subsidization.

Antidumping and countervailing duty trade remedies have been successfully pursued by a variety of domestic industries, including producers of steel, industrial equipment, computer chips, agricultural products, textiles, chemicals, and consumer products. Both the Import Administration and the International Trade Commission have staff available to assist domestic industries in deciding whether there is sufficient evidence to file a petition for antidumping or countervailing duty investigations. The staff may also assist eligible small businesses with the filing process.

How can I learn more about filing a petition?

http://www.usitc.gov/http://www.customs.ustreas.gov/

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Contact the Import Administration, Office of Policy at (202) 482-4412 or by e-mail at Petitioners_Support@ita.doc.gov Additional information can also be found at the Import Administration web site: ia.ita.doc.gov

Note: This document is for general information purposes only. When interpreting and applying the law, readers should refer to the Tariff Act of 1930, as amended, (19 U.S.C. 1671-1671h, 1673-1673h) and the related regulations in Title 19 of the Code of Federal Regulations.

mailto:Petitioners_Support@ita.doc.govhttp://ia.ita.doc.gov/

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Standard of Review

UNITED STATES ANTI-DUMPING MEASURES ON CERTAIN HOT-ROLLED STEEL PRODUCTS FROM JAPAN, WT/DS184/AB/R, 24 July 2001

http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm () IV.Article 17.6 of the Anti-Dumping Agreement and Article 11 of the DSU: Standard of Review

50Before turning to the issues raised on appeal, it appears to us useful to address certain general aspects of the standard of review established by Article 17.6 of the Anti-Dumping Agreement, as this standard bears upon each issue arising in this appeal. 2 Article 17.6 of the Anti-Dumping Agreement reads:

In examining the matter referred to in paragraph 5:

(i) in its assessment of the facts of the matter, the panel shall determine whether the authorities' establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned;

(ii) the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations.

51Two threshold aspects of Article 17.6 need to be noted. The first is that Article 17.6 is identified in Article 1.2 and Appendix 2 of the DSU as one of the "special or additional rules and procedures" which prevail over the DSU "[t]o the extent that there is a difference" between those provisions and the provisions of the DSU. ()

2We have referred to Article 17.6 of the Anti-Dumping Agreement in previous Reports: Appellate Body Report, European Communities Anti-Dumping Duties on Imports of Cotton-type Bed Linen from India ("European Communities Bed Linen"), WT/DS141/AB/R, adopted 12 March 2001, paras. 63-65; Appellate Body Report, Thailand Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel H-Beams from Poland ("Thailand Steel"), WT/DS122/AB/R, adopted 5 April 2001, paras. 137 and 138; and Appellate Body Report, United States Lamb Safeguard, supra, footnote 28, para. 105 and footnote 63 thereto.

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53The second threshold aspect follows from the first and concerns the relationship between Article 17.6 of the Anti-Dumping Agreement and Article 11 of the DSU. Article 17.6 lays down rules relating to a panel's examination of "matters" arising under one, and only one, covered agreement, the Anti-Dumping Agreement. In contrast, Article 11 of the DSU provides rules which apply to a panel's examination of "matters" arising under any of the covered agreements. Article 11 reads, in part:

a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements (emphasis added)

54Article 11 of the DSU imposes upon panels a comprehensive obligation to make an "objective assessment of the matter", an obligation which embraces all aspects of a panel's examination of the "matter", both factual and legal. Thus, panels make an "objective assessment of the facts", of the "applicability" of the covered agreements, and of the "conformity" of the measure at stake with those covered agreements. ()

56Article 17.6(i) of the Anti-Dumping Agreement also states that the panel is to determine, first, whether the investigating authorities' "establishment of the facts was proper " and, second, whether the authorities' "evaluation of those facts was unbiased and objective" (emphasis added) () Thus, panels must assess if the establishment of the facts by the investigating authorities was proper and if the evaluation of those facts by those authorities was unbiased and objective. If these broad standards have not been met, a panel must hold the investigating authorities' establishment or evaluation of the facts to be inconsistent with the Anti-Dumping Agreement.

57We turn now to Article 17.6(ii) of the Anti-Dumping Agreement. The first sentence of Article 17.6(ii), echoing closely Article 3.2 of the DSU, states that panels "shall" interpret the provisions of the Anti-Dumping Agreement "in accordance with customary rules of interpretation of public international law." Such customary rules are embodied in Articles 31 and 32 of the Vienna Convention on the Law of Treaties ("Vienna Convention"). 3 Clearly, this aspect of Article 17.6(ii) involves no "conflict" with the DSU but, rather, confirms that the usual rules of treaty interpretation under the DSU also apply to the Anti-Dumping Agreement.

()

62Finally, although the second sentence of Article 17.6(ii) of the Anti-Dumping Agreement imposes obligations on panels which are not found in the DSU, we see Article 17.6(ii) as supplementing, rather than replacing, the DSU, and Article 11 in particular. Article 11 requires panels to make an "objective assessment of the matter" as a whole. Thus, under the DSU, in examining claims, panels must make an "objective assessment" of the legal provisions at issue, their "applicability" to the dispute, and the "conformity" of the measures at issue with the covered agreements. Nothing in Article 17.6(ii) of the Anti-Dumping Agreement suggests that panels examining claims under that Agreement should not conduct an "objective assessment" of the legal provisions of the Agreement, their applicability to the dispute, and the conformity of the measures at issue with the Agreement. Article 17.6(ii) simply adds that a

3Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679. See, Appellate Body Report, United States Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3 at 15; Appellate Body Report, Japan Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97 at 104-106.

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panel shall find that a measure is in conformity with the Anti-Dumping Agreement if it rests upon one permissible interpretation of that Agreement.

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Byrd Amendment

WORLD TRADE ORGANIZATION

WT/DS217/AB/R WT/DS234/AB/R 16 January 2003 (03-0209)

Original: English

UNITED STATES - CONTINUED DUMPING AND SUBSIDY OFFSET ACT OF2000

AB-2002-7

Report of the Appellate Body () II. Factual Background () 12. The CDSOA provides that the United States Commissioner of Customs ("Customs") shall distribute, on an annual basis, duties assessed pursuant to a countervailing duty order, an anti-dumping duty order, or a finding under the United States Antidumping Act of 1921, to "affected domestic producers" for "qualifying expenditures". An "affected domestic producer" is defined as a domestic producer that: (a) was a petitioner or interested party in support of the petition with respect to which an anti-dumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered; and (b) remains in operation. The term "qualifying expenditures" refers to expenditures on specific items identified in the CDSOA, which were incurred after the issuance of the anti-dumping duty finding, or order or countervailing duty order. Those expenditures must relate to the production of the same product that is subject to the anti-dumping or countervailing duty order, with the exception of expenses incurred by associations which must relate to the same case. () VII. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement () 242. In our view, the Panel was correct in finding that the CDSOA is a specific action related to dumping or a subsidy within the meaning of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. It is clear from the text of the CDSOA, in particular from Section 754(a) of the Tariff Act, that the CDSOA offset payments are inextricably linked to, and strongly correlated with, a determination of dumping, as defined in Article VI:1 of the GATT 1994 and in the Anti-Dumping Agreement , or a determination of a subsidy, as defined in the SCM Agreement . The language of the CDSOA is unequivocal. () ASIL Insights http://www.asil.org/insights/insigh144.htm WTO Arbitration Decision on Retaliation Against the US over the Byrd Amendment By Eliza Patterson September 2004

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Eight related World Trade Organization (WTO) arbitration decisions issued on August 31, 2004, [1] set the amount of retaliation eight US trading partners (the Requesting Parties) may impose against the United States for its failure to comply with a prior WTO Appellate Body ruling that the Continued Dumping and Subsidy Offset Act (CDSOA) -- commonly known as the Byrd Amendment -- violated WTO rules. [2] In that ruling, the Appellate Body, largely upholding a prior panel decision, held that the CDSOA violated the Antidumping Agreement Article 18.4, the Subsidy and Countervailing Measures Agreement Article 32.5, and the WTO Agreement Article XVI:4. [3] The reason for the violation was that the CDSOA provides that duties assessed pursuant to a countervailing duty order or an antidumping duty order are to be distributed on an annual basis to the affected domestic petitioners in the case and to those who supported the successful petition, rather than being retained by the US government.

As a result of the US failure to bring the CDSOA into compliance, eight of the eleven complainants in the dispute requested authorization under WTO Dispute Settlement Understanding Article 22.2 to suspend concessions or other obligations (in common parlance, to retaliate) with respect to their trade with the United States. Their requests led to the August decision, which is important for several reasons.

First, the decision confirmed the long-standing WTO norm that retaliation must be based on the amount of trade damage caused by the law found to be in violation of WTO rules, and not on the extent or nature of the illegality. [4] Specifically, the arbitrator rejected the Requesting Parties' argument that because each disbursement under CDSOA violated the WTO, the total amount of disbursements, rather than the trade impact, should be used to determine the level of retaliation.

Second, the decision held that the relevant trade damage for establishing retaliation rights is not the total global trade effects of the illegal measure, but rather the more limited impact on the trade of the requesting party. In other words, countries are only entitled to retaliate in amounts equal to the trade effects of the illegal measure on their own exports regardless of the global effects of the illegal measure. This is so even if less than 100% of the adverse trade effects are countered by retaliation. Specifically, the arbitrator rejected the complainants claims that they should be allowed to consider not only the trade damage suffered by their own exporters, but should additionally be allowed to allocate among themselves the trade damage suffered by countries that did not participate in the case. [5] ()

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Current Debates (Friends of Anti-Dumping)

Bridges Weekly Trade News Digest, Vol. 7, No. 11, Mar. 26, 2003

http://www.ictsd.org/weekly/03-03-26/story2.htm ()

New Submissions Tabled on Anti-Dumping

Discussions on anti-dumping continued to divide WTO Members at the Negotiating Group meeting. While 15 "Friends of Anti-Dumping Negotiations" want to change WTO rules to prevent abuse of anti-dumping measures and burdensome or unnecessary investigations, the US wishes to maintain maximum flexibility in the use of trade remedies and focuses on closing loopholes in the existing anti-dumping agreement.

During the Rules Negotiating Group meeting, the EU submitted a paper containing a proposal for fast-track procedures with regard to unjustified anti-dumping and countervailing investigations (TN/RL/W/67). The "Friends of Anti-Dumping Negotiations" -- Brazil, Chile, Colombia, Costa Rica, Israel, Japan, Korea, Norway, Chinese Taipei, Switzerland, Thailand, Turkey and Hong Kong, China -- made another proposal (TN/RLW/76). Their proposal suggests tightening the use of sunset reviews, to prevent the extension of anti-dumping duty orders beyond the five years set out under the WTO Antidumping Agreement. The 'Friends' groups said that in practice "an expansive use of the exception [sunset reviews to continue the order] turns the continuation of the order into a de facto practice". The US outrightly dismissed the proposal at the meeting.

The US submitted a paper on clarifying and improving subsidies disciplines, suggesting that the category of prohibited government subsidies be extended to include large domestic subsidies, subsidies to cover operating losses and government debt forgiveness (TN/RL/W/78). A second submission proposed clarifying issues under the anti-dumping and subsidies agreements, including investigations on perishable goods and persistently dumped and subsidised imports of certain products (TN/RL/W/72). The US in the latter case referred, inter alia, to its steel industry.

Egypt, following the line taken by the US rather than the "Friends of Anti-Dumping Negotiations," stated that dumping, not measures to prevent dumping, are trade disruptive, and more rules making anti- dumping measures more complicated would be counterproductive (TN/RL/W/27). This paper, submitted by Egypt in February, stressed that many 'new users' of anti-dumping measures were developing countries that would find it difficult and burdensome to deal with complex rules put forth by some Members on anti-dumping. China tabled its first paper on anti-dumping during the rules meeting. The paper called for stronger disciplines on anti-dumping actions, and for the removal of a clause on "non-market economy" (TN/RL/W/66).

Meanwhile, a representative of the National Foreign Trade Council (NFTC), a US business group, called on WTO Members to start from a "clean slate" in anti-dumping negotiations and to abandon the current agreement. The group has presented its proposal to US trade negotiators. The proposal

http://www.ictsd.org/weekly/03-03-26/story2.htm

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suggests developing model regulations and instruments for national antidumping regimes -- based on, inter alia, US regulations -- that countries could implement at the national level in order to be in compliance with the WTO.

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1-2. SUBSIDIES AND COUNTERVAILING MEASURES

Overview:

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm

This agreement does two things: it disciplines the use of subsidies, and it regulates the actions countries can take to counter the effects of subsidies. It says a country can use the WTO's dispute settlement procedure to seek the withdrawal of the subsidy or the removal of its adverse effects. Or the country can launch its own investigation and ultimately charge extra duty (known as "countervailing duty") on subsidized imports that are found to be hurting domestic producers. The agreement builds on the Tokyo Round Subsidy Code. Unlike its predecessor, the present agreement contains a definition of subsidy. It also introduces the concept of a "specific" subsidy - i.e. a subsidy available only to an enterprise, industry, group of enterprises, or group of industries in the country (or state, etc) that gives the subsidy. The disciplines set out in the agreement only apply to specific subsidies. They can be domestic or export subsidies. As with anti-dumping, the subsidy agreement is part of the package of WTO agreements that is signed by all members - the Tokyo Round "code" was only signed by some GATT members.

The agreement defines three categories of subsidies: prohibited, actionable and non-actionable. It applies to agricultural goods as well as industrial products, except when the subsidies conform with the Agriculture Agreement. Prohibited subsidies: subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. They are prohibited because they are specifically designed to distort international trade, and are therefore likely to hurt other countries' trade. They can be challenged in the WTO dispute settlement procedure where they are handled under an accelerated timetable. If the dispute settlement procedure confirms that the subsidy is prohibited, it must be withdrawn immediately. Otherwise, the complaining country can take counter measures. If domestic producers are hurt by imports of subsidized products, countervailing duty can be imposed. Actionable subsidies: in this category the complaining country has to show that the subsidy has an adverse effect on its interests. Otherwise the subsidy is permitted. The agreement defines three types of damage they can cause. One country's subsidies can hurt a domestic industry in an importing country. They can hurt rival exporters from another country when the two compete in third markets. And domestic subsidies in one country can hurt exporters trying to compete in the subsidizing country's domestic market. If the Dispute Settlement Body rules that the subsidy does have an adverse effect, the subsidy must be withdrawn or its adverse effect must be removed. Again, if domestic producers are hurt by imports of subsidized products, countervailing duty can be imposed. Non-actionable subsidies: these can either be non-specific subsidies, or specific subsidies for industrial research and pre-competitive development activity, assistance to disadvantaged regions, or certain types of assistance for adapting existing facilities to new environmental laws or regulations. Non-actionable subsidies cannot be challenged in the WTO's dispute settlement procedure, and countervailing duty cannot be used on subsidized imports.

http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm

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But the subsidies have to meet strict conditions. Some of the disciplines are similar to those of the Anti-Dumping Agreement. Countervailing duty (the parallel of anti-dumping duty) can only be charged after the importing country has conducted a detailed investigation similar to that required for anti-dumping action. There are detailed rules for deciding whether a product is being subsidized (not always an easy calculation), criteria for determining whether imports of subsidized products are hurting ("causing injury to") domestic industry, procedures for initiating and conducting investigations, and rules on the implementation and duration (normally five years) of countervailing measures. The subsidized exporter can also agree to raise its export prices as an alternative to its exports being charged countervailing duty. Subsidies may play an important role in developing countries and in the transformation of centrally-planned economies to market economies. Least-developed countries and developing countries with less than $1,000 per capita GNP are exempted from disciplines on prohibited export subsidies. Other developing countries are given until 2003 to get rid of their export subsidies. Least-developed countries must eliminate import-substitution subsidies (i.e. subsidies designed to help domestic production and avoid importing) by 2003 - for other developing countries the deadline is 2000. Developing countries also receive preferential treatment if their exports are subject to countervailing duty investigations. For transition economies, prohibited subsidies must be phased out by 2002. Data on use of anti-dumping measures can be found in the 1997 annual report.

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Relevant Provisions Read in Primary Sources: GATT 1994 Articles III, para. 8 (b), XVI, Ad Article XVI (Interpretive Note) Subsidy Code (Agreement on Subsidies and Countervailing Measures) Articles 1-11, 13, 15-21, 23, 25, 30

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The Concept of Benefit

http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm

WORLD TRADE

ORGANIZATION WT/DS70/AB/R 2 August 1999

(99-3221)

Original: English

CANADA - MEASURES AFFECTING THE EXPORT OF CIVILIAN AIRCRAFT

AB-1999-2

Report of the Appellate Body () V. Interpretation of "Benefit" In Article 1.1(b) of the SCM Agreement 149. In interpreting the term "benefit" in Article 1.1(b) of the SCM Agreement, the Panel found that:

the ordinary meaning of "benefit" clearly encompasses some form of advantage. In order to determine whether a financial contribution (in the sense of Article 1.1(a)(i)) confers a "benefit", i.e., an advantage, it is necessary to determine whether the financial contribution places the recipient in a more advantageous position than would have been the case but for the financial contribution. In our view, the only logical basis for determining the position the recipient would have been in absent the financial contribution is the market. Accordingly, a financial contribution will only confer a "benefit", i.e., an advantage, if it is provided on terms

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that are more advantageous than those that would have been available to the recipient on the market.4 (emphasis added)

150. The Panel concluded that the notion of "cost to government" is not relevant to the interpretation and application of the term "benefit", within the meaning of Article 1.1(b) of the SCM Agreement.5 The Panel found contextual support for this reading of "benefit" in Article 14 of the SCM Agreement. It also found that Annex IV of that Agreement does not form part of the relevant context of "benefit" in Article 1.1(b).

151.Canada appeals the Panel's legal interpretation of the term "benefit" in Article 1.1(b) of the SCM Agreement. In Canada's view, the Panel erred in its interpretation of "benefit" by focusing on the commercial benchmarks in Article 14 "to the exclusion of cost to government", and by rejecting Annex IV as relevant context.6 Canada maintains that Annex IV of the SCM Agreement supports the view that "cost to government", which is mentioned in Annex IV, is a legitimate interpretation of the term "benefit". In its appellee's submission, Brazil agrees fully with the Panel's interpretation.

152.Under the heading "Definition of a Subsidy", Article 1.1 of the SCM Agreement provides, in relevant part:

1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:

(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government")

and

(b) a benefit is thereby conferred. (emphasis added)

153.In addressing this issue, we start with the ordinary meaning of "benefit". The dictionary meaning of "benefit" is "advantage", "good", "gift", "profit", or, more generally, "a favourable or helpful factor or circumstance".7 Each of these alternative words or phrases gives flavour to the term "benefit" and helps to convey some of the essence of that term. These definitions also confirm that the Panel correctly stated that 4Panel Report, para. 9.112. The Panel confirmed its interpretation in similar terms in its conclusion at para. 9.120 of the Panel Report. 5Ibid., para. 9.112. 6Canada's appellant's submission, paras. 98 and 102. 7The New Shorter Oxford English Dictionary, (Clarendon Press, 1993), Vol. I, p. 214; The Concise Oxford Dictionary, (Clarendon Press, 1995), p. 120; Webster's Third New International Dictionary (unabridged), (William Benton, 1966), Vol. I, p. 204.

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"the ordinary meaning of 'benefit' clearly encompasses some form of advantage."8 Clearly, however, dictionary meanings leave many interpretive questions open.

154.A "benefit" does not exist in the abstract, but must be received and enjoyed by a beneficiary or a recipient. Logically, a "benefit" can be said to arise only if a person, natural or legal, or a group of persons, has in fact received something. The term "benefit", therefore, implies that there must be a recipient. This provides textual support for the view that the focus of the inquiry under Article 1.1(b) of the SCM Agreement should be on the recipient and not on the granting authority. The ordinary meaning of the word "confer", as used in Article 1.1(b), bears this out. "Confer" means, inter alia, "give", "grant" or "bestow".9 The use of the past participle "conferred" in the passive form, in conjunction with the word "thereby", naturally calls for an inquiry into what was conferred on the recipient. Accordingly, we believe that Canada's argument that "cost to government" is one way of conceiving of "benefit" is at odds with the ordinary meaning of Article 1.1(b), which focuses on the recipient and not on the government providing the "financial contribution".

155.We find support for this reading of "benefit" in the context of Article 1.1(b) of the SCM Agreement. Article 14 sets forth guidelines for calculating the amount of a subsidy in terms of "the benefit to the recipient". Although the opening words of Article 14 state that the guidelines it establishes apply "[f]or the purposes of Part V" of the SCM Agreement, which relates to "countervailing measures", our view is that Article 14, nonetheless, constitutes relevant context for the interpretation of "benefit" in Article 1.1(b). The guidelines set forth in Article 14 apply to the calculation of the "benefit to the recipient conferred pursuant to paragraph 1 of Article 1". (emphasis added) This explicit textual reference to Article 1.1 in Article 14 indicates to us that "benefit" is used in the same sense in Article 14 as it is in Article 1.1. Therefore, the reference to "benefit to the recipient" in Article 14 also implies that the word "benefit", as used in Article 1.1, is concerned with the "benefit to the recipient" and not with the "cost to government", as Canada contends.

156.The structure of Article 1.1 as a whole confirms our view that Article 1.1(b) is concerned with the "benefit" to the recipient, and not with the "cost to government". The definition of "subsidy" in Article 1.1 has two discrete elements: "a financial contribution by a government or any public body" and "a benefit is thereby conferred". The first element of this definition is concerned with whether the government made a "financial contribution", as that term is defined in Article 1.1(a). The focus of the first element is on the action of the government in making the "financial contribution". That being so, it seems to us logical that the second element in Article 1.1 is concerned with the "benefit conferred" on the recipient by that governmental action. Thus, subparagraphs (a) and (b) of Article 1.1 define a "subsidy" by reference, first, to the action of the granting authority and, second, to what was conferred on the recipient. Therefore, Canada's argument that "cost to government" is relevant to the question of whether there is a "benefit" to the recipient under Article 1.1(b) disregards the overall structure of Article 1.1.

8Panel Report, para. 9.112. 9The New Shorter Oxford English Dictionary, (Clarendon Press, 1993) Vol. I, p. 474; The Concise Oxford English Dictionary, (Clarendon Press, 1995), p. 278; Webster's Third New International Dictionary, (William Benton, 1966), Vol. I, p. 475.

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157.We also believe that the word "benefit", as used in Article 1.1(b), implies some kind of comparison. This must be so, for there can be no "benefit" to the recipient unless the "financial contribution" makes the recipient "better off" than it would otherwise have been, absent that contribution. In our view, the marketplace provides an appropriate basis for comparison in determining whether a "benefit" has been "conferred", because the trade-distorting potential of a "financial contribution" can be identified by determining whether the recipient has received a "financial contribution" on terms more favourable than those available to the recipient in the market.

158.Article 14, which we have said is relevant context in interpreting Article 1.1(b), supports our view that the marketplace is an appropriate basis for comparison. The guidelines set forth in Article 14 relate to equity investments, loans, loan guarantees, the provision of goods or services by a government, and the purchase of goods by a government. A "benefit" arises under each of the guidelines if the recipient has received a "financial contribution" on terms more favourable than those available to the recipient in the market.

159.Canada has argued that the Panel erred in failing to take account of paragraph 1 of Annex IV as part of the relevant context of the term "benefit". We fail to see the relevance of this provision to the interpretation of "benefit" in Article 1.1(b) of the SCM Agreement. Annex IV provides a method for calculating the total ad valorem subsidization of a product under the "serious prejudice" provisions of Article 6 of the SCM Agreement, with a view to determining whether a subsidy is used in such a manner as to have "adverse effects". Annex IV, therefore, has nothing to do with whether a "benefit" has been conferred, nor with whether a measure constitutes a subsidy within the meaning of Article 1.1. We agree with the Panel that Annex IV is not useful context for interpreting Article 1.1(b) of the SCM Agreement.

160.Canada insists that the concept of "cost to government" is relevant in the interpretation of "benefit". We note that this interpretation of "benefit" would exclude from the scope of that term those situations where a "benefit" is conferred by a private body under the direction of government. These situations cannot be excluded from the definition of "benefit" in Article 1.1(b), given that they are specifically included in the definition of "financial contribution" in Article 1.1(a)(iv). We are, therefore, not persuaded by this argument of Canada.

161.In light of the foregoing, we find that the Panel has not erred in its interpretation of the word "benefit", as used in Article 1.1(b) of the SCM Agreement.

()

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Peace Clause

WTO Agreement on Agriculture Article 13 http://www.sice.oas.org/Trade/ur_round/UR13BE.asp

Article 13: Due Restraint

During the implementation period, notwithstanding the provisions of GATT 1994 and the Agreement on Subsidies and Countervailing Measures (referred to in this Article as the "Subsidies Agreement"):

(a) domestic support measures that conform fully to the provisions of Annex 2 to this Agreement shall be:

(i) non-actionable subsidies for purposes of countervailing duties 4;

(ii) exempt from actions based on Article XVI of GATT 1994 and Part III of the Subsidies Agreement; and

(iii) exempt from actions based on non-violation nullification or impairment of the benefits of tariff concessions accruing to another Member under Article II of GATT 1994, in the sense of paragraph 1(b) of Article XXIII of GATT 1994;

(b) domestic support measures that conform fully to the provisions of Article 6 of this Agreement including direct payments that conform to the requirements of paragraph 5 thereof, as reflected in each Member's Schedule, as well as domestic support within de minimis levels and in conformity with paragraph 2 of Article 6, shall be:

(i) exempt from the imposition of countervailing duties unless a determination of injury or threat thereof is made in accordance with Article VI of GATT 1994 and Part V of the Subsidies Agreement, and due restraint shall be shown in initiating any countervailing duty investigations;

(ii) exempt from actions based on paragraph 1 of Article XVI of GATT 1994 or Articles 5 and 6 of the Subsidies Agreement, provided that such measures do not grant support to a specific commodity in excess of that decided during the 1992 marketing year; and

(iii) exempt from actions based on non-violation nullification or impairment of the benefits of tariff concessions accruing to another Member under Article II of GATT 1994, in the sense of paragraph 1(b) of Article XXIII of GATT 1994, provided that such measures do not grant support to a specific commodity in excess of that decided during the 1992 marketing year;

http://www.sice.oas.org/Trade/ur_round/UR13BE.asphttp://www.sice.oas.org/Trade/ur_round/UR13BE.asp#f4t#f4t

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(c) export subsidies that conform fully to the provisions of Part V of this Agreement, as reflected in each Member's Schedule, shall be:

(i) subject to countervailing duties only upon a determination of injury or threat thereof based on volume, effect on prices, or consequent impact in accordance with Article VI of GATT 1994 and Part V of the Subsidies Agreement, and due restraint shall be shown in initiating any countervailing duty investigations; and

(ii) exempt from actions based on Article XVI of GATT 1994 or Articles 3, 5 and 6 of the Subsidies Agreement.

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Subsidies Annual Report (2003) http://www.wto.org/english/tratop_e/scm_e/scm_e.htm

(emphasis added) REPORT (2003) OF THE COMMITTEE ON

SUBSIDIES AND COUNTERVAILING MEASURES () IV.NOTIFICATION OF SUBSIDIES 5.2003 new and full notifications. In accordance with Article 25.1 of the Agreement and Article XVI:1 of GATT 1994, all Members of the Committee were required to submit a new and full notification of subsidies to the Committee by 30 June 2003. As of 29 October 2003, 3410 WTO Members had notified subsidies pursuant to Article 25 of the Agreement and Article XVI of GATT 1994. In addition, 11 Members had notified that they maintain no subsidies notifiable pursuant to these provisions. These notifications may be found in document series G/SCM/N/95/.... A table indicating the status of 2003 subsidy notifications is reproduced in Annex A to this Report.

()

VI.NOTIFICATION AND EXAMINATION OF COUNTERVAILING DUTY LAWS AND/OR REGULATIONS 11.As of 31 October 2003, pursuant to Article 32.6 and in accordance with a decision by the Committee, 96 Members11 had notified the Committee of their domestic countervailing duty legislation or made communications in this respect to the Committee (G/SCM/N/1 and addenda). 35 Members had not, as yet, made notifications under Article 32.6 of the Agreement. A table indicating the status of these notifications is reproduced in Annex E to this Report.

()

VII.SEMI-ANNUAL REPORTS ON COUNTERVAILING ACTIONS 14.Notifications for 1 July-31 December 2002. As of 28 October 2003, 6 Members had notified countervailing actions taken during the period 1 July-31 December 2002. 47 Members had notified the Committee that they had not taken any countervailing duty action during this period. The remaining 76 Members had not submitted a notification. These semi-annual reports were circulated in document series G/SCM/N/93. The status of semi-annual reports is set out in Annex F to this Report.

10 The European Communities is counted as one Member. 11 Ibid.

WORLD TRADE

ORGANIZATION G/L/655 4 November 2003

(03-5880)

http://www.wto.org/english/tratop_e/scm_e/scm_e.htm

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15.Notifications for 1 January-30 June 2003. As of 28 October 2003, 11 Members had notified countervailing actions taken during the period 1 January-30 June 2003. 39 Members had notified the Committee that they had not taken any countervailing action during this period. 81 Members had not submitted a notification. These semi-annual reports were circulated in document series G/SCM/N/98. The status of semi-annual reports is set out in Annex F to this Report.

()

VIII.REPORTS ON ALL PRELIMINARY OR FINAL COUNTERVAILING DUTY ACTIONS 17.Pursuant to Article 25.11 of the Agreement, Members are to report to the Committee without delay all preliminary and final countervailing actions taken. Guidelines for the information to be contained in these reports are set forth in G/SCM/3. As of 31 October 2003, reports of preliminary and final countervailing actions had been received during the review period from the European Communities; South Africa; and the United States (G/SCM/N/91, 94, 96-97 and 100-103). The Committee reviewed the notifications of preliminary and final actions at its regular meetings in May and October 2003.

()

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Agricultural Subsidies Found Illegal 1. U.S. Cotton Subsidy Guardian Unlimited, WTO Rules American Cotton Subsidy Illegal, April 8, 2004, http://www.guardian.co.uk/wto/article/0%2C2763%2C1204996%2C00.html Brazil has won a landmark victory at the World Trade Organisation that could spell the beginning of the end of rich countries' subsidy payments to their farmers. The WTO, based in Geneva, has ruled that $1.5bn (830m) of annual subsidies given by the United States government to its 25,000 cotton farmers are mostly illegal. () The ruling is the first time a developing country has won such a decision from the WTO when arguing against one of the big trade powers. () 2. EU Sugar Subsidy CNN World Business, Brazil says WTO to rule against EU, August 4, 2004, http://www.cnn.com/2004/BUSINESS/08/04/brazil.wto.ap/ BRASILIA, Brazil (AP) -- The World Trade Organization found European Union subsidies for sugar producers violate global trade rules, upholding a complaint filed by Brazil, Australia and Thailand, a top Brazilian official said. () The sugar decision followed another big trade victory for Brazil in June, when it won a WTO case claiming that U.S. cotton subsidies cause artificially low international prices, hurting Brazilian farmers. ()

http://www.guardian.co.uk/wto/article/0%2C2763%2C1204996%2C00.htmlhttp://www.cnn.com/2004/BUSINESS/08/04/brazil.wto.ap/

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1-3. THE DOHA AGENDA ON ANTIDUMPING AND SUBSIDIES

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm

The Doha Ministerial Declaration (Nov. 20, 2001)

WORK PROGRAMME

() WTO rules

28. In the light of experience and of the increasing application of these instruments by members, we agree to negotiations aimed at clarifying and improving disciplines under the Agreements on Implementation of Article VI of the GATT 1994 and on Subsidies and Countervailing Measures, while preserving the basic concepts, principles and effectiveness of these Agreements and their instruments and objectives, and taking into account the needs of developing and least-developed participants. In the initial phase of the negotiations, participants will indicate the provisions, including disciplines on trade distorting practices, that they seek to clarify and improve in the subsequent phase. In the context of these negotiations, participants shall also aim to clarify and improve WTO disciplines on fisheries subsidies, taking into account the importance of this sector to developing countries. We note that fisheries subsidies are also referred to in paragraph 31.

29. We also agree to negotiations aimed at clarifying and improving disciplines and procedures under the existing WTO provisions applying to regional trade agreements. The negotiations shall take into account the developmental aspects of regional trade agreements.

http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm

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2. Mexican HFCS (2000) http://www.wto.org/english/tratop_e/dispu_e/distab_e.htm

WORLD TRADE ORGANIZATION

WT/DS132/R 28 January 2000

(00-0303)

Original: English

MEXICO ANTI-DUMPING INVESTIGATION OF HIGH FRUCTOSE CORN SYRUP (HFCS) FROM THE UNITED STATES

REPORT OF THE PANEL The report of the Panel on Mexico Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 28 January 2000 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report. An appeal shall be limited to issues of law covered in the Panel report and legal interpretations developed by the Panel. There shall be no ex parte communications with the Panel or Appellate Body concerning matters under consideration by the Panel or Appellate Body. Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 30 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.

http://www.wto.org/english/tratop_e/dispu_e/distab_e.htm

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()

VII. FINDINGS A. Introduction 7.1. This dispute involves the imposition of a definitive anti-dumping measure by the Mexican Ministry of Trade and Industrial Development (SECOFI) on imports of high-fructose corn syrup (HFCS) from the United States. The United States raises claims concerning the initiation of the investigation, the final determination imposing the measure, the period of application of the provisional measure, and the retroactive application of the final anti-dumping measure for the period during which the provisional measure was in effect.

7.2. On 14 January 1997, Mexico's National Chamber of Sugar and Alcohol Industries (Sugar Chamber) filed an application for an anti-dumping investigation with SECOFI alleging that imports of HFCS from the United States were being exported to Mexico at dumped prices and threatened Mexico's sugar industry with material injury. On 27 February 1997, SECOFI published a notice in Mexico's Diario Oficial announcing the initiation of an anti-dumping investigation on imports of HFCS, grades 42 and 55, originating in the United States.12 SECOFI established the period from 1 January 1996 to 31 December 1996 as the period of investigation. Parties filed responses to investigation questionnaires and to requests for supplementary information in April and May 1997, and also filed other submissions throughout the investigation.

7.3. On 25 June 1997, SECOFI published a notice announcing a preliminary determination imposing provisional anti-dumping duties ranging from 66.57 to 125.30 U.S. dollars per metric ton in the case of imports of HFCS grade 42, and 65.12 to 175.50 U.S. dollars per metric ton in the case of imports of HFCS grade 55.13 The provisional measures remained in place until the final determination was published.

7.4. On 23 January 1998, SECOFI published a notice announcing the final determination that dumped imports of HFCS from the United States threatened material injury to the Mexican sugar industry. The final determination imposed definitive anti-dumping duties ranging from 63.75 to 100.60 U.S. dollars per metric

12 Resolucin por la que se acepta la solicitud de parte interesada y se declara el inicio de la investigacin antidumping sobre las importaciones de jarabe de maz de alta fructosa, mercanca clasificada en las fracciones arancelarias 1702.40.01, 1702.40.99, 1702.60.01 y 1702.90.99 de la Tarifa de la Ley del Impuesto General de Importacin, originarias de los Estados Unidos de Amrica, independientemente del pas de procedencia. (Decision to accept the request of the interested parties and to start the antidumping investigation of high fructose corn syrup imports, merchandise classified in tariff classifications 1702.40.01, 1702.40.99, 1702.60.01 and 1702.90.99 of the Schedule to the General Import Duties Act, originating in the United States of America, irrespective of the country of export). US-3, MEXICO-1 (Initiation Notice). 13 Resolucin preliminar de la investigacin antidumping sobre las importaciones de jarabe de maz de alta fructosa, mercanca clasificada en las fracciones arancelarias 1702.40.01, 1702.40.99, 1702.60.01 y 1702.90.99 de la Tarifa de la Ley del Impuesto General de Importacin, originarias de los Estados Unidos de Amrica, independientemente del pas de procedencia. (Preliminary determination in the antidumping investigation of high fructose corn syrup imports, merchandise classified in tariff classifications 1702.40.01, 1702.40.99, 1702.60.01 and 1702.90.99 of the Schedule to the General Import Duties Act, originating in the United States of America, irrespective of the country of export). US-2, MEXICO-2 (Preliminary Determination).

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ton in the case of imports of HFCS grade 42, and 55.37 to 175.50 U.S. dollars per metric ton in the case of imports of HFCS grade 55.14

The notice provides that the Ministry of Finance and Public Credit was entrusted with collecting the definitive anti-dumping duties, and the latter was directed to collect such duties retroactively to the date of the imposition of the provisional measure.

()

C. Alleged violations regarding the initiation of the investigation ()

2. Alleged insufficiency of the information in the application 7.63. The United States notes that Article 5.2 of the AD Agreement provides that an application requesting the initiation of an investigation "shall include evidence of ... injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement and ... a causal link between the dumped imports and the alleged injury". Relying on the Panel's decision in Guatemala-Cement15, the United States argues that because the AD Agreement defines the term "injury" to include threat of material injury,16 evidence both of threat of material injury and of a causal link between the allegedly dumped imports and the alleged threat of material injury is required where, as here, an application alleges threat of material injury.

7.64. The United States asserts that, contrary to the requirements of Article 5.2 of the AD Agreement, the application filed by the Sugar Chamber requesting the initiation of an anti-dumping investigation did not contain sufficient evidence of threat of material injury, because it lacked sufficient information regarding the likely impact of allegedly dumped imports of HFCS on the domestic industry, and the attendant relevant economic factors and indices bearing on the likely state of the domestic industry. In addition, the United States argues that, because the application did not contain sufficient evidence regarding the alleged 14 Resolucin final de la investigacin antidumping sobre las importaciones de jarabe de maz de alta fructosa, mercanca clasificada en las fracciones arancelarias 1702.40.99 y 1702.60.01 de la Tarifa de la Ley del Impuesto General de Importacin, originarias de los Estados Unidos de Amrica, independientemente del pas de procedencia. (Final determination in the antidumping investigation of high fructose corn syrup imports, merchandise classified in tariff classifications 1702.40.01, 1702.40.99, 1702.60.01 and 1702.90.99 of the Schedule to the General Import Duties Act, originating in the United States of America, irrespective of the country of export). US-1, MEXICO-6 (Final Determination).

15 Guatemala-Cement, WT/DS60/R (Guatemala-Cement Panel Report), para. 7.76. The United States recognizes that the Panel's decision on the merits in Guatemala-Cement has no legal status and thus does not create "legitimate expectations" within the meaning of Japan-Alcohol. See Japan-Taxes on Alcoholic Beverages (Japan-Alcohol), WTDS8/AB/R (Japan-Alcohol AB Report), adopted 1 November 1996, pages 14-15. However, the United States argues that we may take it into account if we consider its reasoning persuasive on any point. See id. The Appellate Body reversed the Guatemala-Cement Panel's ruling on its authority to consider the dispute in that case, finding that no "matter" had been presented to the Panel. Consequently, the Appellate Body found that the Panel should never have considered the substance of the dispute, and further stated that it could not, itself, rule on the substantive issues raised on appeal. It is this decision that was adopted by the Dispute Settlement Body, together with the Panel's report "as reversed by the Appellate Body report". WT/DS60/12. Thus, we are of the view that the Panel's ruling on the substance of the dispute in Guatemala-Cement has no legal status, but that we may take the reasoning of the Panel in that case into account in our decision, to the extent we consider it persuasive.

16 See AD Agreement, footnote 9.

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threat of injury, it did not contain sufficient evidence of the causal link between the allegedly dumped imports and the alleged threat of injury.

7.65. The United States notes that the Sugar Chamber alleged in the application that it represented all but two domestic sugar mills, and, as stated in the initiation notice, its membership collectively accounted for 98 per cent of domestic sugar production.

Accordingly, the United States maintains that information regarding the likely impact on the domestic industry and relevant economic factors was clearly and uniquely within the applicants control. Nonetheless, the United States asserts, the Sugar Chamber did not even respond to the pertinent questions in SECOFIs application form requesting such information, responding "N/A" (not applicable) to the relevant portions of the application form. The United States contends that, by answering "N/A", the Sugar Chamber was stating to SECOFI its belief that the likely impact on the industry and the factors set forth in Article 3.4 were not relevant to the initiation of an investigation on the basis of allegations of threat of material injury. ()

7.66. Mexico considers that the application submitted by the Sugar Chamber contained the information that was reasonably available to it and that it included sufficient information concerning dumping, threat of injury and a causal relationship between the two as well as evidence concerning the factors and indices mentioned in Article 5.2(i) to (iv) of the AD Agreement. Mexico points out that Article 5.2(iv) of the AD Agreement expressly stipulates that the application must contain information on "the consequent impact of the imports on the domestic industry, as demonstrated by relevant factors and indices having a bearing on the state of the domestic industry, such as those listed in paragraphs 2 and 4 of Article 3" (emphasis added by Mexico). In Mexico's view, the ordinary meaning of the terms "relevant" and "such as" in Article 5.2(iv) makes it clear that the requirement is not a strict one as regards the factors and indices. The reference to Articles 3.2 and 3.4 of the AD Agreement is simply illustrative.

()

7.69. In Mexico's view, Article 5.2(iv) leaves the investigating authority with the authority to determine the relevant indices and factors by which the consequent impact of the dumped imports can be evaluated.17 Thus, it is up to the investigating authority to decide whether the information submitted with the application for the investigation deals with relevant factors and indices. Mexico asserts that SECOFI carried out a comprehensive analysis of the information submitted, as is clear from paragraphs 24 to 99 of the notice of initiation, in order to reach the conclusion that the application submitted by the Sugar Chamber met the requirements of Article 5.2 of the AD Agreement. Mexico acknowledges that in parts of the questionnaire the Sugar Chamber indicated that the question was not applicable ("N/A"). However, Mexico asserts that this was not because the required information was irrelevant in supporting the alleged threat of injury, but because the Sugar Chamber, following the order of the questionnaire, incorporated the information in other sections.

7.70. In addressing this issue we must consider first, what information Article 5.2 requires to be in an application, and second, whether SECOFI's conclusion that the Sugar Chamber's application contained the information reasonably available to the Sugar Chamber on those elements was consistent with the AD Agreement. The main issue in dispute between the parties is, in a case where threat of injury is alleged, what is the information concerning the factors set forth in Article 3.4 of the AD Agreement, and what is the 17 The United States does not argue that information reasonably available to the applicant on all of the Article 3.4 factors must be included in the application, but rather argues that the application did not contain information on relevant factors which was reasonably available to the Sugar Chamber.

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information regarding the existence of a causal link, that must be provided in the application, pursuant to Article 5.2(iv).

7.71. We turn first to the text of Article 5.2, which provides in pertinent part:

"An application under paragraph 1 shall include evidence of (a) dumping, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement and (c) a causal link between the dumped imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following:

(iv) information on the evolution of the volume of the allegedly dumped imports, the effect of these imports on prices of the like product in the domestic market and the consequent impact of the imports on the domestic industry, as demonstrated by relevant factors and indices having a bearing on the state of the domestic industry, such as those listed in paragraphs 2 and 4 of Article 3".

7.72. It is clear from the text of the provision that an application must contain "information", in the sense of evidence, regarding the consequent impact of the (allegedly dumped) imports on the domestic industry. It is also clear from the text that this "information" must "demonstrate" the consequent impact of the imports on the domestic industry. 18

7.73. However, the inclusion in Article 5.2(iv) of the word "relevant" and the phrase "such as" in the reference to the factors and indices in Articles 3.2 and 3.4 in our view makes it clear that an application is not required to contain information on all the factors and indices set forth in Articles 3.2 and 3.4. Rather, Article 5.2(iv) requires that the application contain information on factors and indices relating to the impact of imports on the domestic industry, and refers to Articles 3.2 and 3.4 as illustrative of factors which may be relevant.19 Which factors and indices are relevant to demonstrate the consequent impact of imports on the domestic industry will vary depending on the nature of the allegations made by the industry, and the nature of the industry itself. If the industry provides information reasonably available to it concerning factors which are relevant to the allegation of injury (or threat of injury) it makes in the application, and the information concerning those factors demonstrates, that is, "shows evidence of", the consequent impact of dumped imports on the domestic industry, we believe that Article 5.2(iv) is satisfied.20

7.74. Obviously, the quantity and quality of the information provided by the applicant need not be such as would be required in order to make a preliminary or final determination of injury. Moreover, the applicant need only provide such information as is "reasonably available" to it with respect to the relevant factors. Since information regarding the factors and indices set out in Article 3.4 concerns the state of the domestic industry and its operations, such information would generally be available to applicants. Nevertheless, we

18 We do not understand "demonstrate" in this context to mean "prove", but rather to mean "show evidence of; describe or explain by help of specimens". Concise Oxford Dictionary, 1976. 19 However, as discussed in section 0. below, the requirements of Article 3.4 are not merely illustrative in the context of final determinations. 20 This does not mean that such an application is or would necessarily be sufficient for purposes of initiation. That is a separate issue, which is addressed further below.

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note that an application which is consistent with the requirements of Article 5.2 will not necessarily contain sufficient evidence to justify initiation under Article 5.3.21

7.75. The application submitted by the Sugar Chamber on its face contains information on relevant Article 3.4 factors, and that information shows evidence of the allegations of threat of injury and causal link in the application. Some of this information is contained in confidential Annexes to the application. Some of this information is requested in sections of the SECOFI application form to which the Sugar Chamber responded "N/A".22

However, we do not consider that whether the Sugar Chamber filled out the application form provided by SECOFI in the clearest and best manner is in any way dispositive of whether the application satisfied the requirements of Article 5.2. Rather, we look to whether the necessary information was actually provided.

7.76. The Sugar Chamber alleged that dumped imports of HFCS threatened the domestic industry with material injury. The application contained information showing increases in imports, and information showing that market prices for sugar did not reach the maximum price level, while HFCS was priced below sugar, HFCS substitutes for sugar, and producers in the United States could reduce their prices. The application also contained information, inter alia, on the Mexican sugar producers' production, sales, exports, imports, consumption, inventories and employment23; cash flow, financial situation, income, production costs and financial ratios24; installed capacity25; and investment projects in the sugar industry26. The United States argues that an application alleging only threat of material injury must contain some "meaningful analysis" of the likely impact of allegedly dumped imports on the domestic industry, and that the Sugar Chamber's application in this case did not. However, Article 5.2 does not require an application to contain analysis, but rather to contain information, in the sense of evidence, in support of allegations. While we recognize that some analysis linking the information and the allegations would be helpful in assessing the merits of an application, we cannot read the text of Article 5.2 as requiring such an analysis in the application itself.27

21 Guatemala-Cement Panel Report, para. 7.497.51. As the Panel noted in that case, the investigating authority may, but is not required to, obtain additional information which, together with that provided in the application, constitutes sufficient evidence to justify initiation under Article 5.3. Id. para. 7.53. 22 We note in this regard that SECOFI's application form instructs applicants, in para. 4.4 "It is important to mention that an antidumping investigation cannot be initiated for injury and threat of injury simultaneously, given that the two concepts are mutually exclusive". US-5(a) & (b). This instruction may be the reason the Sugar Chamber responded "N/A" to section 4.2 of the application form, which sets out the information SECOFI requires for applications alleging injury, but provided information in response to section 4.3 of the application, which sets out the information SECOFI requires for applications alleging threat of injury. Section 4.3 of the application form requests information on the Article 3.7 factors, and on expected return on investments, but does not specifically mention information concerning consequent impact on the domestic industry, or refer to the Article 3.2 and 3.4 factors. The Sugar Chamber's application includes information on these latter as annexes to its response under section 4.3 of the application. 23 See Application, MEXICO-16 and Annex 6-A to Application, and the national balance for sugar, MEXICO-17. 24 See Application, MEXICO-16 and Annexes 4.19, 4.20 and 4.21 to Application, MEXICO-33. 25 See Application, MEXICO-16 and Annex 4.22 to Application, MEXICO-30. 26 See Application, MEXICO-16 and Annex 4.24 to Application, MEXICO-32. 27 Of course, the investigating authority must examine the accuracy and adequacy of the information in the application to determine whether there is sufficient evidence to justify initiation, pursuant to Article 5.3, a question which is addressed further below. However, this obligation falls on the investigating authority,

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7.77. This information, if read in the light of the allegations, provides evidence in support of the allegation that dumped imports of HFCS from the United States threatened material injury to the Mexican sugar industry. The United States has concentrated much of its argument on the proposition that the application should have contained information concerning "potential negative effects" on various of the Article 3.4 factors. In this regard, we note that information, in the sense of evidence, concerning the future is at best a calculated estimate based on past experience. While we agree that specific projections concerning a domestic industry's sales, output, profits, market share, employment, etc., would certainly be relevant in an application alleging threat of material injury, we cannot conclude that the absence of such projections constitutes a fatal