- Time and Date: 14:00-17:00, Wednesday, November 4, 2015
- Venue: RIETI's seminar room (METI Annex 11th floor, 1121), 1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo
Anti-dumping measures are duties levied by the government of an importing country to counter unfair trade practice, i.e., the exports from another country cause injury to the domestic industry as the products are exported at less than the normal value of the products. The World Trade Organization (WTO) Agreements allow governments to take such action. In recent years, there have been an increasing number of cases where excess capacity in specific regions has harmed producers in other regions, leading to an increase in the number of anti-dumping investigations worldwide, and to concerns about the proper implementation of existing rules. This seminar was conducted to deepen knowledge about the global trends in anti-dumping and other trade remedy measures, and to discuss issues such as Japan's efforts to improve its anti-dumping system. Panelists were invited from the WTO and Brazil, a country ranked second in terms of the number of anti-dumping measures taken in the last five years.
TAKADA Shuzo (Director-General, Trade Control Department, Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry)
This year marks the 20th anniversary of the WTO. I would like to reiterate my respects for its role in promoting fair trade. This seminar will focus on anti-dumping measures against unfair trade practices.
Historically, Japan has been reluctant to make use of anti-dumping measures, and this might have been a disadvantage for the country as a business location. Meanwhile, given that emerging countries have been experiencing economic slowdowns and excess capacity in recent years, there is growing concern of possible dumped exports worldwide. Under such circumstances, some Japanese companies have shown interest in anti-dumping measures. In response, the Japanese government is working to develop an environment that enables companies to make use of such measures according to the global standard.
We are also reviewing domestic rules. This year, the Ministry of Economy, Trade and Industry (METI) has requested the Ministry of Finance (MOF) to reform the system, including the elimination of requirements related to applications by industry associations. Procedures to file applications have undergone a sweeping review and have been significantly improved. At the same time, since October 2015, a model application form has been posted on METI's website to give potential applicants an idea of items to be stated on the application form. Furthermore, the timeframe for imposing provisional measures has been shortened by about four months, leading to the provision of prompt relief to domestic industries injured by dumped imports. We will continue our efforts towards further improvement.
Anti-dumping: What is it, who does it?
Jesse G. KREIER (Counsellor, World Trade Organization)
The legal basis of anti-dumping is found in Article VI of the General Agreement on Tariffs and Trade (GATT) 1994, which states that anti-dumping measures may be imposed if dumped imports are causing material injury or threat of material injury to an established industry. Similarly, countervailing measures are also permitted to respond to harm caused by subsidization or subsidized imports. Safeguard measures also allow for states to impose temporary duties on imports that cause or threaten serious injury to a domestic industry regardless of the fairness of the imports.
1. Anti-dumping Enforcement
World Trade Organization (WTO) member states must comply with the requirements of GATT 1994 and the WTO's anti-dumping agreement. The WTO monitors anti-dumping measures to ensure compliance and allows WTO members to question other members' anti-dumping actions through the Committee on Anti-dumping Practices. Dumping is about the pricing of individual exporters, so one exporter may be doing it while others are not. A simple example is an exporter charging less in a foreign country than at home or prices being charged that are less than production costs.
A country decides whether dumping is causing injury based on WTO agreements. Each country sets up a neutral fact-finding investigating authority that must fully explain the necessity of anti-dumping measures. Decisions may be challenged and rule violations could result in trade retaliation. The domestic industry must request initiation of an anti-dumping investigation, provide sufficient evidence, and fully cooperate with the investigating authority.
2. Worldwide Anti-dumping Trends
Among the three trade remedies of anti-dumping, countervailing measures, and safeguards, anti-dumping is by far the most commonly used. Indeed, nearly every major trading country uses anti-dumping. Anti-dumping saw a spike in 2000 and 2001, and we are seeing more anti-dumping cases recently. During the first five years of the WTO agreement, the European Union, the United States, and South Africa were the top three users of anti-dumping. India has since become the biggest user, while developing countries are increasingly using it. The top target of investigations is China (the largest exporter) followed by Korea and the United States. Anti-dumping measures against Japan have decreased significantly in the past decade, and Japan rarely imposes anti-dumping measures.
Every WTO member is allowed to use anti-dumping measures, but affected industries must provide evidence of injury and cooperate with authorities to determine if such measures are warranted.
Recent Developments on the Brazilian Trade Remedies System
Marco Cesar Saraiva DA FONSECA (Director, Department of Trade Remedies, Ministry of Development, Industry and Foreign Trade, Brazil)
1. Trade Remedies in Brazil
Trade remedies were introduced in 1987, and Brazil's first regulations were influenced by Europe. However, due to high tariffs in Brazil, there was not much need for anti-dumping provisions prior to the Treaty of Asunción (creation of Mercosur). The Department of Trade Remedies (DECOM) was established to deal with trade remedies, anti-dumping, safeguards, and countervailing duties following the WTO's creation. DECOM is under the Ministry of Development, Industry, and Foreign Trade.
DECOM determines the existence of dumping, countervailable subsidies, increased imports, injury to the domestic industry and a causal link between them, and then submits a report to the Technical Group on Trade Remedies who then sends a recommendation to the Chamber of Foreign Trade (CAMEX) for the Ministers Council to decide whether measures are warranted. The Secretariat of Economic Monitoring, under the Ministry of Finance, is the agency responsible to conduct the public interest assessment, and also submits its conclusion to CAMEX.
2. Recent Regulatory Changes in Brazil
Changes to the anti-dumping system and procedures were prompted by the 2008 financial crisis that spurred an increase of imports that affected domestic producers. The new president elected in 2010 promised to protect the Brazilian market. The Industrial and Foreign Trade Policy dictated an accelerated timeframe of 10 months for anti-dumping investigations and a preliminary determination within 120 days.
A new anti-dumping regulation was implemented in 2013. It incorporates decisions from the Dispute Settlement Body (DSB) and WTO plus provisions. A definition of dumped imports was created, expressly excluding non-dumped imports and the minimum margin of dumping volumes from imports of the subject product that are used to determine injury. Zeroing was prohibited and English notifications are being produced. A new law was passed in Brazil and currently documents may be submitted in English, French, Spanish, or Portuguese. In compliance with the Implementation-Related Issues and Concerns of the Doha Round, if a final determination is negative another investigation on the same product may not be initiated within one year. The lesser duty rule became mandatory under certain conditions.
3. Anti-dumping Trends in Brazil
95% of trade remedy investigations are for anti-dumping. A surge in overall petitions took place in 2011. From the total of applications lodged at DECOM, historically 57% of petitions were initiated, while others were denied or withdrawn, and 1% are under analysis. A surge of initiations were seen in 2012 and 2013 that have since decreased. 55% of investigations led to definitive duties, while 2% had both duties and undertakings, and 2% were only undertakings. 37% of investigations ended with no measures, and 4% are under investigation.
Trade Remedies in Japan: With focus on anti-dumping measures
OTA Tomoko (Director, Office for Trade Remedy Investigations, Trade and Economic Cooperation Bureau, Ministry of Economy, Trade and Industry)
1. Anti-dumping: State of play
Since the establishment of the World Trade Organization (WTO) in 1995, the number of investigations initiated by the WTO members has tended to increase at times of economic crises. Taking a look at Japan's economic partnership agreement (EPA) partner countries, during the five years from 2010 to 2014, larger countries have initiated investigations in double-digit figures or more each year, while Japan has initiated only two investigations during this period. Looking at the number of anti-dumping measures actually imposed in the past 20 years, the number of measures against Japan was 134, while the number of measures by Japan was only seven.
The basic materials industry accounts for a large proportion of sectors targeted by anti-dumping measures. A total of 3,058 measures were taken during the past 20 years globally. Of the total, about 30% were imposed against steel-related industries, about 30% against chemicals, and the remainder against paper and chemical fiber industries, showing a bias toward process industries. In Japan, although its steel and chemical industries are the targets of other members' anti-dumping measures, it has used anti-dumping measures only against five products, including polyester staple fiber, and 10 countries since the establishment of the WTO.
2. Improving the Japanese anti-dumping system
To initiate an investigation, the domestic industry must file an application requesting the levying of anti-dumping duties. Behind the fact that anti-dumping measures have not been used frequently in Japan were several problems, including limited knowledge of the anti-dumping system and about how to prepare an application. To address these problems, we have aimed at operating the system according to the global standard, thereby making anti-dumping measures one of the options for the Japanese industry.
Specifically, in order to improve access to the anti-dumping system, we have published a model application form, eliminated the duplication of work that existed at the application preparation stage and investigation stage, revised the application guide to improve guidance, and made a request to amend the remaining restrictive regulations.
To make the investigation process easier to understand, we have worked to increase transparency and ensure due process. This includes actions such as the announcement of investigation results at an early stage by actively using preliminary determination, publishing of questionnaires on the website, clarification of business confidentiality standards, advance announcement of the dates of preliminary determination and disclosures of essential facts, and an increase of rebuttal opportunities.
The WTO Agreements are the rules that govern international trade and support the world's free trade system. Japan has so far focused on just observing the rules. From now on, however, we should aim to create a fair market environment based on the global trade rules by making good use of the WTO Agreements.
KAWASE Tsuyoshi (Faculty Fellow, RIETI / Professor, Faculty of Law, Sophia University)
Japan has been criticized historically for dumping exports, including the Social Dumping debate before World War II and the one-dollar blouse problem in the mid-1950s, when Japan joined the General Agreement on Tariffs and Trade (GATT). In the 1970s, when Japan achieved high industrialization, one-third of anti-dumping investigations initiated globally were against Japan. Against this backdrop, Japan at that time took the position to tighten its discipline on trade remedy measures, including anti-dumping measures.
In the 1990s, however, as the number of anti-dumping investigations against Japan diminished and a trade deficit with China, through its growth, became constant, Japan began to gradually develop the mindset of an invoking country of anti-dumping measures. It was very symbolic that Japan imposed its first anti-dumping duty against ferro silico manganese in 1993. The invocation of provisional safeguard measures against scallions, shiitake mushrooms, and rushes for tatami mats in 2001 has marked a turning point.
Currently, Japan is promoting the liberalization of trade and investment through free trade agreements (FTAs) and economic partnership agreements (EPAs), as well as the WTO Agreement. The Trans-Pacific Strategic Economic Partnership Agreement (TPP) negotiations reached a broad agreement about one month ago. These developments will cause Japanese industries to be more influenced by dumping by overseas producers than before. In other words, the day will come that Japan will need to invoke anti-dumping measures due to market liberalization.
FUJII Kojiro (Attorney-at-law (admitted in Japan/New York), Nishimura & Asahi)
With the TPP negotiations reaching a broad agreement, it is my understanding that trade remedy measures will play the role of a safety net in the future. Moreover, from the perspective of revitalizing regional economies in Japan, it will be necessary to provide small and medium-sized companies and the agricultural sector with a way to readily utilize trade remedy measures. However, the Japanese trade remedy system is more rigid and restrictive than the anti-dumping agreement of the WTO, in terms of qualifications for application and support requirements.
Although it is important for the authorities to give due consideration to stakeholders who are injured by dumping, the interest of various stakeholders should be coordinated in a flexible manner, including customizing individual investigations to properly take care of such interests and utilizing public interest requirements.
There is a great need for anti-dumping applications by industry associations, in particular. First of all, it allows the sharing of human resources, which would facilitate organizing of data and other work. When several companies file an application, if there isn't a person who properly handles sensitive information such as prices, antitrust problems may arise. There are also companies that feel uncomfortable about acting against overseas exporters in their individual companies' names.
Although the risk of abuse of anti-dumping measures always exists, unjust anti-dumping measures should be rectified through the WTO's dispute settlement procedures based on the WTO Agreement and the rules accumulated by the Panels and the Appellate Body. There is little significance in making the procedures for anti-dumping measures in our own country more prudent than necessary. In order to make use of trade remedy measures, the relevant authorities need to increase personnel and develop specialists, while efforts should be made to nurture lawyers and economists who represent both domestic industries and importers.
MIYAZAKI Hiroshi (General Manager, Head of Div., Trade Administration Div., Nippon Steel and Sumitomo Metal Corporation)
Global crude steel production, which had been about 800 million tons per year until around 2000, reached almost 1.7 billion tons in 2014. Most of the production growth was due to increases in China. Crude steel production in China in 2014 was in excess of 800 million tons or about half of global production. At present, it is said that there is excess capacity of about 600 million tons per year globally. In line with growing production, China has increased steel exports, to about 100 million tons per year according to the latest data, which is the same level as Japan's annual production. Under such circumstances, the number of steel-related trade remedy measures has doubled in the last three years: 110 anti-dumping measures and 16 safeguard measures have been invoked or are under investigation.
As for trade remedy measures against Japanese steel products, 21 anti-dumping measures and 16 safeguard measures have been invoked or are under investigation. Japanese steel producers, in cooperation with the Japan Iron and Steel Federation, are making efforts to deter importing countries from invoking such measures, make them abolish their existing measures early, and prevent new cases of trade friction from arising, in parallel with responding to individual investigations.
Meanwhile, the Japan Iron and Steel Federation has strengthened the monitoring of steel imports. Given that steel imports from South Korea, Taiwan, and China are on the rise, the possibility of the federation filing anti-dumping petitions exists. Therefore, we appreciate the Japanese government's move to simplify procedures for anti-dumping investigation applications, and we will positively consider such measures.
Toward increased utilization of anti-dumping measures
Ota: I do not think that anti-dumping measures will increase in Japan in the future because of TPP negotiations reaching agreement. The reason we are working to make improvements to the anti-dumping measures is because dumping tends to occur whenever there is excess capacity especially in the process industries, and as there are no international competition rules that apply globally, responding to dumping will become an issue. By ensuring the transparency and due process of the anti-dumping system, Japan will be able to use anti-dumping measures with confidence.
Fonseca: A trade agreement like the TPP should lead to increased imports, but it would be difficult to impose anti-dumping measures in that situation. This is because it is not easy to prove the causal link of dumping causing damage to the domestic industry.
Kreier: To impose an anti-dumping measure, you must prove the existence of specific objective facts. You must also establish that there was actually serious damage incurred by or impact on the domestic industry. To do this, the key is for domestic producers to cooperate and share information.
Ota: At METI, we think that in the past we may not have done enough to present the changes in the system in a visible way. This is why we have posted a model application form on our website.
Fujii: For us lawyers too, there were times in the past when it was not easy to explain the timeframe and costs associated with anti-dumping investigations to industries and companies. Thanks to the authorities' efforts, however, various matters have been standardized and transparency has increased, so it has become easier to estimate such matters. Furthermore, various kinds of work are involved in the application procedures, but if roles are shared properly between the companies and the lawyers, it is possible to obtain advice from the lawyers while holding down costs. Additionally, if the transparency and due process of the procedures are established, the exchange of assertion and rebuttal between the parties who apply for the anti-dumping measures and the parties who will be disadvantaged by them should become more substantial than now; these might be phases where lawyers could be well utilized.
Human resources development
Fonseca: In Brazil, to work as a foreign trade analyst for the Department of Trade Remedies (DECOM), first the person must become a government employee. Most of those who were employed in and after 2013 were lawyers and economists, so we have become capable of doing swift and high-quality investigations. It is important to remember, however, that this is supported by public funds.
Kawase: It is certainly important to develop human resources within the government, but it is also essential to nurture personnel within companies who have appropriate knowledge and are capable of communicating with the government. European and U.S. companies have liaison personnel who lobby and make various requests to the government, while Japanese companies are slow to develop such specialists.
Miyazaki: In our company, overseas entities become frequently involved in multilateral trade issues in which Japan is not involved. As we need to provide them with support, the Trade Administration Division was established. Meanwhile, we appreciate that it will become easier to file applications by groups; within the Japan Iron and Steel Federation there is the International Trade Committee, which deals with cases of anti-dumping measures being imposed, and the Fair Trade Committee, which deals with cases of imposing such measures. Within the private sector, I think the Japanese steel industry has made relatively steady progress in human resources development.
Questions and Answers
Q1: It should be shared with companies what level of data they should have available at the time of filing an application.
Fonseca: In Brazil, as financial information is obtained from the relevant companies in advance of applications, when an application is filed by the domestic industry, all of the necessary information are in place. Normally, the exporters do reply to the questionnaires, so decisions are made based on the facts obtained from them.
There is a kind of template for the application, and the applicant fills in the blanks. Submission of information before the initiation of an investigation puts a strain on the domestic industry, but once the initiation of an investigation is determined, no additional information need to be provided. Thereafter, we request supplying information only at the time of the field investigation.
Fujii: When filing an application for an anti-dumping measure, it is naturally very important whether the fact of dumping can be shown and whether indicators and data of damage can be prepared in an appropriate manner. Regarding imports from emerging countries, however, selling prices and costs in exporters' home markets cannot be easily obtained from publicly available information. There may be cases where local consultants should be used.
Kreier: First of all, the applicant needs to collect two types of data--on the domestic market and the domestic industry. What is important is to secure full cooperation between producers and the industry group. If only some of the producers join in the application, it would be difficult to prove injury in the domestic market. Information on the fact of dumping are more complex and vary by country and the nature of the industry. For example, industries that have an abundance of detailed information and published prices, such as the metal industry and the steel industry, could fulfill the standards for initiating investigations.
The best data are the actual prices in the exporting country. However, for commodities, there are often gaps between the list price and the actual price. Since there are usually insufficient pricing information, supporting information, such as the method of cost calculation, costs incurred by the company, or the fact that material costs differ by country are often provided, and there are cases when that is deemed sufficient.
To exceed the threshold level of evidence, exporters have to produce information, but, of course, they cannot be forced to do so. If the exporter is not forthcoming in providing information even after the initiation of the investigation, information included in the application form, whose grounds are unclear, may have to be used. Thus, an investigation is initiated when the threshold of sufficiency is exceeded, but once the investigation is initiated, it will depend on the extent to which the exporter will provide information.
Q2: When purchased from the same importer and when the selling prices are different, will the price for dumping determination be determined based on the lowest price? Another question is given that our company is actively promoting overseas production, from the perspective of our overseas plant, the plant is an importer of the basic materials that we are sending from Japan. In this case, I do not think we are causing damage to the basic material industry overseas. Is this still a problem?
Ota: In Japan, in principle, the average price of all transactions conducted in the year is calculated. The average export price thus obtained is compared with the annual average selling price of the same product in the domestic market to determine whether dumping occurred.
As for the second question, the first issue is whether products exported from Japan are dumped or not. And the second element is that if the parent company has sold the products to its subsidiary at prices that are lower than its domestic selling prices, whether the transaction has caused injury to the domestic industry of the importing country. The mere fact of dumping does not suffice in levying a duty. It needs to be proved that the dumped exports have caused injury to the domestic industry of the importing country.
Fujii: If there are a number of potential local basic material producers that want to sell products to your company's overseas plant, your company will not be excluded from the targets of anti-dumping measures simply because the transactions are internal consumptions or intragroup transactions.
Miyazaki: With Japanese consumer electronics and automobile manufacturers expanding overseas, there are many cases where steel products that have been sold in Japan are exported to foreign countries. If an exported steel product is a general-purpose product that can be produced by local steel makers, the threat of anti-dumping cases may arise. In some cases, Japanese products were excluded from the scope of anti-dumping measures by obtaining testimony from the local user companies that they were in need of high-grade steel products and that they wanted to continue to import. On the other hand, there were cases where Japanese products were not excluded from the scope and the Japanese user companies gave up a part of their overseas production. They procured steel products in Japan and processed them into slightly downstream parts, which were then exported. When manufacturers expand overseas, they take the risk of basic materials procurement to some extent.
Q3: If the Japanese steel sector files an anti-dumping claim, how will our domestic customers take that? Will retaliatory action be taken by the target country of the anti-dumping measure?
Fonseca: The Brazilian steel industry had always been the target of anti-dumping measures in the 1980s-1990s, but now it is a claimant. Although there is the possibility that a company becomes both the target and applicant of anti-dumping measures, that does not necessarily lead to a decline in reputation. When a company needs protection, friction could arise with consumers, but that is a price that has to be paid.
Ota: When we consider a rule-based multilateral trading system, it is important to note that it is not the rule of might but rather the rule of law which prevails. The WTO has more than 160 members which means that international trade is based on rules. As the Japanese industry does not have much experience in using anti-dumping measures, there may be concern that the other party may get offended. But I think it is important to step forward and trust the rule-based multilateral trading system. Our investigations are quasi-judicial procedures, and the legal proceedings are based on international rules and concrete evidence.