Antidumping Negotiations in the Doha Round: Strategy and Tactics

Date November 11, 2002
Speaker Brink LINDSEY(Senior Fellow, Cato Institute)


Antidumping is devilishly technical and has emerged as a main issue in the multilateral trading system. So far, efforts have been made to address abuses. But the situation is changing and getting more complicated. Antidumping used to be a rich country issue. Now, however, 65 countries or so are running to pass antidumping legislation to fight trade liberalization. So antidumping (AD) is becoming a much bigger problem.

The US is now the number three target of AD cases. Developing countries are now using AD against other developing countries. This trend threatens to subvert the gains from liberalized trade.

There is now an opening up of space between the US and EU position on AD. The US will more likely find itself isolated in defending AD. So the price of keeping the existing AD laws in the US in tact during the course of negotiations of the Doha Round will rise because addressing the flaws of AD is becoming more important to a greater number of countries. AD reform is now more possible than ever before. The Doha talks will provide the best opportunity to change AD rules an impose discipline to reduce abuses. To get the most out of this Round, the best approach is needed.

My study with Dan Ikenson quantifies price inflations from AD duties. AD remedies create dumping margins out of thin air. This study will be useful for trade negotiators. And a more comparative look at exports and analyses along these lines would show what is important in this area.

As a negotiating strategy, the most important thing is to go beyond a list of ad hoc requests or proposals. People usually just make modifications to the current AD system, which lets AD users hide behind the nice talk of AD, such as "leveling the playing field," "correcting bad policies," and "fair trade." Also the law is terribly complicated. The US approach is to say to those who want to reform AD, "You are trying to weaken AD laws." The way to counter this argument is to say, "No, we are simply trying to improve AD laws in order to make them do what you say they should do."

The Doha Declaration creates an opportunity to reform AD because it refers to the basic concepts and principles of AD, but does not define what they are. So, in this sense, the Declaration opens up a can of worms. AD laws date back to before 1921, before the GATT and the multilateral trading system. In the 1960s and 70s, there were attempts to set standards. And during the Uruguay Round, there were attempts to codify an agreement. But these rules simply codified existing practices, and there was no question as to what the purposes of AD laws were. The current mention of "concepts and principles" opens the question.

If you can show that AD laws are not doing what its supporters say they are doing, you have a strong case for reform. American supporters of AD say that the laws are meant to respond to market-distorting government policies. The gist is that there are various ways (such as subsidies or tolerating anticompetitive behavior) that governments can distort markets and give advantages to particular companies.

These polices create unfair advantages through price discrimination (different prices in different markets) or below cost sales (selling products below "cost"). This practice is accomplished by allowing a company to charge high prices in home markets, from which the companies can derive profits to subsidize their exports. If the home market is closed, there can be no arbitrage to level prices. These sanctuary markets create the situation that allows price discrimination to occur.

Yet AD laws do not ask for proof of distorting government policies or that companies are subsidizing their exports. The laws only ask for proof of price differentials, but there are many possible reasons for charging different prices. Investigators at the Commerce Department have a tendency to find the existence of price differentials, and a fair analysis of price discrimination is rare. If AD is to address price discrimination, you need to compare all prices, not just the highest prices. Moreover, companies should be making high profits at home to subsidize their exports, but many times this is not the case.

The gist is that the existing AD laws fail on two accounts: They fail to identify the very price discrimination that the laws target. And there is no effort to examine whether or not prices reflect market-distorting government policies. Until these problems are fixed, AD cases can only been seen as an elaborate excuse for protectionism.

Questions and Answers

Q: Is requiring evidence of market distorting government policies a good way to sell your proposal in the US?

We propose that market-distorting government policies must be proved before starting an AD case. Also AD authorities should be required to find the existence of market distorting policies before they provide relief. In cases where there are no barriers or non-tariff barriers, the case should be dropped. You should create the conditions for the constructive reform of AD.

Q: When you try to be expedient, you may actually hurt your cause.

To negotiate successfully, you have to be realistic. The way you frame the debate will determine how many allies you will have.

Q: What is the intent of the US submission to the AD negotiating group?

You have to understand the political conditions in which the US Trade Representative is operating. Ambassador Zoellick had to defend what he was doing by showing that he had an offensive agenda (not simply defensive) and that the US will go after practices that allow dumping. But there is little we can do-I think a lot of what Zoellick is saying is simply rhetorical. The US hopes that this posture would validate its free market credentials. But, instead, the posture serves the interests of the reformers because, if the US focuses on market-distorting policies, there are more opportunities for the supporters of reform to show that these principles should apply to all cases.

Q: What about reforming the assessment of injury?

Our proposal is focused on the dumping-margin issue because the most obvious failure of AD laws is when it comes to the definition of dumping. Regarding injury analysis, the same argument can be made: if you cannot find artificial advantages for a company, there is no basis for action. The key is to create a system where you can tell whether the authorities are doing the right thing or not. In this sense, the approaches adopted by the Appellate Body in recent safeguard cases regarding causation analysis are wrong. "Genuine and substantial link of cause and effect" does not solve the problem. The panel's "but for" test was more appropriate. The right approach is unitary, rather than bifurcated, analysis.

*This summary was compiled by RIETI Editorial staff.