US blocks UNCTAD work on anti-dumping, traditional knowledge

by Chakravarthi Raghavan

Geneva, 25 Feb 2001 --   The United States has blocked any analytical work and empirical studies  at the UN Conference on Trade and Development in the area of anti-dumping and counter-vailing measures, as also on some of the issues relating to intellectual property and traditional knowledge.

The US position came out at the UNCTAD Commission on Trade in Goods, Services and Commodities, which at its meeting last week, considered three sets of issues: those relating to the ongoing agricultural negotiations; questions relating to the anti-dumping and countervailing measures and their impacts on developing countries; issues relating to systems for protection of traditional knowledge, innovation and practices -  areas touching on the WTO/TRIPS agreement; and the charges of ‘bio-piracy’ against transnational pharmaceutical companies.  In agriculture, the Commission recommended that UNCTAD provide analysis and technical assistance to developing countries to facilitate their effective participation in the WTO negotiations on agriculture, paying particular attention to the concerns of the Least Developed Countries (LDCs) and the Net Food Importing Developing Countries (NFIDCs).

Technical assistance from UNCTAD and other international organizations were required in analysing information on agricultural trade policies of other countries in the current WTO negotiations, the Commission said in its recommendations. Based on available documentation and quantification of domestic and export support measures and market access conditions, UNCTAD, working with the FAO and other international organizations, was asked to provide statistical and analytical background needed to support developing countries in the negotiations and assess the impact of support measures and market access restrictions on competitiveness of exports of interest to developing countries, particularly LDCs and NFIDCs, at the commodity- and country-levels.

UNCTAD was also asked to analyse the impact of the Agreement on Agriculture (AoA) on the agricultural trade of LDCs, NFIDCs, and small island developing countries, and the impact of erosion of preferences and the process of adjustment from dependence on preferential market access in the light of MFN tariff liberalization. UNCTAD was also mandated to identify, in accordance with Art.20 of the AoA, concrete measures to be included under the concept of S&D treatment, which could be a comprehensive way to help developing countries to meet their development objectives using, among others, trade policy measures.

UNCTAD was also mandated to undertake analysis to support developing countries in identifying policy options in the WTO agriculture negotiations by analysing the possible impact of new developments (such as new production technology, world agricultural supply chains, consumer preferences and food safety concerns in developed-country markets)  in world agricultural trade; impact of the reform process on key staples of developing countries, with particular reference to policy measures to enhance agricultural productivity, food security and rural poverty alleviation; and ways to reduce cost disadvantages in agricultural trade, due particularly to transport costs, faced by land-locked developing countries and small island developing nations.

The willingness to give a mandate for analytical support to developing countries in the agriculture negotiations and the steadfast opposition to any role in anti-dumping issues, insisting these be dealt with in the appropriate WTO bodies, if at all, perhaps illustrated the US ‘sensitivity’ to ensure that its ability to use selective trade defence instruments like anti-dumping, do not come under independent scrutiny.

In the area of anti-dumping, the Commission had before it the report of an expert meeting on the impact of anti-dumping and countervailing (AD/CV) actions.

That expert meeting, held 4-6 December 2000, identified issues relating to AD/CV measures that might be addressed in future multilateral trade negotiations, current activities of the WTO Committee on AD practices, the WTO’s Dispute Settlement mechanism and national policies of member states.

Following up on the meeting, the UNCTAD Trade Commission last week had before it draft recommendations that would have called on UNCTAD to:

·        conduct an analysis on the special difficulties faced by developing countries with respect to the incidence of excise, sales and other internal taxes for refund and the impact of this being considered as export subsidy;

·        undertake empirical studies of the practical trade impact of various thresholds, the methodological approach, and certain economic concepts in the application of anti-dumping and countervailing measures;

·        undertake a study on the impact of dumping and anti-dumping measures on the globalization of production, with particular focus on the special situation of developing countries; and

·        examine the technical feasibility of provisions for enhancing the special and differential treatment in the application of AD/CV measures.

The United States however would not agree to such a mandate for UNCTAD to undertake any analytical work or studies. It would only agree to UNCTAD providing technical assistance to developing countries to develop an improved understanding of AD/CV rules and procedures and the capacity to administer AD/CV remedies and participate in AD/CV duty proceedings more effectively.

The Expert Committee meeting itself had been unable to make specific recommendations, with the US and the EC both having objected to some of the agreed conclusions proposed by the Chair of that meeting.

The report of the meeting set out the country experiences and problems, and based on the national experiences, presentations of resource persons and the secretariat’s own background note, the report of the meeting set out the issues that might be addressed, as appropriate, in future multilateral trade negotiations, within the WTO Committee on Anti-dumping and the WTO dispute settlement mechanisms.

The report also set out the various views expressed in the debate at the experts committee.

These views included under ‘dumping’, that the 5% viability test on dumping should be applied on a global basis for the like product, and (before applying a constructed value, rather than use of the normal value to judge dumping) conduct a review to determine whether the low domestic sales volume compared with export volume was caused by the small size of the domestic market of the export countries.

In relation to the threshold for sales below cost in a domestic economy (which are excluded in judging the normal value and existing dumping), a view at the expert meeting was the 20% threshold now used may not adequately reflect business realities. The current trend of investigating authorities seem to be that where sales below cost represent more than 20% of total domestic sales, these are systematically excluded, and the normal value is based on remaining sales above cost. This artificially and arbitrarily increases normal values and thus the dumping margin.

The current provisions in the AD rules of the WTO (Art.2.2.2), which provides too much discretion to the investigating authorities in setting the administrative, selling and general costs and profits, should be clarified so that ‘unreasonable’ calculations are now allowed.

Some of the areas on which the views were expressed at the experts meeting included the need for common rules to achieve a fair comparison between prices; use of credit costs in normal value calculations, even if they are not based on contractual arrangements; clarification of Art.2.4 of the AD agreement so that drawback adjustments in duties are based on the prevailing business practices and realities; need for rules on identification and quantification of ‘level of trade’ used in dumping calculations; use of exchange rates in price calculations, particularly in respect of countries which use floating exchange rates, and where there is a need to distinguish between short-term fluctuations and long-term trends.

In anti-dumping investigations, while exchange losses are taken into account, exchange gains are frequently ignored, and Art. of the anti-dumping agreement should be clarified to exclude consideration of both exchanges gains or losses or ensure exchange gains are included in calculation of costs of production.

The provisions in Art.2..4.2 of the anti-dumping agreement, setting out exceptions in calculating normal value (which enable the investigating authorities to set normal value on weighted average basis, if they find a pattern of export prices among different ‘purchases’, ‘regions’ and ‘time-periods’) are now too broad and favour large economies. The exceptions should be tightened.

Some of the participants and experts at the experts meeting had called for empirical research and study by UNCTAD on the issue of the practical impact of an increased de minimis dumping margin.

In the area of judging ‘injury’ to domestic producers (warranting countervailing measures against dumping),the views at the experts meeting suggested that the application of ‘thresholds’ for excluding negligible imports from injury determinations should be based on market share, rather than share of total imports, and the level of negligible imports for exclusion should be raised to a level higher than the current three percent. The current practice of cumulating individual suppliers meeting the ‘negligibility criteria’, using the 7% threshold, should be revised or eliminated.

The lesser duty rule (where the countervailing duty is to be lesser than the ‘dumping’ margin, if such lesser duty suffices to remove injury to the domestic industry) should be made mandatory, and its application subject to regular review.

In terms of procedure, the views expressed at the experts meeting included the need to strengthen the disciplines of investigating procedures to ensure that there is no repeated recourse to anti-dumping investigations and actions against the same product. Initiation of such investigation should be precluded for at least 365 days.

In cases where the ‘standing’ of domestic parties seeking anti-dumping investigations are challenged, the burden of proof should not be on the exporters; rather the investigation authorities of an importing country should demonstrate that they have correctly determined the standing of the domestic parties claiming to represent the domestic industry.

Both the experts group meeting, and the Commission discursions brought out a number of issues of special concern to the developing countries in anti-dumping actions. Often, even the initiation of  investigations, subsequently determined to be unfounded, could have a devastating effect on developing-country exporters, since they may result in cutting off trade in crucial export markets and often frustrate efforts of countries to diversify exports to new sectors. It could also result in diversion of investment away from the developing countries to the major market countries.

While Art. 15 of the anti-dumping agreement provides for special treatment to developing countries, this is in the way of a ‘best endeavour’. The provision should be made operational, by increasing the de minimis thresholds for dumping and injury to levels that provide meaningful trade advantages for developing countries and eliminating cumulation of their exports.

Developing-country exporters also face serious difficulties in defending their interests against AD actions. They don’t possess technical expertise and lack resources required for legal counsel or in pursuing their rights under the WTO’s dispute settlement mechanisms.

The US and the EC had sought to block any outcome of the experts meetings. Ultimately, the chair and others decided that the various views should be reflected in the report, even if there were no agreed conclusions.

At the Commission, the US was critical of this, and ultimately blocked any UNCTAD role of study or analysis on the subject, insisting on its being confined to technical support to enable the developing countries to understand the AD rules.

The United States complained that the report of the experts meeting did not fully reflect the diversity of views, and that the US and some other delegations had spoken in support of the appropriateness of anti-dumping remedy. The US had also criticised, at the experts meetings, the views of other delegations. While acknowledging that the not all views were shared by all experts, nevertheless the report of the experts committee meeting had said the text reflected fairly “the richness and diversity of views expressed.”.

The US, which in the WTO context (in the run-up to Seattle and now for Doha) is totally opposing any consideration of changes to the AD rules; and dismissed the mention of some of the problems and views in the UNCTAD experts committee report as no more than “a litany of desired changes to the rules”.

If any of the issues raised merited further discussion, the US said in the UNCTAD trade commission meeting, that the “sensible venue” for that would be in the WTO Anti-dumping Practices Committee and its Ad Hoc Group on Implementation (where the US in fact is blocking any serious discussions).

The EC took a less hard-line view, but said that many of the issues raised in the report of the experts meeting were on the table (at the WTO) as part of the Special Sessions of the General Council on implementation. The EC was open to consider many of the recommendations, but in the proper context - - either at the Special Sessions or a New Trade Round. As for S&D treatment for developing countries on AD/CV questions, the issue was more complex and nuanced.  “Companies in developing countries,” the EC claimed, “often possess similar resources, and can be as large, technologically sophisticated and productive as anything in developed countries.” Also, more and more, developing and developed countries alike were finding themselves subject to anti-dumping investigations by developing countries and in the last three years, certain developing countries were among the biggest users of the AD defence instruments in the world.

Referring to the ‘back-to-back’ and repeated recourse to AD investigations (a complaint against the EC), the EU said this was a “very complex issue”. Circumstances in the market for a particular product could change very quickly and, without the possibility of a second AD proceeding, investigating authorities may be inclined in ‘borderline cases’ for a finding of injurious dumping to be on the safe side. The Community, the EU claimed, applied higher standards for AD measures than most other WTO signatories. Nevertheless, the EU was open to discussing this issue in a new round.

Japan said that while AD actions were legitimate under the WTO, Japan was concerned with the abuses, which have a profound negative effect on the global free-trade regimes. Japan was particularly concerned since AD users were increasing and many developing countries were imposing AD measures on other developing countries. Japan hence supported the study of these issues.

From the side of the developing countries, in the Commission discussions, Cuba, speaking for the developing countries of the Group of 77 and China, had said that while AD/CV actions were legitimate measures, the increased AD actions were due to the less than stringent implementation of relevant WTO agreements and the somewhat vague and ambiguous provisions giving domestic complainants full use of flexibility.

Egypt, speaking for the African group of countries, said that the paradox facing many developing countries was that while their own exports were subject to AD actions in foreign markets, they themselves were often unable to apply anti-dumping measures against dumped imports in their own markets. This was particularly the case in many African countries. And while both developing and developed countries were the subject of anti-dumping actions, the impact of these actions were disproportionately severe on exporters in developing countries. The production capacity and diversification base of the developing world was often limited and their ability to defend themselves against AD actions was weak. Even though there were far less cases of AD actions against African countries, those taken had a serious impact as many of the African exporters were small- and medium-sized enterprises and not well-established in the market.

Singapore, speaking for the Asian Group and China, said that some 30 specific issues had been highlighted at the expert meeting with respect to dumping, injury and procedure, and areas of concern to developing countries. There had been substantive exchanges at the experts meeting on the possible ways and means by which the adverse effects of AD/CV actions on trade, particularly of developing countries, could be reduced.

[The experts meeting was chaired by Ms. Margaret Liang of Singapore.]

Singapore told the Commission that the Asian group attached great importance to the analytical work on AD/CV actions carried out by UNCTAD. Many Asian countries had been hit by these actions, and some of them were even the main targets of these actions, and their trade had been adversely affected.

Although the AD/CV actions were measures permitted by the WTO rules, “they are now the most frequently used trade remedies” and this had created instability and uncertainty in the markets for many Asian developing countries, affecting both production and employment. The adverse impact of such measures on developing countries was much greater than the actual trade involved, as the initiation of AD/CV actions could have an immediate impact on trade flows, as importers seek alternative sources of supply. Even if final duties are not imposed, as demonstrated in the grey cotton fabrics case (initiated by the EU), the initiation of investigations entail a huge burden for respondents, particularly those in developing countries.

Another issue of concern to the Asian Group and China was the situation of “double jeopardy” in the area of textiles and clothing: many imports of these products from developing countries was already subject to quota restrictions and the “back to back” investigations in this area had caused concern to many Asian textile exporting countries.

In the view of the Asian Group and China, “a tightening of the disciplines” in the areas of AD/CV actions was an urgent matter in order to prevent a situation in which the elimination of the MFA quotas under the WTO’s Agreement on Textiles and Clothing would be followed by a wave of AD/CV actions against exports of textiles and clothing by Asian countries.

The globalization of production, leading to diversified sourcing of many important industrial components, has given AD actions a new dimension. This had given rise to the use of “anti-circumvention” measures to linkages with competition policy and use of rules of origin - all of which need to be further studied by the UNCTAD secretariat.

The experiences of some countries had shown that AD actions can represent “strategic interventions to protect the interests of certain domestic producers through undermining the positions of competitors by cutting off lower-cost international inputs. “The inability of downstream users to have access to the lowest-cost international inputs has had a wider ripple effect on their economy.”

The Asian Group and China would like to reconfirm UNCTAD’s mandate in this area (set out in para 132 of the Bangkok Plan of Action) and request that work be continued on analysis on impact of AD/CV actions, and in particular on such key issues as: the practical impact of increasing the thresholds such as de minimis dumping margin, de minimis subsidy level; the impact of AD on globalization of production and its implications for developing countries; and the impact of and solution to ‘sales below cost’, the lesser duty rule, the problems of cyclical industries, exchange rate fluctuations and accumulation.-SUNS4844

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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