January 31, 2005
The American Institute for International Steel (AIIS) is a trade association that represents North American importers and exporters of steel and companies which supply services to them, such as port authorities, stevedoring firms, port authorities, customs brokers and others. AIIS also has as members companies which consume/manufacture steel into finished and intermediate products.
AIIS has as its principal policy objective the promotion of free trade in steel. Since the inception of its oldest predecessor organization in 1950, free trade in steel has been the focus of AIIS. Since the mid 1960s, steel producers in the US have used trade remedy laws and political pressure to protect their domestic market. As a result, AIIS members are well acquainted with how the trade laws work in ways which are blatantly protectionist, and contrary to WTO obligations, and the goals and objectives of the WTO – the promotion of trade liberalization and open markets. During the 1990’s, the use of protectionist trade laws spread around the world.
AIIS strongly supports proposals to eliminate all subsidies in the steel sector. But this alone will not remove trade distortions in steel, because trade remedy laws themselves are now one of the major distortions.
Because of our unfortunate experience with the abuse of trade laws, we have some specific suggestions regarding the current round of negotiations and how trade laws could be harmonized internationally to assure more predictability and certainty. Increased certainty and predictability would mean increased trade and living standards around the world and the reduction of trade frictions. The following are the principal trade law change proposals, especially for antidumping, that we believe the US negotiators should adopt during the current WTO Doha Round negotiations.
We believe that the WTO anti-dumping rules should revert to the original intent; that antidumping measures should be applied only based on an international standard that protects domestic industries only from truly predatory practices so that there is no discrimination between domestic suppliers and exporters/importers for the same commercial pricing decisions in a given market. While in the context of the current WTO anti-dumping rules (which punish “foreigners” for behaving exactly the same as domestic industry) this may appear to be a controversial proposal, it is the WTO norm for many other international rules such as phyto-sanitary and other health and safety rules, intellectual property rights, financial and other service rules, etc. For example, it would be considered a trade barrier if the US applied product standards such as ASTM (American Society for Testing and Materials) for steel differently based on the origin of the steel product.
Within that general rule, the following are the principal changes to WTO anti-dumping disciplines that AIIS supports in the current Doha Round. It should be noted that most of these changes are currently part of the WTO Agreement, but not mandatory, even though many Members already abide by them.
1. Prospective duty payments. The US Government should press for the elimination in Doha of the option to use a retrospective duty payment methodology in favor of a mandatory prospective system. The retrospective method of determining and collecting AD and CVDs is in itself a trade barrier. Under the current US system, an importer who buys a product covered by an AD or CVD does not know the actual duty payment due until a year or more after the sale. Virtually all of our trading partners use the prospective system which allows an importer to know the cost to import a product covered by an AD or CVD at the time of importation. We believe that some version of the Canadian system, which allows an importer to raise his price to a level above the “normal value” and not pay an anti-dumping duty at all, is the preferred approach. Administrative reviews would still be appropriate, but when the new rate was calculated, it would apply prospectively.
2. Lesser duty rule. AIIS believes that this provision, already the norm around the world, (including for example in the EU), should be made mandatory in the WTO anti-dumping rules. The purpose of antidumping rules is to remedy injury, so the duty charged should not exceed the amount necessary to offset the injury. There is no reason for a 100% duty to be put in place when a 5% duty would eliminate the injury to the domestic industry.
3. Public interest test. AIIS believes that this provision, also the norm around the world, should be made mandatory under the WTO anti-dumping code. This test should be applied at both the beginning of the procedure before initiation of the safeguard, antidumping or countervailing duty case, and also at the end of a case before duties are applied.
4. Consuming industry standing. This proposal flows directly from the public interest test. Domestic consumers of a product under investigation should be involved from the beginning of the proceeding – whether anti-dumping, countervailing duty or safeguard -- on equal footing with any other party. It is preposterous to have companies potentially knocked out of business due to a trade remedy duty not even have the ability to speak, with standing, about their economic interests during the processing of a trade law complaint.
5. Material injury/causation. Some countries use a definition of “material injury” that is far too easy to show. According to the US legislative history of the Uruguay Round, “material” injury is any injury that is not “insignificant or immaterial.” This definition of “material” is not consistent with the intent and purpose of the WTO agreements. In addition, the causation standard for AD, CVD and safeguard cases should be clarified to require that dumped, subsidized imports, or surged imports under the safeguard rules, when considered on their own, are causing material injury or threat thereof.
6. Sunset. Under existing WTO rules, AD and CVD cases are expected to sunset after 5 years. The WTO rules need to be clarified in order to assure only the most egregious cases are continued for another 5 years, possibly by requiring another petition.
7. In order to reduce the number of unfounded cases filed, some level of evidentiary standard must be created before the authorities initiate a case. The current system allows petitioners to file cases and disrupt markets often until the national authorities find no injury at the final stage of the process. In the US, this has allowed companies to use the anti-dumping law as part of their commercial strategy to disrupt the steel market for as much as a year or more during which time petitioners have more market power.
8. Zeroing. This practice disregards import prices from an exporter that are not dumped – zeroing them out in the calculation – and only uses those import prices calculated to be dumped. Dumping margins should be calculated based on the summation of all the import transactions so that the dumping margins reflect the totality of trade from a specific exporter. While we hope that this issue is taken care of prior to the conclusion of the Doha Round, we have included it in our list of trade law proposals at this time in case the issue is not formally and finally eliminated via the dispute process.
9. Transparency. While we believe the WTO’s trade remedy rules are flawed in many important ways, we believe that a strength of the US system is its transparency. We would urge the US to pursue inside the WTO increased transparency of proceedings in the Agreements. The spread of the use of the anti-dumping and other trade measures should make this an important goal of the current WTO round.
There are other highly technical changes that would also make the anti-dumping rules more economically rational and consistent with the purpose of the WTO Code, such as the treatment of indirect selling expenses and affiliated party’s transactions.
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