Introduction Antidumping

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An Introduction to the Law and

Economics of Antidumping

James P. DurlingVinson & Elkins LLP

Washington DC

Thomas J. PrusaRutgers University and NBERNew Brunswick NJ


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Overview

Goals for the presentation: Focus on AD

Basic concepts of AD

Practical impact of AD measures Emerging issues to consider

Approach for presentation:

Assume no prior knowledge

No technical jargon


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AD The Trade Remedy of Choice

Key trade remedies Safeguard Actions (escape clause): injury

Countervailing Duty (CVD): injury & govt subsidy

Antidumping (AD): injury & pricing

AD is the dominant law

More AD disputes than all other trade laws combined

Between 1995-2005, WTO members reported: 2,851 antidumping disputes initiated

181 countervailing duty disputes initiated

142 safeguard disputes initiated


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0

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1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

#cas

es

0%

10%

20%

30%

40%

50%

60%

70%

80%

%byNew

Users

Worldwide Use of Antidumping, 1980-2003


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AD in International Context

International framework: AD rules included in Kennedy, Tokyo, and

Uruguay Rounds

Distinctive domestic laws implement this

broader international framework

To adapt the old phrase, the devil is often inthe domestic details


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What is Antidumping?

Dumping:charging an export price below normal value

Lower export price than domestic price price discrimination

Sales below cost

It is not illegal or criminal

It is not economically unfair:

domestic price discrimination & sales below cost is often

implied by standard microeconomic theory

But it does trigger a legal right to offsetting duties


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Key Substantive Elements

An export price below normal value Domestic prices in the exporting country

The most comparable third country prices

Constructed value cost of producing the item

Injury to the domestic industry

Caused by the low-priced imports


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Key Procedural Elements

A petition to start the case. A finding of unfairly low prices

A finding of injury caused by imports Preliminary and final findings

Sometimes more than one agency

U.S. antidumping practice as an example


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AD Case Filed (Day 1)

AD Duties

Almost always

affirmative & largeAffirmative to 2/3(often higher for new

users)

Preliminary Injury Preliminary LTFV

(5-7 months)

Final Injury Final LTFV

(9-14 months)


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Average margin rises

from 15% to over 50%(compare with MFN tariff levels)


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Also a steady increase in affirmative

injury decisions (but not as sharp)


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AD Case Filed (Day 1)

Preliminary Injury Preliminary LTFV

Final Injury Final LTFV

AD Duties

(5-7 months)

(9-14 months)

When does AD

begin to matter?

After duties imposed

(e.g., tariff)

Before case filed (threat)

After preliminary

LTFV


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Answer?

AD impacts trade before, during, and afterinvestigation

U.S. estimates: AD imposes larger costs

than any other protective measure except

MFA (which is now defunct)

EU estimates: AD about as costly asagriculture protection


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Pre-Duty Impact

Before the case: Rumors or explicit signaling

Exporters pull back (even with antitrust risk)

During the case:

Importers and exporters get nervous

Some systems have great uncertainty


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Post-Duty Impact

AD impacts trade flows regardless ofoutcome

Duties Levied

Settled Cases (price/quantity agreements)

Rejected Cases


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Value of Trade Subject Countries

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

t0 t+1 t+2 t+3 t+4

Time

%Change

fromyear

t0

High Duty (Affirmative)

Low Duty (Affirmative)


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AD induces trade diversion

High Duty Cases

-60%

-40%

-20%

0%

20%

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60%

80%

100%

t0 t+1 t+2 t+3 t+4

Time

%

Changefromyeart0

Subject Countries

Non-subject countries


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Measured Post-Duty Impact

Fall/RiseRise

40-80%

Rise

20-40%Non-subj

Rise20-25%

Fall

60-70%Fall50-60%Subject

AUVQuantityValue


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Measured Investigation Effects

Once preliminary AD duties imposed, tradevolumes fall dramatically

Estimates are that at least half the impact on

trade occur during the investigation

Trade impact can be significant enough that

the investigation effectalone makes thecase profitable


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Emerging Issues

Proliferation of AD users The treatment of so-called non-market

economies

The changing dynamics of multi-lateral

negotiations


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Implications for EU & U.S.

EU & U.S. have long been the biggestadvocates for AD protection and the driving

force behind the weakening of AD rules

Will they regret making AD so easily

abused?

Filing trends suggest

Yes


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Drop Steel Industry


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Non-Market Economies

China is the most important NME Many countries use special rules:

Export prices determined same way

Use of surrogate values: Chinese unitquantities and surrogate unit values

Enormous unpredictability

Some countries have graduated China tomarket economy status.


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The Next Frontier for NMEs

For more than twenty years, no CVDagainst NMEs like China.

U.S. has its first case: AD and CVD cases

against coated paper from China.

Enormous uncertainty about whether and

how the U.S. will proceed with this case.


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Negotiating Dynamics

Doha Round has been stalled; prognosisuncertain due to the major issues.

The rules negotiations have been

proceeding slowly. Large increase in AD users has shifted roles

played by different countries.

Political support for concept of AD withoutunderstanding the details.


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Conclusions

AD and trade remedies of growingimportance.

Crucial for all involved to understand at

least the basics.

Important for decision-makers to begin

thinking about the broader implications.

Documents

Introduction Antidumping