TRADED REMEDY LAWS OF PAKISTAN UNDER

THE WTO REGIME

INAAMUL HAQUE & NAEEM ULLAH KHAN

I. Introduction

Free trade among nations is perceived now-a-days, as the key to economic growth, peace and better standards of living, leading to a happier state of human existence at a global level.1 It is now widely recognized that “those countries that have chosen to make trade a pillar of economic growth have, indeed grown more strongly and become wealthier than those which have a reliance on domestic markets behind the protective walls”.2 The World Trade Organization (WTO)’s regulatory framework for international trade itself promotes free trade and accordingly affects the rights and obligations of the business concerns.3

The WTO system seeks to help international trade flow as smoothly and freely as possible. Removing and lowering trade barriers, thus, is one of the key operational objectives of its system through which the trade, among nations is being encouraged. Notwithstanding this it would not be entirely correct to characterize the WTO as a “free trade” institution. As a matter of fact the WTO provides for “system of rules dedicated to open fair and undistorted competition”.4

In order to protect the WTO member countries industries from unfair trade conscious significant exceptions have been allowed to the principle of non-discrimination embodied in requirement of the MFN treatment.5 These exceptions make it possible for any member to rise (which otherwise would be contrary to the

Inaamul Haque LL.M (Harvard), Distinguished Scholar/ Adjunct Professor Punjab University Law College, Former Exective Director World Bank, Advocate High Court. Pakistan. Naeem Ullah Khan LL.M (Punjab) Lecturer Punjab University Law College, Pakistan.This article contains personal views of authors and do not necessarily reflect those of any Organization..1 Views as to benefits of free trade owes much to the work of Adam Smith, ( An inquiry into the Nature and Causes of the Wealth of Nations, 1776) and David Ricardo (on the Principle of Political Economy and Taxation, 1817). However, there are several eminent economists who do not entirely subscribe to such positive evaluation of the free trade. (See Krugman, Increasing returns, Monopolistic competition and International Trade, 1979, 9(4) Journal of International Economics 467). See I. Carr et al, International Trade Law 2005, at 1xxxvii and see also J. Steglitz, GLOBALIZATION AND ITS DISCONTENTS (2002).2 WTO, The Future of the WTO (2004) Report by the Consultative Board to the DG WTO. 3 I. Carr et al, R.K. Goupta supra note 1 at 1xxxvii.4 WTO, Understanding the WTO, at 12.5 It relates most Favored Nation Treatment which means favor one favor all.

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MFN rule) barriers against products from specific countries and companies. The relevant legal provisions in this regard are provided in the Agreement on Implementation of Article VI of the GATT 1994, the Agreement on Subsidies and Countervailing Measures and the Agreement on Safeguard Measures.

This paper examines Pakistan trade-remedy laws enacted under the umbrella of the WTO system. These laws are intended to remedy hardships for Pakistani industries resulting from the unfair actions and policies of foreign businesses and governments. The paper also inter-alia provides to the jurisprudence for “Trade Remedial Laws” with special reference to the case law found from different jurisdictions including that from the WTO. In Sections IX and XII some recommendations have been proposed to improve the situation.

II. Rationale for Trade Protection Measures

One of the foremost objectives of the World Trade Organization (WTO) regime has been to liberalize the trade and help in globalizing the economies.6 To achieve this object Members were required to effect substantial tariff reductions in Uruguay round7 and to remove quantitative restrictions on imports so that the trade could flow without hindrance.8

The free flow of the trade has, however, posed new challenges both for governments and domestic producers. Domestic producers face challenges of intense competition form more efficient producers from all over the world. They may export goods at far cheaper prices than those prevailing in the importing market and thereby threatens the very survival of domestic competitors. Obviously no government can let its domestic industry to die and allow its people to lose their livelihood. The WTO members therefore, have to find ways and means to protect their producers, while still remaining with the discipline of WTO.9

The Agreements on trade remedy measures have been in fact designed to incline Members to open up their markets without undue fear of contingent damage as they can take appropriate protective measures in a situation threatening their domestic producers and causing them any injury.

6 R. K. Gupta, Safeguards, Countervailing & Anti-Dumping Measures against Imports & Exports, 2003,p.2 7 Uruguay Round, (a place in Latin America) bought about the biggest reform of the world’s trading system since GATT was created at the end of 2nd World War. And yet, despite its troubled progress the Uruguay Round did see some early results. Within only two years, participants had agreed on a package of cuts in import duties. 8 See R.K. Goupta, supra note 6.9 Id

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III. Trade Remedy Laws in Pakistan – A Preliminary Exposition

Pakistan has three trades remedy laws namely: Anti-Dumping Duties Ordinance, Countervailing Duties Ordinance, and Safeguard Measures Ordinance. These provide a system of defense against imports into Pakistan. These laws are frequently characterized as “contingent protection laws” because the import relief is provided only under certain conditions.10

Ever since the establishment of the WTO the principal objective of trade system is to prevent unfair trade practices in global economy and provide temporary remedies to the importing country in emergency or in exceptional circumstances11. Anti-dumping, Countervailing and Safeguard measures have been gaining increasing relevance for industrialists and entrepreneurs in the multilateral trading system. These trade measures have a bearing on decision making by the exporters, importers and the domestic producers, in one-way or other.12

Anti-Dumping Duties Ordinance, 2000, seeks to give-effect to the provision of Article VI of the General Agreement on Tariff and Trade, 1994, and to the Agreement on Implementation thereof and amends and consolidates the law relating to imposition of anti-dumping duties to offset the effect of dumping.

Countervailing Duties Ordinance, 2001, gives effect to the provision of Article VI and XVI of the General Agreement on Tariff and Trade, 1994, and to the Agreement on Subsidies and Countervailing Measures.

Safeguard Measures Ordinance, 2002, seeks to give-effect to the provision of Article XIX of the General Agreement on Tariff and Trade, 1994, and to the Agreement on Safeguards. This law provides for the imposition of safeguard measures in accordance therewith. It also provide a framework for investigation and determination of serious injury or threat of serious injury caused by products imported into Pakistan and for matters ancillary thereto or connected therewith.

Administration of Trade Remedy Laws (TRLs)

Administration of TRLs has been assigned to the National Tariff Commission (NTC hereinafter called the Commission) which is an autonomous body established in 1990, under the Commission Act, 1990. The Commission administrates these laws, conducts studies, prepares reports and makes recommendation to the Federal Government on tariff protection to the domestic industry. The Commission, inter-alia, provides protection to the indigenous industry, helps in improving the competitiveness of the indigenous industry and promotes exports from Pakistan.

10 Administrated protection and procedural protectionism are two others terms for contingent protection. 11 R. K. Gupta, supra note 6 at 1.12 Available at http://www.ktc.go.kr/en/forum/down/3%20KingLi_07.6.18.ppt

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Quasi-judicial powers have been given to it for conducting investigation, imposing anti-dumping and countervailing duties or adopting safeguard measures.13

IV. Conceptual Foundations

Restrictions in the Nature of the Escape Clause14

The WTO provisions relating to an import defense are to some extant, akin to those contained in Section 201 of the United States Trade Act of 1974.15 The essence of the “Escape Clause” and that of the WTO’s trade remedy provisions are to allow a country to restrict temporarily imports when rising imports can be demonstrated to cause a serious injury to an industry of the importing country. As allowed by the WTO rules such provisions have been incorporated in the trade-remedy laws of Pakistan. The rationale behind the escape type of clauses is based on two grounds. The first is “the economic adjustment” and second is “formidable force for import restrictions”16.

Concept of Dumping as Embodied in the WTO Law

In ordinary language, it is usual to designate all low-cost imports as dumped imports. The Agreement on Anti-dumping Practice, however, lays down strict criteria for determining when an imported product should be treated as being dumped. In particular it states that “a product is to be considered as being dumped”, if its export price is less than the price at which a like product is sold for consumption in the exporting country. In other words, if on the basis of a comparison of the export price and the home consumption price in the exporting country it is found that the latter price is higher, the product could be treated as being dumped.17

This Agreement authorizes countries to levy anti-dumping duties on dumped products. Pakistan through Anti-dumping Ordinance, 2000 [repealing the Imports of Goods (Anti-dumping and Countervailing Duties) Ordinance, 1983] has also has given effect to the WTO provisions relating to imposition of antidumping duties in order to offset the effect of dumping.

V. Anti-Dumping18 Law in Pakistan

13 See Generally National Tariff Commission Act, 1990.14 C. Coughlin, U.S. Trade-Remedy Laws: Do They Facilitate or Hinder Free Trade? 1991, at 3.15 See Jackson 1990 for a comparison of the legal nuances of U.S law with Article XIX of GATT.16 C. Coughlin, R.K. Goupta , supra note 14.17 Business Guide to the World Trading System, 1999 at 145, 146.18 Article VI: 1 of GATT states that dumping occurs when a producer-exporter sells its product in a foreign market at less than normal value. In general this practice occurs when the price at which the company exports its product is lower than price its charges in its home country. The difference between the foreign

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Main Features of the Anti-Dumping Ordinance

The purpose of Anti-dumping Ordinance is to prevent unfair practice of price discrimination in which foreign firms sell any product in Pakistan at prices lower than they charge in their domestic markets i.e. selling at prices below the average total cost of production. This law provides a frame work for investigation and determination of dumping and consequential injury as well as imposition of anti-dumping duty to offset dumping.19

A product is considered to be dumped if it is sold in Pakistan at a price which is less than its normal value, in exporting country.20 If the Commission determines that the product in question is being sold in Pakistan at a price less than its foreign market value than the case is referred for investigation. The Commission then investigates whether, as a result of the dumping a domestic industry is injured or is likely to be injured or even prevented from being established in Pakistan.

The normal value of an investigated product is determined on the basis of comparable price paid or payable in the ordinary course of trade for the sale of like products when destined for consumption in an exporting country. The Commission may also establish normal value of an investigated product on the basis of comparable price paid or payable in the ordinary course of trade for sale of like product when destined for consumption in the country of origin of the investigated product if:

(a) Such products are not produced in an exporting country; or(b) There is no comparable price for them in an exporting country.21

Criteria for Determination of Injury

Dumping Margin and Normal Value

An important context, in the contest of anti dumping proceedings is that of dumping margin, which helps determination of anti-dumping duties. A generic formula22 for calculation of dumping margin is:

Dumping Margin = Normal value – Export Price ----------------------------------- X 100

Export Price

and domestic market price is commonly referred to as the dumping margin. 19 See preamble, R.K. Goupta, supra not 1. 20 See Section 4 Anti-dumping Ordinance, (2000)21 See Section 5 Anti-dumping Ordinance, (2000)22 R. Bhala, International Trade Law: Theory and Practice, (2001) at 820.

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Normal Value = Domestic price, i.e. the price the exporter charges in its home market.

Export Price = Foreign price, i.e. the price the exporter charges in importing countries in which the dumping is alleged.Dumping Margin is Positive then dumping occurs and negative or zero then no dumping occurs.

Injury in Pakistani law means material injury or threat of material injury to domestic industry or material retardation of the establishment of a domestic industry, when dumping imports are causing such injury.23

The requirement of the injury test has been elaborated in the WTO/GATT system.24

Extensive provisions governing both substance and procedure may be found in the WTO Agreement on Implementation of Article VI and the WTO Agreement on Subsidies and Countervailing Measures. The provisions in the two agreements relating to injury are virtually identical.25 The relevant portions of Pakistan Trade Remedy Law, which follow the requirements of the WTO Agreements fairly closely, are found in the Anti-dumping and Countervailing Duties Ordinances. The determination of injury analysis in dumping and countervailing duties in Pakistan is also more or less the same.

The Determination of Injury

The law mandates that determination of injury to domestic industry should be based on an objective examination of all relevant factors. These factors may include but shall not be limited to26:

(a) Volume of dumped imports; 

(b) Effect of dumped imports on prices in domestic market for like products;

(c) Consequent impact of dumped imports on domestic producers of such products. 

With regard to volume of dumped imports, the Commission considers whether there has been a significant increase in dumped imports, either in absolute terms or relative to production or consumption in Pakistan27.

23 See Section 2 (i) Anti-dumping Ordinance, (2000)24 J.H. Jackson et al, Legal Problems of International Economic Relations, (2002) at 727.25 Id26 See Section 15 (1), Antidumping Ordinance, (2000.)27 See section 15 (2), Antidumping Ordinance, (2000).

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With regard to effect of dumped imports on prices in domestic market, the Commission considers whether28 – 

 (a) There has been a significant price undercutting by the dumped imports as compared with price of a domestic like product; or 

 (b) Whether the effect of dumped imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise would have occurred, to a significant degree. 

No one or several of the factors identified in sub-clauses (2) or (3) of Section 15 of the Ordinance deemed to necessarily give decisive guidance and the Commission may take into account such other factors as it considers relevant for the determination of injury29.

In circumstances where domestic industry in relation to a product in question has been divided into two or more competitive markets and producers within each such market are regarded as a separate industry. Thus injury may be found to exist even where a major portion of the total domestic industry does not suffer injury provided that, there is a concentration of dumped imports into such a market, and provided further that dumped imports are causing injury to the producers of all or almost all of the production within such market30.

Existence of injury is a critical element in anti dumping action. Dumping as such is not actionable. Existence of an injury is pre requisite for imposition of anti dumping duties. The Pakistani law lays down exhaustive procedures in this regard. Following are important provisions:

Where imports of a like product from more than one country are the subject of simultaneous investigations, the Commission may cumulatively assess the effects of such imports on domestic industry but only if it is determined that: 

(a) Dumping margin in relation to an investigated product form each country is more than the negligible amount as specified in Section 41 of the Ordinance and volume of dumped imports form each investigated country is not less than the negligible quantity as specified in law31; and

(b) A cumulative assessment of the effects of the imports is appropriate in the light of –

i. The conditions of consumption between the imports; and

28 See section 15 (3), Antidumping Ordinance, (2000).29 See section 15 (4), Antidumping Ordinance, (2000).30 See section 15 (5), Antidumping Ordinance, (2000).31 See section 16, Antidumping Ordinance, (2000).

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ii. The conditions of competition between the imports and a domestic like product.

Examination of Relevant Economic Factors

The Commission is required to under take a detailed examination of the impact of dumped imports on the domestic industry. Such an examination is to include an evaluation by the Commission of all relevant economic factors and indices having a bearing on the state of the domestic industry, including, but not limited to:

(a) Actual and potential decline in sales, profits, output, market share, productivity, return on investments, or utilisation of capacity; 

(b) Factors affecting domestic prices; 

(c) Magnitude of dumping margin; and 

(d) Actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments.32 

The list of factors specified above is not supposed to be exhaustive, nor one or several of these factors be deemed to necessarily give decisive guidance. 

The Commission is to assess effect of dumped imports in relation to production of a domestic like product in Pakistan when available data permit separate identification of that production on the basis of criteria of production process, producer’s sales and profits: provided that if such separate identification of that production is not possible, the Commission is to assess effects of dumped imports by examination of the production of the narrowest group or range of products, which includes a domestic like product, for which necessary information can be provided.33 

Causation – Determination of Injury

32 See section 17 (1), Antidumping Ordinance, (2000)33 See section 17 (2), Antidumping Ordinance, (2000)

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The Commission has to satisfy itself that dumped imports are causing injury as specified in the Ordinance. The Commission is thus mandated to consider causal relationship between dumped imports and injury to domestic industry based on an examination of relevant evidence before it.34

Legal Effect of Other Factors

There can be a host of factors adversely influencing an industry without emanating from dumping. Such factors are not to be confused with dumped imports non- dumped import factors may include the following:35

(a)   Volume and price of imports not sold at dumping prices; 

(b)  Contraction in demand or changes in the patterns of consumption; 

(c) Trade restrictive practices of and competition between foreign and domestic producers; 

(d) Developments in technology; and 

(e) Export performance and productivity of domestic industry. 

Threat of Material Injury – Determination of Injury

A part from the actual injury protection extends to cases of threat of mataul injury. In making a determination regarding existence of a threat of material injury, the Commission is required to consider all relevant factors, including but not limited to:

(a) A significant rate of increase of dumped imports indicating the likelihood of substantially increased imports; 

(b) Sufficient freely disposable, or an imminent and substantial increase in capacity of an exporter of dumped goods into Pakistan indicating the likelihood of substantially increased dumped exports to market in Pakistan, taking into account the availability of other markets elsewhere in the world to absorb any additional exports; 

(c) Whether imports are entering at prices that shall have a significant depressing or suppressing effect on prices in Pakistan, and would likely increase demand for further imports; and 

34 See section 18 (1), Antidumping Ordinance, (2000).35 See section 18 (3), Antidumping Ordinance, (2000).

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(d) Inventories of an investigated product.36

None of the factors mentioned above by itself shall be deemed to necessarily give decisive guidance in making a determination regarding a threat of material injury. The Commission is bound by law to base its determination on totality of the relevant factors and is to satisfy itself that further dumped exports are imminent and that, unless protective action is taken, material injury shall occur.37

Termination of Investigation

The investigation is terminated if there is no sufficient evidence of either dumping or resultant injury. Likewise the investigation is terminated if the dumping margin is found to be negligible or the volume of import is negligible or if injury is negligible. The law lies down that the dumping margin is negligible if it is less than 2% (expressed as a percentage of export prices). As for the volume of imports it normally regarded negligible if the volume of dumped imports of the product is less than 3% of total imports of like product.38

Appeal/Review – There is a right to appeal to the appellate tribunal established by the Federal Government against any affirmative or negative final determination by Commission and any final determination pursuant to review.39

VI. Relevant Case Law

A lot of case law can be found from different jurisdictions including that from the WTO. Some of the cases are:

PVC Resin Case40 – Indian Case

In an anti-dumping investigation into imports of PVC Resin from Brazil, Mexico, Republic of Korea and USA into India, it was found that the existing capacity in these countries was far in excess of the domestic demand which was leading to price depression in the Indian market and was preventing the domestic industry cover the cost of sales and reasonable profits. There was no indication that extra production could be absorbed in new markets. Structural shape of the resin industry in the exporting countries leading to extra ordinary low prices and the inability of Indian industry to escape injury become to determinants of the decision. Held that there was every likelihood of substantial increase in dumped imports in India and in

36 See section 19 (1), Antidumping Ordinance, (2000).37 See section 19 (2), Antidumping Ordinance, (2000).38 Unless imports of the investigated product from all countries under investigation which individually

account for less than 3% of total imports of alike product collectively account for more than 7% imports of

a like products.39 See section 64 Anti-dumping Ordinance, (2000)40 Notification # 14-9-92. TPD, dated 30 July 1993.

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the absence of anti-dumping measures there was a threat of material injury from dumped imports. Anti-dumping duties were imposed.

Bisphenol Case41 – Indian Case

In the Anti-Dumping investigation against imports into India of Bisphenol-A (BPA) from Japan, it was found that the Japan was exporting BPA to India at an export price less than the normal price. The Authority concluded that the imports were dumped and further those had caused injury to domestic industry by resulting in material retardation. Anti dumping duties were imposed.

Shrimp Case42- WTO Case

Thailand, India, and the United States appealed certain issues of law and interpretations in the two panel reports. These panels were established to consider complaints by Thailand and by India concerning the application of an Enhanced Bond Requirement (the "EBR") by the United States on imports of frozen warm-water shrimp that were subject to anti-dumping duties ("subject shrimp").43

The claims brought by Thailand and India pertained to the EBR imposed by the United States on imports of subject shrimp from Thailand and India.44 Another measure, challenged only by Thailand in US – Shrimp (Thailand), involved the use of "zeroing" by the United States' investigating authorities when calculating dumping margins on the basis of weighted-average comparisons of export prices and normal value in the original anti-dumping duty investigation on imports of shrimp from Thailand.45 The Panel's finding on this issue has not been appealed by the United States.

The Appellate Body (AB) upheld the Panel’s conclusion, that the application of the EBR to subject shrimp is inconsistent with Article 18.1 of the Anti-Dumping Agreement,being inconsistent with the Ad Note to Article VI:2 and 3 of the GATT 1994.

The recommended that the DSB was request the United States to bring its measure, (found in its Report and in the Panel Report, US – Shrimp (Thailand), as modified by the AB’s Report, to be inconsistent with the Anti-Dumping Agreement and the GATT 1994,) into conformity with its obligations under those Agreements.

In respect of the appeal of Panel Report, US – Customs Bond Directive, the Appellate Body: upheld the Panel's findings, in paragraph that the application of the

41 Notification # 14-73-92. TPD, dated 18 February (1994).42 WT/DS343/AB/R, WT/DS345/AB/R, 16 July (2008)43 Panel Report, US – Shrimp (Thailand), para. 2.1; Panel Report, US – Customs Bond Directive, para. 2.1.44 Panel Report, US – Shrimp (Thailand), para. 2.5; Panel Report, US – Customs Bond Directive, para. 2.2.45 Panel Report, US – Shrimp (Thailand), paras. 7.9-7.36 and 8.2.

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EBR falls within the temporal scope of the Ad Note, in the sense that the Ad Note authorizes the imposition of security requirements during the period following the imposition of a United States anti-dumping duty order and recommended that the DSB request the United States to bring its measure, (found in this Report and in the Panel Report, US – Customs Bond Directive, as modified by this Report, to be inconsistent with the Anti-Dumping Agreement and the GATT 1994) into conformity with its obligations under those Agreements.

Stainless Steel Case46 - WTO Case

That had adopted the Appellate Body Report47 and the Panel Report48, (as modified) in United States – Final Anti-Dumping Measures on Stainless Steel from Mexico.49

The United States indicated its intention to implement the recommendations and rulings of the DSB this was, however, done with a caveat that it would require a reasonable period of time in which to do so.50

Consultations between Mexico and the United States did not, however, result in an agreement on the "reasonable period of time" for the implementation. Mexico therefore requested that such period be determined through binding arbitration, pursuant to the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU").51 An arbitrator was appointed after consulting the parties.52

The Arbitrator decided that the reasonable period of time for the United States to implement the recommendations and rulings of the DSB in this dispute is 11 months plus 10 days from the date of adoption of the Panel and Appellate Body Reports.

Case Law on Antidumping Duties in Pakistan

In the following ten cases the Commission after through and transparent investigations imposed definitive anti-dumping duties. The brief facts of the cases are set out below:

(i) Polyester Staple Fiber Case53

46 WT/DS344/15, 31 October 200847 Appellate Body Report, WT/DS344/AB/R.48 Panel Report, WT/DS344/R.49 WT/DS344/10.50 WT/DSB/M/251, para. 9.51 WT/DS344/13.52 WT/DS344/14.53 Final Determination And Levy Of Definitive Antidumping Duty On Dumped Import Of Polyester Staple Fiber Originating In And/ Or Exported From The Republic Of Indonesia, The Republic Of Korea And The Kingdom Of ThailandA.D.C No.12/2006/NTC/PSF

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In a complaint from three domestic producers of Polyester Staple Fiber (PSF) it was alleged that PSF produced in the Republic of Indonesia, the Republic of Korea and the Kingdom of Thailand was exported to Pakistan at dumped prices, which had caused material injury to the domestic industry.

(ii) Ceramic Tiles Case54

In a complaint from a domestic producer of tiles, it was alleged that tiles produced in the Peoples Republic of China were being exported to Pakistan at dumped prices and had caused and were causing material injury to the domestic industry. This was a significant case because the Commission had earlier hesitation to impose a trade remedy measure against China which was a great friend of Pakistan. This inhibition was overcome once the Commission learned to distinguish between friendly relations with a foreign comity and the reality of commercial injury to the domestic industries.

(iii) Phthalic Anhydride (PA) Case55

In a complaint on behalf of the domestic industry it was alleged that PA produced in the Republic of India, was exported to Pakistan at dumped prices and there was a casual relationship between dumped imports and the material injury suffered by the domestic industry.

(iv) Formic Acid (FA) Case56

In a complaint on behalf of the domestic industry producing Formic Acid it was alleged that FA produced in the Republic of Finland and the Federal Republic of Germany was being exported to Pakistan at dumped prices and caused material injury to domestic industry.

(v) Polyester Filament Yarn (PFY) Case57

June 05, 2007. Also available at http//www.ntc.gov.pk 54 Report On Final Determination And Levy Of Definitive Antidumping Duty On Import Of Tiles Which Includes Ceramic, Porcelain/Vitrified/ Granite Wall And Floor Tiles In Glazed/Unglazed, Polished/ Unpolished Finish Originating In And/Or Exported From The Peoples Republic Of ChinaA.D.C No.11/2006/Ntc/Ct Also available at http//www.ntc.gov.pk55 Report On Final Determination And Levy Of Definitive Antidumping Duty On Import Of Phthalic Anhydride Originating In And/Or Exported From The Republic Of India A.D.C No.08/2005/Ntc/PaMay 23, 2006. Also available at http//www.ntc.gov.pk56 Report On Final Determination And Levy Of Definitive Antidumping Duty On Import Of Formic Acid 85% Originating In And/Or Exported From The Republic Of Finland And The Federal Republic Of GermanyA.D.C No.09/2005/Ntc/Fa July 06, 2006 Also available at http//www.ntc.gov.pk57 Report On Final Determination And Levy Of Definitive Antidumping Duty On Import Of Polyester Filament Yarn Originating In And/Or Exported From The Republic Of Indonesia, The Republic Of Korea, Malaysia And The Kingdom Of Thailand.A.D.C No.07/2005/Ntc/PfyMarch 16, 2006. Also available at http//www.ntc.gov.pk

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In a complaint alleged that PFY Indonesia, Korea, Malaysia, and the Thailand exported PFY to Pakistan at dumped prices and caused material injury to the domestic industry.

(vi) Urea Formaldehyde Moulding Compound (“UFMC”) Case58

In a complaint on behalf of the domestic industry producing Urea Formaldehyde Moulding Compound (“UFMC”) it was alleged that UFMC produced in China was exported to Pakistan at dumped prices and caused material injury to the domestic injury.

(vii) Acrylic Tow (AT) Case59

In a complaint on behalf of the domestic industry it was alleged that AT produced in Uzbekistan was exported to Pakistan at dumped prices.

(viii) Poly Vinyl Chloride (PVC) Resin Case60

In a complaint on behalf of the domestic industry it was alleged that PVC Resin produced in Korea and in Iran was exported to Pakistan at dumped prices and caused material injury to the domestic industry.

(ix) Glacial Acetic Acid (GAA) Case61

In a complaint on behalf of the domestic industry it was alleged that GAA produced in Chinese Taipei (Taiwan), China, was exported to Pakistan at dumped prices.

(x) Sorbitol Solution (SS) Case62

58 Report On Final Determination And Levy Of Definitive Antidumping Duty On Import Of Urea Formaldehyde Moulding Compound Originating In And/Or Exported From The People’s Republic Of ChinaA.D.C No.06/2004/Ntc/UfmcNovember 19, 2005. Also available at http//www.ntc.gov.pk59 Report On Final Determination And Levy Of Definitive Antidumping Duty On Acrylic Tow Originating In And/Or exported From Republic Of Uzbekistan To PakistanDecember 09, 2004. Also available at http//www.ntc.gov.pk60 Report On Final Determination And Levy Of Definitive Antidumping Duty On Import Of PVC Resin (Suspension Grade) Into Pakistan Originating In And/Or Exported From The Republic Of Korea And The Islamic Republic Of IranA.D.C No.05/2004/Ntc/PvcrFebruary 23, 2005. Also available at http//www.ntc.gov.pk61 Report On Final Determination And Levy Of Definitive Antidumping Duty On Glacial Acetic Acid Originating In And/Or Exported From Chinese Taipei (Taiwan) To PakistanJune 17 , 2004. Also available at http//www.ntc.gov.pk62 Report On Final Determination And Levy Of Definitive Antidumping Duty On Sorbitol 70% Solution Originating In And Exported From The Republic Of Indonesia And The Republic Of FranceNovember 17, 2003. Also available at http//www.ntc.gov.pk

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In a complaint on behalf of domestic industry it was alleged that dumping of SS exported from Indonesia and France at dumped prices had caused material injury to domestic industry.

Facts Established for Imposition of the Anti-dumping DutiesIn all these ten cases the Commission found that:

1. The investigated product(s) alleged to have been dumped and Pakistani like product(s) were like each other.

2. The investigated product(s) were exported to Pakistan by the exporters/foreign producers, at prices below their normal value;

3. The volume of dumped imports of the investigated product and the dumping margins established for the exporting countries, were above the negligible and de minimis levels as defined in Section 41 of the Ordinance.

4. The domestic industry suffered material injury on account of, volume of dumped imports, price undercutting, price suppression, loss in market share, decrease in sales, decline in return on investment, decrease in profits, decline in production and capacity utilization and decline in productivity.

5. There was a causal relationship between dumped imports of the investigated product and the material injury suffered by the domestic industry during the period of investigation.

In each case the anti-dumping duties were determined keeping in view, inter-alia, the dumping margin i.e. the amount by which is normal value exceeds its export price (Section 2 (f) of the Ordinance). Hence different amount of duties imposed on the products of different exporters.

(xi) P. T. Soirini Corporation Sorbitol Solution (PTSCSS) Review Case63

63 Report On Termination Of Review For Change Of Circumstances Of Anti-Dumping Duty Imposed On Dumped Imports Of Sorbitol 70% Solution From The Republic Of IndonesiaA.D.C No. 002/2003/NTC/SB/CR/07January __, 2007. Also available at http//www.ntc.gov.pk

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In a complaint from PTSCSS, in terms of Section 59 of the Ordinance for review for change of circumstances, the Applicant submitted that change has occurred in the following factors that justify for a review of the change decision of the Commission:

(i) Change in export and domestic prices;(ii) Insistence of customers in Pakistan on receiving Sorbitol ex-Serine;(iii) Inability of local manufacturer to meet the local demand; and(iv) Due to imposition of antidumping duty market share has been taken by other

exporters.

The Commission was required to calculate normal value and export price of the product under Review on the basis of domestic sales and export sales to Pakistan, during pendency of review, in terms of Section 59 of the Ordinance.

The Commission asked the applicant to provide detailed information along with documentary evidence relating to cost of production and export sales to Pakistan and domestic sales, in the prescribed format in the stipulated time period.

Despite repeated reminders for providing data/information on normal value and cost of production the applicant failed to provide the same. The Applicant sought extensions in time, but failed to provide the information in the prescribed format even during the extended period.

The Commission observed that it was not possible to analyze the request of applicant for change of circumstances under Section 59 of the Ordinance in absence of the required information therefore; the Commission terminated the review proceedings.

(xii) Tinplate Review Case64

64 Report on Conclusion of Sunset Review of Anti-dumping Duty Imposed on Dumped Imports of Tinplate Originating in and/or Exported from the Republic of South AfricaA.D.C No. 001/2002/TP/SA/SR/07July 05, 2008. Also available at http//www.ntc.gov.pk

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In response to the notice, as to why a review may not be undertaken (a mandated sunset review) it was represented by the domestic producer of tinplates, that the expiry of antidumping duty on Tinplate would likely lead to recurrence of dumping of product and injury to the domestic industry.

The Commissions findings are as follows:

1. The Exporter stopped exporting product under review to Pakistan after imposition of definitive anti-dumping duty. So, as and when antidumping duty was terminated there was likelihood that the Exporter would start dumping in Pakistani market;

2. During last five years, the Exporter exported secondary quality Tinplate to other countries at a price less than its normal value with dumping margin ranging from 1.31% to 43.41%. Thus, there is every likelihood of recurrence of dumping of the product under review if definitive anti-dumping duty imposed on the Exporter is terminated;

3. The Exporter increased its exports of secondary quality tinplate by more than 50% during last six years as against increase in its capacity utilization by only 4.34% during the same period. It has also sufficient maneuverability to reduce its export prices as it did in 2005-06 over 2004-05 by more than 10%;

4. The domestic industry is likely to suffer material injury due to the likely recurrence of dumping coupled with considerable volume of imports of the product under review;

In terms of Section 58(3) of the Ordinance, a definitive anti-dumping duty shall not expire if the Commission determines in a review that the expiry of such anti-dumping duty would likely to lead to continuation or recurrence of dumping and injury. In view of the analysis and conclusions with regard to likely recurrence of dumping, and material injury there is a need to continue imposition of definitive anti-dumping duty on imports of the product under review. Thus, the Commission decided to continue the imposition of definitive anti-dumping duty imposed @ 27.33% on Tinplate produced by the Foreign Producer and exported by the Exporter for another period of 5 years effective from July 22, 2007.

VII. Trade Remedies Against Subsidies

Countervailing Law

Concept of Subsidies and Countervailing Under the WTO Law

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The provisions of GATT 1994 on the use of subsidies have been elaborated by the Agreement on Subsidies & Countervailing Measures (SCM). The basic aim of these provisions is either to prohibit or to restrain the use of subsidies that cause adverse effects to the interest of the other member countries.65 This agreement does two things: it disciplines the use of subsidies and it regulates the actions countries can take to counter the effects of subsidies. Under this law a country can use the WTO’s dispute settlement procedures to seek the withdrawal of the subsidy or the removal of its adverse effects. Or the country can launch its own investigations and ultimately charge extra duty (known as “countervailing duty”) on subsidized imports that are found to be hurting domestic producers.66

The agreement defines two categories of subsidies prohibited67 and actionable68. It originally contained a third category; non-actionable subsidies. This category existed for five years, ending on 31 Dec, 1999, and was not extended. The agreement applies to agricultural goods as well as industrial products prior to 2003 agriculture subsides were exempt the “peace clause” from any challenge under the agreement it has been provided that, Where the use of permitted subsidies results in material injuries to the domestic industry in an importing member, the rules permit importing countries to take remedial measures which could take the form of countervailing duties on subsidized imports.69

One significant difference between dumping and countervailing situation is dumping occurs as a result of price discriminatory unfair trade practice adopted by the individual companies, while subsidization of goods results form the practices and policies in which a government unfairly confers an advantage or benefit to domestic producer or exporter involving financial contribution by the government or public body.70

In the first (anti dumping actions) case the government of the exporting country is not involved while in the second case it is the foreign government’s action which injects the element of unfairness in trade. To provide protection against unfair and illegal subsidies.

65 See R.K. Goupta, supra note 19 at 145.66 http://www.wto.org > trade topics > goods > subsidies and countervailing measures67 Subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. They are prohibited because they are specifically designed to distort international trade, and are therefore, likely to hurt other countries’ trade. They can be challenged in the WTO dispute settlement procedures where they are handled under an accelerated timetable. If the dispute settlement procedures confirms that the subsidy is prohibited, it must be withdrawn immediately. Otherwise, the complaining country can take counter measures. If domestic producers are hurt by imports of subsidized products, countervailing duties can be imposed. 68 In this category the complaining country has to show that the subsidies have an adverse effect on its interests. Otherwise, the subsidy is permitted. If the Dispute Settlement Body rules that the subsidy does not have an adverse effect, the subsidy must be withdrawn or its adverse effect must be removed. Again if domestic producers are hurt by imports of subsidize products, countervailing duties can be imposed.69 Id70 See R.K. Gupta, supra note 6 at 4.

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Main Features of Countervailing Ordinance, 2001.

Pakistan has promulgated the Countervailing Ordinance 2001. To gives effect to the provisions of Article VI71 and XVI72 of the General Agreement of Tariffs and Trade and to the Agreement on SCM. This law has established a framework for investigation and determination of illegal subsidies incorporated into goods imported into Pakistan and consequential injuries caused by them to the domestic products.73

Levy of Countervailing Duties

The Commission can impose countervailing duty on any imported product when it finds that an exporting country has paid or bestowed a subsidy upon the manufacturing / production of any investigated product (including subsidy on transportation of such product) and such subsidy has caused an injury to the like Pakistani product. A subsidy is deemed to exist if there is a financial contribution by the government of an exporting country including direct transfer of funds or forging of government revenues.

Determinate of Countervailing Duties

The Commission determines amount of countervailable subsidies in terms of any benefit conferred on a recipient. Normally the Commission calculates the most recent accounting year of the beneficiary for this purpose.

Criteria for Determination of Injury

The law mandates that a determination of injury by the Commission shall be based on positive evidence and shall involve an objective examination of number of factors detailed bellow:74 volume of subsidized imports and their effect on prices in domestic market for like products75; and consequent impact of subsidized imports

71 Article VI relates with Anti-dumping and Countervailing Duties, the term countervailing duty means a special duty levied for the purpose off setting any bounty or subsidy bestowed, directly or indirectly upon the manufacture, production or export of any merchandise.72 Article XVI relates with obligations on subsidies that means any form of income or price support, which operates directly or indirectly to increase exports of any product from, or to reduce imports of any product into its territory.73 Preamble of Countervailing Duties Ordinance, (2001). 74 See section 9 (1) Countervailing Duties Ordinance, (2001)75 See section 9 (1) (a) Countervailing Duties Ordinance, (2001)

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on domestic industry76. With regard to volume of any subsidized imports, consideration is given to the fact: whether there has been a significant increase in subsidized imports, either in absolute terms or relative to production or consumption in Pakistan.

As regard to effect of any subsidized imports on prices, consideration is given to the fact whether there has been significant price undercutting by the subsidized imports as compared with the price of a like product of domestic industry, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases which would otherwise have occurred, to a significant degree.

It is further provided that no one or more of above factors shall be deemed to necessarily give decisive guidance to the Commission in its determination.   

An examination by the Commission of an impact of subsidised imports on a domestic industry concerned may include an evaluation of all relevant economic factors and indices having a bearing on the state of the domestic industry.77  

The Commission has to satisfy itself that subsidized imports are causing injury. The consideration of a causal relationship between subsidized imports and injury to domestic industry shall be based on an examination by the Commission of all relevant evidence before it78

Threat of Material Injury

As far as a threat of material injury is concerned the Commission’s determination is to be the based on facts and not merely on allegations, conjectures or a remote possibility and any change in circumstances which would create a situation in which subsidy would cause injury must be foreseen and imminent79. While taking a decision in this regard. The Commission is required to take into considerate factors such as80:

The nature of subsidy or subsidies in question and any trade effects likely to arise there from81;  any significant rate of increase of subsidised imports into a domestic market indicating the likelihood of substantially increased imports;82 sufficient freely disposable capacity of an exporter or an imminent substantial increase in such capacity indicating the likelihood of substantially increased subsidised exports

76 See section 9 (1) (b) Countervailing Duties Ordinance, (2001)77 See section 9 (3) Countervailing Duties Ordinance, (2001)78 See section 9 (4) Countervailing Duties Ordinance, (2001)79 See section 9 (7) Countervailing Duties Ordinance, (2001)80 See section 9 (8) Countervailing Duties Ordinance, (2001)81 See section 9 (8) (a) Countervailing Duties Ordinance, (2001)82 See section 9 (8) (b) Countervailing Duties Ordinance, (2001)

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into Pakistan, account being taken of  the availability of other export markets to absorb any additional exports83; 

Appeal/Review - Any interested party may prefer an appeal to the appellate tribunal against an affirmative or negative final determination by the commission or any final determination pursuant to a review.84

VIII. Relevant Case Law

Bed Linen Case – EC85 – WTO Case

The question before the WTO panel was: whether refusal to accept price undertaking violated the requirement of exploring possibilities of other constructive remedies under Article 15 of SCM. It was observed that failure of the EC to respond in the fashion other than bare rejection, particularly once the desire to offer undertakings have been communicated to it constituted a failure to explore the possibilities of constructive remedies. Thus the sanctity of the SCM regime was reaffirmed.

Acrylonitrile Butadiene Rubber (NBR) Case - India86

The appellate authority made a fair assessment. The fair selling price on actual production was much higher than the fair selling price at normative capacity. The question of injury to domestic industry cannot be decided by assuming ideal conditions, but had to be decided on prevailing conditions through giving reasonable adjustments.

Dynamic Random Access Memory Semiconductors (DRAMS)87 - WTO Case

The United States and Korea each appealed certain issues of law and legal interpretations developed in the Panel Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from

83 See section 9 (8) (c) Countervailing Duties Ordinance, (2001)84 See section 32 Countervailing Duties Ordinance, (2001)85 See spura note 6 at 36886 See R.K. Goupta, supra note 6 at 37487 WT/DS296/AB/R, 27 June 2005 also see http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/WT/DS/296ABR.doc

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Korea (the "Panel Report").88 The Panel was established to consider a complaint by Korea against the United States regarding the imposition of countervailing duties ("CVDs") on DRAMS and memory models containing DRAMS89 from Korea, following an investigation by the United States Department of Commerce (the "USDOC") and the United States International Trade Commission (the "USITC").

The CVD investigation was initiated in response to a petition by American Company.90 The Korean companies investigated included Hynix. The Government of Korea (the "GOK") participated in the investigation as an interested party. The USDOC published a final subsidy determination on 23 June 200391, concluding that Hynix had received financial contributions from the GOK by virtue of, inter alia, the GOK's entrustment or direction of Hynix's creditors to maintain the financial viability of Hynix.92

The USITC in its final injury determination concluded that the domestic industry had been materially injured by reason of imports of subsidized DRAMS from Korea. On the basis of these subsidy and injury determination a CVD order was issued.

Before the Panel, Korea alleged that the United States acted inconsistently with its obligations under SCM Agreed GATT 1994.93

The Appellate Body inter alia up held the Panel’s finding that Korea's request for consultations did indicate the legal basis for the complaint against CVD order,

Modified the Panel's interpretation of Article 1.1(a)(1)(iv),

o Held that the Panel erred in failing to examine the USDOC's evidence in its totality, and requiring, instead, that individual pieces of evidence

88 WT/DS296/R, 21 February 2005.89 Hereinafter, these products will be referred to collectively as "DRAMS". 90 Notice of Initiation of Countervailing Duty Investigation: Dynamic Random Access Memory Semiconductors from the Republic of Korea, United States Federal Register, Vol. 67, No. 229 (27 November 2002), p. 70927 (Exhibit GOK-2 submitted by Korea to the Panel).91 Final Affirmative Countervailing Duty Determination, supra, footnote Error: Reference source notfound, amended as Notice of Amended Final Affirmative Countervailing Duty Determination: Dynamic Random Access Memory Semiconductors from the Republic of Korea, United States Federal Register, Vol. 68, No. 144 (28 July 2003), p. 44290 (Exhibit GOK-6 submitted by Korea to the Panel).92 Issues and Decision Memorandum, for Final Affirmative Countervailing Duty Determination, supra, footnote Error: Reference source not found, dated 16 June 2003 (the "Issues and Decision Memorandum"), pp. 61-62 (Exhibit GOK-5 submitted by Korea to the Panel). 93 Panel Report, para. 3.1.

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could establish entrustment or direction by the GOK of Hynix's creditors;

Based on these findings, the Appellate Body made no recommendations to the Dispute Settlement Body pursuant to Article 19.1 of the DSU. In nutshell of the US authorities were upheld. It would be relevant to note that the essence of the subsidy was a direction of the GOK to Hynix’s creditor to maintain the financial viability of this company. It did not involve any financial assistance by the Government to Hynix’s.

Automobile Parts Case94 - WTO Case

China appealed certain issues of law and legal interpretations developed in the Panel Reports, China – Measures Affecting Imports of Automobile Parts (the "Panel Reports").95 The Panel was established to consider complaints by the European Communities, the United States, and Canada regarding the consistency of certain measures imposed by China on imports of auto parts with the General Agreement on Tariffs and Trade 1994, TRIMs Agreement; (the "SCM Agreement"); and the Protocol on the Accession of the People's Republic of China to the WTO96

The measures challenged by the European Communities, the United States, and Canada (the “complainants” (before the Panel) or the “appellees” (on appeal)) in this dispute—the measures at issue—consist of three instruments enacted by the Chinese Government that affect auto parts imported into China. The measures inter alia, imposed a 25 per cent charge on imported auto parts used in the manufacture of motor vehicles in China, if the imported auto parts are "characterized as complete vehicles" according to specified criteria prescribed under the measures. The amount of the charge was equivalent to the average tariff rate applicable to complete motor vehicles that was higher than the average 10 per cent rate that applied to auto parts.97

94 WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R, 15 December 2008 also see http://docsonline.wto.org/GEN_viewerwindow.asp?http://docsonline.wto.org:80/DDFDocuments/t/WT/DS/342ABR.doc95 Complaint by the European Communities, WT/DS339/R, 18 July 2008 (the "EC Panel Report"); Complaint by the United States, WT/DS340/R, 18 July 2008 (the "US Panel Report"); Complaint by Canada, WT/DS342/R, 18 July 2008 (the "Canada Panel Report"). At its meeting held on 26 October 2006, the Dispute Settlement Body established, in accordance with Article 9.1 of the DSU, a single Panel pursuant to the requests of the European Communities in document WT/DS339/8, the United States in document WT/DS340/8, and Canada in document WT/DS342/8. (Panel Reports, para. 1.8) Following a request by the United States, the Panel issued its findings in the form of a single document containing three separate Reports, with common descriptive and analysis sections, but separate conclusions and recommendations for each complaining party. (Panel Reports, paras. 2.7 and 8.1) 96 WT/L/432.97 Specifically, the Panel found that China imposes a charge equivalent to the amount of the tariff rate applicable to complete vehicles, which is 25 per cent "on average". The Panel referred to China's Schedule of Concessions for the exact tariff rates applicable to products falling under tariff headings 87.02-87.04 and noted that, although the exact tariff rates under these tariff headings vary slightly, in particular at the eight-digit level, the parties had agreed that 25 per cent is the average tariff rate applicable to motor vehicles at

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The Appellate Body upheld the panel findings and recommended that the DSB request China to bring its measures, found to be inconsistent with the GATT 1994, into conformity with its obligations under that Agreement. Likewise in the respect of the complaint of USA.

The Appellate Body recommended that the DSB request China to bring its measures, found to be inconsistent with the GATT 1994, into conformity with its obligations under that Agreement. Similar was the determination in case of Canadian complaint.

Case Law on Countervailing Duties in Pakistan

No countervailing investigation has been initiated so far. However, given the practice on the part of newly industrializing countries to subsidize their industrial exports many case are expected to come up in the future. It is necessary to build up capacity both in the public and private sectors to cape with this kind of proceedings.

IX. Safeguard Measures

Concept of Safeguard Measures under the WTO Law

As stated earlier both Anti-dumping actions and Countervailing measures are there to counter unfair practices of a discriminatory nature and duties to off set such actions are according imposed on company and the product specific basis,98

Safeguard Measures on the other hand are targeted against increased imports, which are applied on a non-discriminatory basis on specified products irrespective of the resource of origin.99 The element of unfair trade is irrelevant. It is just possible upsurge in imports is due to the commitment of an importing country to liberalize the trade regime.

The Agreement sets out criteria for assessing whether serious injury is being caused or is threatened, to be caused. It also specifies the factors which must be considered while determining the impact of imports on the domestic industry. A safeguard measure is applied only to the extent necessary to prevent or remedy serious injury and to help the industry concerned to adjust.100 In principle, Safeguard Measures cannot be targeted as such at imports from a particular country. The WTO Safeguard Committee oversees the operation of the Agreement and is responsible for the surveillance of member countries commitments. Governments have to report

issue in this case. Similarly, the Panel noted that the parties had agreed that the tariff rate applicable to auto parts is 10 per cent "on average". (Panel Reports, para. 7.24 and footnotes 195 and 197 thereto)98 See R.K. Goupta supra note 6 at 5.99 Id100 http://www.wto.org > trade topics > goods > safeguard

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each phase of a safeguard investigation and related decision making the committee reviews all such reports. A Safeguard Measure should not last more than four years, although this can be extended up-to eight years, subject to a determination by competent national authorities.101

The Agreement also seeks to reaffirm faith in the process of liberalization of trade and reassure members of the WTO that any unwarranted developments can be dealt with in accordance with its provision102

Main Features of Safeguard Measures Ordinance

Pursuant to the provisions of Article XIX103 of the General Agreement on Tariffs and Trade (GATT), 1994 and agreement on the Safeguard measures. Pakistan has promulgated the Safeguard Measure Ordinance. This Ordinance sets out a framework for investigation and determination of serious injury or threat of serious injury caused by surge in import of products into Pakistan and for matters ancillary there to or connected there with.104

Determination of Serious Injury

For determination of serious injury or threat of serious injury arising out of increasing volume of imports the Commission, is mandated to consider all the relevant factors. These should be of an objective and quantifiable of nature having a bearing on the situation of domestic industry, including, but not limited to:105

(i) The rate and amount of the increase in imports of the investigated product, in absolute terms and relative to domestic production of like or directly competitive products;106

(ii) The share of the domestic market taken by increased imports of the investigated product;107

(iii) The impact of increased imports of the investigated product on the domestic industry, as evidenced by relevant indicators, including but not limited to, production, productivity, capacity utilization, sales, market share, profits and losses, and employment;108

101 Id102 Id103 Article XIX allows a country to “escape” from negotiated tariff reductions, if the increased imports can be shown to cause or threaten serious injury to domestic producers of competitive products. 104 See generally preamble of Ordinance, 2002.105 See section 4 Safeguard Measures Ordinance, (2002)106 See section 4 (i) Safeguard Measures Ordinance, (2002)107 See section 4 (ii) Safeguard Measures Ordinance, (2002)108See section 4 (iii) Safeguard Measures Ordinance, (2002)

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(iv) Factors other than increased imports of the investigated product which at the same time are causing serious injury or threat of serious injury.109

Threat of Serious Injury: In determining threat of serious injury, the Commission examines, in addition to the above factors, the following:110 

(i) The actual and potential export capacity of the country of production or origin of the investigated product;111 

(ii) Any build-up of inventories of the investigated product in Pakistan and in the country of exportation;112

(iii) The probability that imports of the investigated product will enter the domestic market in increasing quantities;113 

(iv)Any other factors deemed relevant by the Commission.114 

When serious injury or threat of serious injury is being caused by factors other than increased imports of the investigated product, such injury shall not be attributed to the increased imports.115

In light of the above determination of injury the commission shall impose a definitive safeguard measure for no more than four years, including the period of application of any provisional measure, unless it is extended (any extension pursuant to the Ordinance shall not exceed ten years).116

The intention is not to permit adoption of safeguard measure just on an allegation. Utmost care is enjoined to be exercised best the WTO system with its liberal orientation should be defeated.

X. Relevant Case Law

109 See section 4 (iv) Safeguard Measures Ordinance, (2002)110 See section 5 Safeguard Measures Ordinance, (2002)111 See section 5 (i) Safeguard Measures Ordinance, (2002)112 See section 5 (ii) Safeguard Measures Ordinance, (2002)113 See section 5 (iii) Safeguard Measures Ordinance, (2002)114 See section 5 (iv) Safeguard Measures Ordinance, (2002)115 See section 6 Safeguard Measures Ordinance, (2002)116 See section 32 Safeguard Measures Ordinance, (2002)

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Carbon Black Case117 – Indian Case

In the carbon black case it was observed that increased imports entering at declining prices coupled with the fact that surplus capacities were set up abroad-was indicator of imminent serious injury and had in law caused threat of serious injury to domestic producers of carbon black.

Footwear Case 118 – WTO Case

EC challenged safeguard measures taken by Argentina to limit imports of footwear. Action of Argentina was sustained by the Panel which inter-alia based its decision on the express omission of the words “unforeseen developments” on the agreement on safeguard. The appellate body reversed the Penal conclusion that safeguard measures imposed after entry into force of the WTO Agreement which meet the requirements of the Agreement on Safeguards necessarily “satisfy” the requirements of Article XIX of the GATT 1994, as well as the Panel’s finding that the Uruguay Round negotiators “expressly omitted” the clause – “as a result of unforeseen developments and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions …” from Article 2 of the Agreement on Safeguards.

The Appellate Body in this case set a standard that “unforeseen developments” meant developments which must have been unexpected or were not foreseen, at the time of incurring the obligation, which is distinguishable from unforeseeable i.e. which cannot reasonably be expected to be foreseen.

Fresh, Chilled and Frozen Lambs Case119– WTO Case

The Appellate Body in US Safeguard Measures on imports of fresh, chilled and frozen lambs meat form New Zeeland and Australia considered whether the panel erred in finding that the US acted inconsistently with the Article XIX: 1(a) of the GATT 1994. By failing to demonstrate as a matter of fact, the existence of unforeseen developments. The appellate body observed that the US had failed to demonstrate as a matter of fact the existence of unforeseen developments as required by Article XIX: 1(a) of the GATT 1994.

Wheat, Wheat Flour and Edible Oils Case120 – WTO Case

117 See R.K. Goupta supra note 6 at 58,59118 See R.K. Goupta ,supra note 6 at 30,34119 US – Lamb WT/DS 177 & 178 /AB/R adopted on 16 May 2001. 120 Wheat, Wheat Flour and Edible Oils Case – Chile WT/DS 207/R.

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In the Chilean Safeguard Measures on wheat, wheat flour and edible oils case, the panel observed that existence of circumstances constituting unforeseen developments must be demonstrated as a matter of fact. In conclusion it was further observed that Chile failed to demonstrate the existence of unforeseen developments, as required by the Article XIX of GATT 1994.

Case Law on Safeguard Measures in Pakistan

There is only one case on Safeguard Measures with regard to alleged surge in imports of footwear into Pakistan that was initiated on June 2005 but the proceedings were terminated.

XI. Need for Review of Trade Remedial Laws

According to recent reports there is a growing feeling among business community for review of trade remedial laws in general and the Antidumping Duty Ordinance, 2000 in particular by inserting in it a public or community interest clause, as it is called in the European Union (EU) to block application of punitive duty, if it is found hurting exports.121

Usually, countries invoke antidumping laws seek to restrict the inflow of low priced finished goods to protect their domestic industries--- and not raw material. “But our law is allegedly being used to restrict imports of low-priced industrial raw material in the name of preventing injury to its local manufacturers rather than stopping the flooding of the domestic market with finished imported goods. According to yarn producer and an expert on WTO laws.122 “A Majority of the Commission rulings have been given against the foreign suppliers of raw materials for different value added industries. That makes a huge case for undertaking a comprehensive review of the working of the Commission as well as the antidumping law that was promulgated without consulting the stakeholders.,123 Many entrepreneurs are of the view that punitive duties should be imposed only under the oversight of a ministerial committee with powers to decide if the action is actually in the country’s economic interest.124

There appears to be a good to review the issue in-depth. It would be order of a cost benefit analysis is conducted in a more transplant manner before imposition antidumping and / or other trade remedial measures order to introduce a balance between the benefit that would be derived by local companies that are in effect a domestic intermediate industry and the cost that would accrue to the domestic value adding and re-exporting industry as well as to the economy and all others affected, including domestic consumers.” A cost benefit analysis according to exporters

121 N. Jamal, Down Economics & Business Review “Revising the antidumping laws” February 16-22 2009 . also available http//www.kbsc.com.pk .122 Id 123 Id 124 Id

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should also take into account the consequent loss of revenue by way of lost import duties.

The domestic antidumping laws of many countries contain provision for public or community interest. Pakistan itself has twice been a beneficiary of the EU Community Interest. In some cases, including those of import into the EU of grey fabric, antidumping duty on Pakistani exports was not imposed. It was because grey fabric is the raw material for its value-added industry. But when the issue of dumping bed linen was raised, the EU didn’t take long to penalize Pakistan.125

The insertion of public interest clause in the domestic law becomes all the more important because foreign suppliers don’t bother to contest allegations of dumping in Pakistan as “our imports constitute negligibly small part of their total sale volumes”.

XII. Conclusion and Recommendations

Given the legitimate interest of every country to protect its industries and equally

important interest to maximize welfare from international trade a system has been

devised in the form trade remedy laws. But for these laws there cannot be a viable

liberal trade dispensation in the world. Thus the importance of Pakistani laws on

Anti-Dumping, Subsidies and Countervailing and Safeguard Measures is self

evident. It is very important for Pakistan as especially in the context of a globalized

world, to manage the system of trade remedial laws in an objective impartial and

transparent manner and thereby to win the trust of the stakeholder both domestic

and foreign.

Followings recommendations are commended for consideration of policy makers.

125 Id

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o There is need for revisiting antidumping laws as suggested in Section XI

above.

o There is a need to simplify the procedure for filing petitions and investigation

in trade remedy laws.

o Issue of lack of expertise and resources should be properly addressed both by

public and private sectors.

o There is a need to strengthen the relationship between business community

and government in order to have a more effective system of trade remedial

laws.

o Workshops and seminars for building capacity should be regularly conducted

at national and international levels in collaboration with WTO secretariat,

UNCTRAL, Chamber of Commerce and Industry and Trade Development

Authority of Pakistan.

o Trade remedy system should be operated in an open and transparent manner.

The transparency and due process obligations should be further refined.

o Avoiding the unwarranted and necessary use of trade remedy instruments

should be the practice.

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Matrix of Trade Remedy Laws and Mechanics of Protecting Domestic Industries

Statute Focus of Proceedings

Criteria for Action Mechanics of Response

Legal Responsibility

Anti-Dumping Ordinance, 2000

Increasing imports sold below cost of production or below price in exporting country market

a) A significant rate of increase of imports into domestic market causing injury to the domestic industry or threat of material injury .

b) Substantial increase in capacity of an exporter to the market in Pakistan.

c) Imports have a significant depressing or suppressing effects on prices-in Pakistan.

Application submitted by the complainant to Commission Or Suo Motu action by Commission. It established leads to imposition of duties.

Commission of Pakistan is to consider the following aspects with regard to:a) Volume of dumped

imports.b) Effect of dumped

imports on prices in domestic market for like product.

c) Consequent impact of dumped imports on domestic manufacturers of such products.

Countervailing Duties Ordinance, 2001

Injury and threat of injury to domestic industry from subsidised imports.

Manufacturing or export subsidies Application presented by the complainant party to Commission Or suo motu action by Commission and countervailing duties are imposed. .

Determination of injury by Commission based on concrete evidence and objective examination of

a) Volume of subsidized imports.

b) Effect of subsidized imports on prices

SOURCE – Relevant provisions from Anti-dumping, Countervailing and Safeguard Measures Ordinances and modified by authors for easy understanding of academia.

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domestic market for like products.

c) Consequent impact of subsidize imports on domestic industry.

Safeguard Measures Ordinance, 2002

Increasing Imports Injury or threat of injury to domestic industries due to increasing imports.

Application presented to Commission. Or suo motu action by Commission.

a) Commission to take protective action after by examining the rate and amount of an increase in imports of investigated products.

b) Determining consequent impact on various sectors of economy.

(Actual and potential exports capacity of country of production / origin and probability of entrance of imports, inter-alia, relevant factors.)

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