Trade Rules Negotiations: The Way Forward

1. RULES NEGOTIATIONS: WAY FORWARD ICRIER 6 April 2006 Abhijit Das, Senior Trade Officer, UNCTAD India Programme

2. Rules Negotiations: What is cooking • Procedural improvements in anti-dumping investigation • More precision in dumping margin determination • Improvements in injury analysis and causality • Tightening of disciplines on reviews • Expeditious dispute resolution • Expand prohibited subsidies • Acceptance of specific methodologies for determination of benefit • Harmonise anti-dumping and cvd investigation procedures • Improvements in cvd investigation procedure • Improvements in definition of de facto export subsidy • Disciplines on fisheries subsidies • Will the final dish be delicious for all or even for any one country?

3. Overall balance in Rules negotiations • Australia, Canada, EU, Egypt, FANs, India, New Zealand and US are active in Rules negotiations. • But, US and Japan likely to be the key players in determining the ambition level and overall balance in the Rules Negotiations: their position would be crucial in deciding the way forward

4. US interests in ADA negotiations • Overwhelmingly defensive interest • A few issues in which it has a positive interest include: • Rules on anti-circumvention • Improvements in the provision on New Shipper Review • Improvement in the standard of review provision

5. Japan (FANs) interest in ADA negotiations • Offensive interest in almost all provisions of the ADA • Detailed proposals made on increasing precision and predictability in • initiation • dumping margin determination • defining material injury • injury evaluation • causality • mandatory application of lesser duty rule • public interest • reviews, particularly sunset reviews • due process and investigation procedure • Defensive interest mainly in anti-circumvention and NSR

6. ADA negotiations: can interests be balanced • Given the extensive interest of Japan (FANs) in amendments to the ADA, US may have to give up more than what it is likely to gain in ADA negotiations • In ADA negotiations difficult to achieve balance between interest of Japan (FANs) and US

7. ADA- US interests: Anti-circumvention • US seeks to address two situations of circumvention which undermine effectiveness of trade remedy rules through : • minor alteration in the product • replacement of trade in the product by trade in its sub-components which are assembled in the importing country or in a third country • US proposal – impose anti-dumping duty / cvd on a product not subject to original investigation if any of the above two situations of anti-circumvention arises

8. Anti- circumvention: How do others view it • FANs - Anti-Circumvention is a complex issue and the Informal Group was not able to reach a conclusion even on the basic question of what constitutes circumvention • Legitimate right of business to change their source of supply. • Difficult to differentiate between the real circumvention and legitimate business behavior. • With increasing globalization, fast development of products using new technology, new products can be developed very fast. • Need to exercise caution, otherwise anti-circumvention provision could lead to further abuse of anti-dumping measures • Canada and EU have a nuanced position and look forward to the issue being addressed by NGR. • India has faced problems relating to circumvention, but has opposed rules

9. Anti- circumvention: Way forward • US and EU already apply anti-circumvention provision – not challenged so far under DSU • To ensure predictability and more fair rules, may be better to include anti-circumvention provision in the ADA • Need to clearly define the rights and obligations under anti-circumvention proceedings • Need to be more precise on when anti-circumvention provision can be invoked • Limited duration for anti-circumvention duty remaining in place

10. ADA- US interests : NSR • US envisages a two-step approach for NSR • New concept of threshold determination requiring the parties to establish that: • they are not related to any of the parties currently subject to duties. • they are engaged in bona fide sales to the importing country. • If positive threshold determination, then no duty would be levied during the review • NSR would not be on an accelerated basis

11. NSR: How do others view it • Most of the countries opposed to US proposal • ‘bona fide commercial sales’ will be subject to higher and strict standards • deletion of the need for accelerated review against the interest of genuine NSRs

12. NSR: Way forward • In certain cases India has also faced problems similar to that faced by US • Need to retain the requirement of accelerated review • The requirement of ‘bona fide commercial sales’ could be made more precise for preventing abuse and protecting the rights of exporters

13. ADA – Japan (FANs) interests: Sunset reviews • Initial proposal of FANs sought termination of anti-dumping duties at the end of the 5-year period.

14. Sunset reviews: How do others view it • Other countries have underscored the need for strengthening disciplines on SSR • Illustrative list of parameters suggested for the ‘likelihood’ test • Major users opposed to automatic termination of anti-dumping duties at the end of the 5-year period

15. Sunset Reviews: Way forward • ‘Likelihood’ test is extremely subjective, if not outright speculative • Suggested list of parameters for the ‘likelihood’ test has limited scope for improving the situation. • Recent proposal from Japan provides the middle ground- • Automatic termination of anti-dumping duties after x no. of years • Initiate SSR before the end of 5th year on receipt of a well documented petition by or on behalf of the domestic industry • Clearer standards for ‘likelihood’ test

16. ADA- Japan (FANs) interests: LDR • India has joined the FANs on this issue • Mandatory application of LDR proposed • NIP to be calculated using one of the following: • Current price of the like product produced by domestic producers • The price of the domestic like product during a period prior to being affected by dumping • Price of non-dumped imports of the product under investigation • Constructed price method

17. LDR: How do others view it • Following strong objections by US and Egypt : • Article 9:1 allows Members discretion to impose duty up to dumping margin • How to quantify injury margin on the basis of one injury factor (price) • Imposition of LDR may lead to duty absorption • Implementing LDR will be resource intensive • Implementing LDR will be complex • Other countries implementing LDR appear keen only to preserve their existing practise

18. LDR: Way Forward • Limit mandatory application of LDR to original investigation • Provide flexibility to the country to notify a preferred methodology to be followed, with reasoned explanations in cases of deviation • If need be, expand the category of permitted methodology to include other practices not covered

19. Subsidies Issues – US interest: Expanding Prohibited Subsidies • US has proposed expanding the list of prohibited subsidies to include ‘intrusive govt. interference in the marketplace’ • Art. 6.1 subsidies • Subsidies which have forestalled industry restructuring • Creation and maintenance subsidies – steel sector specified.

20. Expanding Prohibited Subsidies: How do others view it • Nuanced support from certain developed countries • Generally opposed by developing countries as it would severely restrict policy space

21. Expanding Prohibited Subsidies: Way Forward • As the US proposal is not well developed, is it a mere straw man to be demolished after concessions have been extracted? • Would introduce disciplines on capacity – new element in the ASCM context • Clear definition of creation and maintenance subsidies needed. • Prohibition should not apply to developing countries

22. Fisheries Subsidies: Important element for overall balance in Rules Negotiations • Disciplines on fisheries subsidies appear essential for achieving overall balance in Rules Negotiations- US on the offensive and some of the FANs (Japan, Chinese Taipei and Korea) on the defensive.

23. Fisheries Subsidies: Who has what interest • US, New Zealand, Australia etc are seeking general prohibition on fisheries subsidies – top down approach • Japan, Korea etc. resisted negotiations. Appear willing to live with bottoms up approach • Brazil has sought to link disciplines with fisheries patently at risk

24. Rules negotiations: India’s interest • Need to tread a finely balanced path in ADA negotiations with tilt towards export interest • In subsidies need to seek improvements in provisions on: • export competitiveness • reasonable and effective verification system for duty concessions • In fisheries subsidies protect: • Interests of small fishermen • Support for deep sea fishing • Inland fishing

25. Rules Negotiations • No overall winner • Most countries would have to give up some issues of their crucial interest • Domestic industry and DGAD need to be prepared to implement improved procedural and transparency requirements • There could be some surprises towards the end. • Need to visualise end game and be adequately prepared for it

26. THANK YOU