CONTINGENT TRADE REMEDIES BASIC PRINCIPLES and RULES April 2014

1. CONTINGENT TRADE REMEDIES BASIC PRINCIPLES and RULES April 2014 Judith Czako Counsellor, Rules Division WTO Secretariat

2. Fundamental WTO principle – mutual opening-up of Members to increased international trade • Why? • economic benefits of trade • How? • Market access (tariff bindings) • Ban on quantitative restrictions • Non-discrimination (MFN and national treatment)

3. Potential problemsfor domestic competitors • Allow, under certain circumstances, the application of «contingent trade remedy measures» to imports • Allows Members to depart from the fundamental principles of the GATT system

4. What are the measures? • ANTI-DUMPING measures • COUNTERVAILING measures • SAFEGUARD measures

5. BASIC PRINCIPLES IN WTO AGREEMENTS • Procedural rules • Especially for AD and CVD – fewer specific rules for Safeguard investigations

6. BASIC PRINCIPLES IN WTO AGREEMENTS • Substantive rules for Determinations • Existence of contingency: • dumping, subsidy, or increased imports • Injury • degree and type of injury • Causal link

7. DETERMINATIONS NECESSARY FOR ACTION • Dumped imports cause injury to domestic industry • Subsidized imports cause injury to domestic industry • Increased imports cause serious injury or threat thereof to domestic industry

8. The conditions governing the application contingent trade remedy measures are not discretionary. • ALLof the rules and principles set out in the relevant WTO Agreements must be respected in each case

9. Domestic legal basis • Measures taken unilaterally by the government of the importing Member, and applied at the border • AD/CVD - Not required to have national law • BUT, must respect Agreements • almost impossible without domestic legislation • Safeguards - must have previously published procedures before taking action

10. Anti-dumping measures • Anti-dumping duties on future imports concerned • general rule: different rate for each exporter • Price undertakings • exporters individually undertake to raise prices to eliminate dumping or injury

11. Countervailing measures • Countervailing duties on imports concerned • general rule: different rate for each exporter benefitting from subsidies • Price undertakings • exporters individually undertake to raise prices to eliminate subsidy benefit or injury • Exporting government undertaking • eliminate or limit subsidy, or take measures concerning effects of subsidy

12. Safeguard measures • Form unspecified • Tariff increase above bound rate • Quota • Tariff quota • Other possibilities? Must choose most suitable measure

13. Safeguard measures • Applied to whom? • MFN – measures apply to all imports irrespective of source • limited exception for small developing suppliers

14. Definitions – Dumping • Introduction of a product into the commerce of another country at less than its «normal value» • international price discrimination

15. Definitions – Subsidy • A financial contribution • By a government or any public body • That confers a benefit • That is specific

16. AD/CVD Definitions – Like Product • Domestic product identical to the imported product under investigation OR, if no identical product, • Domestic product having characteristics closely resembling those of the imported product under investigation

17. SAFEGUARDS Definitions – Like or Directly Competitive Product • Undefined in text • Generally accepted to be broader definition than in AD and CVD cases

18. AD/CVD Definitions – Domestic industry • Domestic producers as a whole of the product that is like the product concernedOR • Producers whose collective output constitutes a major proportion of the total production of the like product

19. SAFEGUARDS Definitions – Domestic industry • Domestic producers as a whole of the like or directly competitive products operating within the territory, OR • those whose collective output of the like or directly competitive products constitutes a major proportion of the total production of those products

20. DOMESTIC INDUSTRY • Determination of who is in the domestic industry determination controls: • Who may request AD/CVD investigation • Whose data are considered in injury analysis

21. AD/CVD Definitions – Three forms of injury • «material injury»: Present/existing injury to a domestic industry • «threat of material injury»: Injury that has not taken place yet but is imminent; and • «material retardation» of the establishment of a domestic industry

22. AD/CVD Definitions – Threat of Material Injury • Clearly imminent • Based on facts: not allegation conjecture or “remote possibility”

23. AD/CVD Definitions – Material Retardation • NO factors, criteria, or other guidance in text regarding determination of material retardation of the establishment of a domestic industry

24. SAFEGUARDS Definitions – Two forms of injury • Serious injury • defined as significant overall impairment in the position of the domestic industry • serious injury generally accepted to be worse than material injury in AD and CVD cases

25. SAFEGUARDS Definitions –Two forms of injury • Threat of serious injury • defined as serious injury that is clearly imminent • Based on facts, not allegation, conjecture or remote possibility

26. SAFEGUARDS • material retardation is NOT a form of injury that can be the basis for a safeguard measure

27. Definitions – Causal link • Causal linkbetween importsANDinjury • a genuine and substantial relationship of cause and effect between imports and injury, based on objective examination of evidence    • injury caused by factors other than the imports must not be attributed tothe imports

28. Determination of DumpingNormal value • Generally, price of like product when sold in the exporting country • i.e., exporting country domestic market price

29. NORMAL VALUE • the comparableprice • in the ordinary course of trade • for the like product • when destined for consumption in the exporting country

30. EXCEPTIONS TO USE OF DOMESTIC PRICE • no salesof the like product in the ordinary course of trade, OR • sales do not permit a proper comparison • a particular market situation • low volume of sales in the exporting country (<5% of investigated imports)

31. NO DOMESTIC PRICE? Two alternatives: Export price to a third country Constructed value in the exporting country no hierarchy between these two

32. EXPORT PRICE TO THIRD COUNTRY • the comparable price • of the like product • when exported to an appropriate third country • provided that this price is representative

33. CONSTRUCTED NORMAL VALUE constructed substitute for domestic market price in exporting country • Cost of production in country of origin • plus reasonable amount for administrative, selling and general costs • and reasonable amount for profits

34. EXPORT PRICE • The price of the exported product in the market of the importing country

35. ALTERNATIVES • If no export price OR • export price unreliable due to • association or • compensatory arrangement between the exporter and the importer

36. CONSTRUCTED EXPORT PRICE • BASIS: • Price of first sale to an independent buyer OR • other reasonable basis

37. Establishing the existence of dumping • Compare the normal value and export price • Dumping exists where export price is less than normal value E.g.: Normal value: €25 per kg less export price: __€20 per kg Difference (positive) € 5 per kg Dumping margin of 25% (on basis of EP)

38. Fair comparison  • Compare prices at the same level of trade, normally ex-factory • as nearly as possible at the same time • Differences which affect price comparability must be accounted for – “adjustments” of “allowances”: • E.g., Conditions/terms of sale, quantities, physical characteristics, taxation, and any others demonstrated to affect price comparability

39. NON-MARKET ECONOMY • Special case: where Government role • in setting prices results in prices in exporting country that do not reflect market situation • in establishing input prices precludes constructing a normal value

40. NON-MARKET ECONOMY • No methodology provided • Broad discretion

41. Many sales, one dumping margin • Weighted average normal value of all transactions to weighted average export price of all transactions • Transaction normal value to transaction export price • weighted average normal value of all transactions to transaction export price

42. Establishing the existence of subsidy • Examine individual government programmes/actions alleged to be subsidies, under definition in Agreement

43. FINANCIAL CONTRIBUTION • Direct transfer of funds, e.g. • Grants • Loans • Equity infusions

44. FINANCIAL CONTRIBUTION • Potential direct transfer of funds, e.g. • Loan guarantees

45. FINANCIAL CONTRIBUTION • Foregone or uncollected Government revenue, e.g. • tax credits or • import duty exemption on machinery

46. FINANCIAL CONTRIBUTION • Provision of goods or services other than general infrastructure • Purchase of goods • Income or price support

47. GOVERNMENT OR PUBLIC BODY • government or public body makes financial contribution OR • entrusts or directs a private body to make financial contribution • within the territory of the Member

48. BENEFIT • Advantage to recipient • Compared to obtaining same financial contribution in marketplace

49. SPECIFICITY • Principle - Specific financial contribution distorts resource allocation which can lead to trade distortion

50. Determine amount of subsidy • Little guidance • benefit to recipient, not cost to government • method of calculating benefit in national legislation or regulations • application must be explained in each case