Chapter 11

Regulating Import Competition and Unfair Trade

 

I. Double Edged Sword of Import Regulation

 

II. Safeguards against injury

          A. GATT Escape Clause

          B. GATT 1994 Agreement on Safeguards

                   1. Limits on use of safeguards

                   2. Trade compensation

                   3. WTO Committee on Safeguards

 

Argentina:  Safeguard measures on imports of footwear (WTO app 1999)

          Argentina increased duty on imported shoes from 35% to 200%.  Made an exception for MERCOSUR countries (ie South American trade zone countries).  

          EC argued (1) no sufficient showing for safeguards; (2) can’t discriminate; (3) surge must be from “unforeseen” developments

          App body ruled for EC on all counts.

          C. Safeguards against injury under US law

                   1. Standard for import relief

                   2. ITC safeguard investigations

                   3. Available remedies under US law

          D. Trade adjustment assistance

                   1. Federal assistance to firms

Harley Davison, US ITC 1983

          Harley faced big downturn in its sales during recession of early 80s. At same time, Honda and Kawasaki were increasing market share and sales.  Some Hondas and Kawasakis were built in USA. 

          ITC recommended safeguard relief.  It said that Harley did not have to sort out recession from competition problems.  Five year plan from 45, 35, 20, 15 and 10 on duties in addition to 4.4% ad valorem rate.

 

          E. US steel industry: a case study in protectionism

 

III. Unfair import laws: dumping and anti-dumping duties

          A. Economics of dumping

          B. GATT 1994 Antidumping Agreement

                   1. Calculating the dumping margin

                   2. Calculating the export price

                   3. Calculating the normal value of like products in exporting or producing country

                   4. What is a “like product”

Chilean Salmon, 266 F.3d 1372 (Fed Cir. 2001)

          US salmon producers accused Chilean company of dumping salmon at low prices in US.  Court faced question of how to calculate the antidumping duty under the statute.  Question of whether to count only “premium grade” or also “super premium” grade.  If not, then margin would be 1.21%, if so, then 2.23%.

          Court accepted finding of ITA that grades were really the same.

 

                   5. Adjustments to value and price

                   6. Market viability test and constructed value

                   7. Sales below cost

                   8. Level of trade problem

          C. GATT dispute settlement in dumping cases

          D. Dumping and non-market economies in transition

          E. Market oriented industries

Chinese Aspirin, ITA (2000)

          Chinese companies accused of dumping aspirin.  French company with US factory filed complaint.  Issue was whether Chinese companies acted independently of the government or not.  If so, competition rules applied and they were probably in compliance.  Court found them not to be government controlled, and gave them separate anti dumping duty rates.

          Epilogue.  French company closed factory in US, and moved to China.

 

IV. Unfair Import Laws: Subsidies and countervailing duties

          A. GATT 1994 Agreement on Subsidies and Countervailing Measures

          B. Definition of a subsidy

          C. Prohibited subsidies

          D. Domestic subsidies

                   1. Remedies for adverse effects on domestic subsidies

                   2. What makes a subsidy specific

                   3. Upstream subsidies

          E. Non-actionable or socially beneficial subsidies

          F. Subsidies and state owned enterprises

                   1. Exports from newly privatized enterprises

European Steel, (WTO 2002)

          Euro steel companies were mostly state owned at one time.  Later, they were privatized.  Question was whether subsidies given before privatization should count.  US law had said if subsidy went to “same person,” (ie on privatization the company remained the same entity) then the subsidy counted.  

          WTO said that does not work.  Look at case by case basis.  Effect of subsidy should count for life of assets.  However, that can be rebutted if company is sold at arms length for fair market value.

                   2. When a remedy becomes a subsidy: Subsidy offset act

                   3. Material injury in US unfair import cases