Level of trade refers to the stage of transaction, e.g., whether the sale is to retailers, to local distributors, or to regional distributors. If levels other than ex-factory level have entered into the calculations, they will have to be reduced to ex-factory level by making suitable adjustments.
Normal method for comparison of prices
After having made all the relevant calculations, the actual comparison will normally be made according to the following methods:
- a weighted average normal value will be compared with a weighted average of the prices of all export transactions
- the normal value will be compared with the export price on a transaction-to-transaction basis
This parity in comparison is important as it ensures a degree of fairness. If the average normal value were to be compared with the export prices in individual transactions, it will generally result in a higher dumping margin. In averaging the export prices of various transactions, the higher export prices get balanced with the lower prices and, the margin becomes smaller.
A weighted average normal value may be compared with the export prices of individual transactions when there is a pattern of export prices differing significantly among purchasers, regions or time periods. To prove a pattern in respect of regions, for example, it will be necessary to show that the prices of products exported to a particular region in the importing country are usually different from the prices for other regions.
Determination of Injury
In order to impose anti-dumping duties, the investigating authorities of the importing Member must make a determination of injury.
Coverage of injury: Injury covers material injury to a domestic industry, or threat of material injury to a domestic industry, or material retardation of the establishment of a domestic industry.
Elements of analysis: To confirm the determination of injury, a Member must examine the volume of dumped imports either in absolute terms or relative to production or consumption in the domestic industry, and price effects of dumped imports on the domestic market such as significant price undercutting by the dumped imports as compared with the price of a like product of the importing Member or price depression or prevention of price increase of domestic like products evaluate the impact of dumped imports on the domestic industry, such as actual or potential declines in sales, profits, output, market share, productivity, return on investment, utilization of capacity, actual or potential effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investment
A demonstration based on an examination of all relevant evidence must be given to show that there is a causal relationship between the dumped imports and the injury to the domestic industry. Apart from dumping, other factors such as changes in the pattern of demand or developments in technology may cause injury to domestic producers. Injury caused by such factors must not be attributed to dumped imports.
Procedures for Imposition of Anti-dumping Duties
Initiation of investigations: Generally, investigations should be initiated on the basis of written request submitted by or on behalf of a domestic industry, stating evidence of dumping, injury, and causality, as well as information regarding the product, industry, importers, exporters, and other matters.
Investigation: collection of evidence, use of sampling techniques, confidentiality of sensitive information, transparency of proceedings, on-the-spot investigations, use of best information available, etc. Investigations should be completed within one year, and in no case more than 18 months after initiation.
All interested parties should be given an opportunity to present evidence and to comment.
Anti-dumping investigations are to end immediately in cases where the authorities determine that the margin of dumping is de minimis, i.e., less than 2% of the export price, or that the volume of dumped imports is negligible, i.e., less than 3% of the imports of the like product in the importing country individually and no more than 7% collectively.
Provisional measures: Provisional measures preferably in the form of a security through cash deposit of bond may be applied if there is a preliminary affirmative determination of dumping, injury and causality 60 days after initiation of an investigation. The time limit is usually 4 months, with a possible extension to 6 months. The period of provisional measures for a Member imposing anti-dumping duties lower than the margin of dumping is 6 and 9 months respectively.
Price undertaking: In the case of preliminary affirmative determination of dumping, injury and causality, undertaking from exporters may be acceptable by revising prices to remove the effects of dumping or by ceasing exports at dumped prices to the area in question.
Imposition of anti-dumping duties: Members should collect duties on a non-discriminatory basis on imports from all sources found to be dumped and causing injury, except with respect to sources from which a price undertaking has been accepted. Moreover, the amount of the duty collected may not exceed the dumping margin, although it may be a lesser amount.
Retroactive duty: Anti-dumping duty can be imposed on products imported up to 90 days prior to the date of application of provisional measures in the following cases:
- there is a history of dumping causing injury
- the importer was, or should have been, aware that the exporter practices dumping which would cause injury
- the injury is caused by a massive volume of dumped imports in a relatively short time, which is likely to seriously undermine the remedial effect of the prospective final anti-dumping duty.
Duration and termination: The ‘sunset’ requirement establishes that dumping duties shall normally terminate no later than 5 years after first being applied, unless a review investigation prior to that date establishes that expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury. This 5-year ‘sunset’ provision also applies to price undertakings.
Article 12 sets forth detailed requirements for public notice by investigating authorities of the initiation of investigations, preliminary and final determinations, and undertakings. The public notice must disclose non-confidential information concerning the parties, the product, the margins of dumping, the facts revealed during the investigation, and the reasons for the determinations made by the authorities, including the reasons for accepting and rejecting relevant arguments or claims made by exporters or importers.
Members may challenge the imposition of anti-dumping measures, in some cases may challenge the imposition of preliminary anti-dumping measures, and can raise all issues of compliance with the requirements of the Anti-dumping Agreement, before a panel established under the Dispute Settlement Understanding.
But, the role of the panel is very much restricted in the field of anti-dumping. It will only determine whether the authorities of the importing Member established the facts properly and whether they evaluated the facts in an unbiased and objective manner.
When the domestic industry of a third country (also an exporting country) suffers injury because of the dumping practices of the enterprises of a Member in an importing Member country, the third country Member has to request the importing country Member to conduct an investigation and to take further action for anti-dumping measures. The decision whether to initiate and proceed with an investigation rests with the importing country.
1. What is Dumping and how is it countered by countries?
2. Outline the Procedure of Imposing Anti-Dumping Duties.
3. Which measures may count as subsidies?
4. How are subsidies treated in WTO system?
5. Give examples of “unfair trade practices”.
6. Does the GATT allow unilateral action against “unfair trade practices”?
1. John H. Jackson, The World Trading System: Law and Policy of International Economic Relations (2nd ed., Cambridge, MA: MIT Press, 1997). p. 247-277
2. Jackson/Davey/Sykes, 666-756, 757-814, 815-843.
Trade liberalization, and even economic growth, are not ends in themselves. The ultimate aim of Government is to promote human welfare in the broadest sense, and trade policy is only one of many instruments Governments use in pursuing this goal. But trade policy is nevertheless very important, both in promoting growth and in preventing conflict. The building of the multilateral trading system over the past 50 years has been one of the most remarkable achievements of international cooperation in history. The system is certainly imperfect—that is one of the reasons why periodic negotiations are necessary—but the world would be a far poorer and more dangerous place without it.
In January 2000, WTO Member Governments started a new round of negotiations to promote the progressive liberalization of trade in services. The GATS agreement specifically states that the negotiations “shall take place with a view to promoting the interests of all participants on a mutually advantageous basis” and “with due respect for national policy objectives and the level of development of individual Members”. The pace and extent of these negotiations are set by the WTO’s 149 Member Governments themselves according to their different national policy priorities.
It is impossible for any country to prosper today under the burden of an inefficient and expensive services infrastructure. Producers and exporters of textiles, tomatoes or any other product will not be competitive without access to efficient banking, insurance, accountancy, telecoms and transport systems. In markets where supply is inadequate, imports of essential services can be as vital as imports of basic commodities. The benefits of services liberalization extend far beyond the service industries themselves; they are felt through their effects on all other economic activities.
The production and distribution of services, like any other economic activity, is ultimately destined to satisfy individual demand and social needs. The latter element—social needs—is particularly relevant in sectors like health or education which in many, if not all, countries are viewed as a core governmental responsibility. They are subject to close regulation, supervision and control. Although social policy concepts—including equity and universal access—do not necessarily imply that Governments also act as producers, public facilities have traditionally been, and continue to be, the main suppliers of services such as health and education in most countries.
In 1999, the value of cross-border trade in services amounted to US$1350 billion, or about 20% of total cross-border trade. This understates the true size of international trade in services, much of which takes place through establishment in the export market, and is not recorded in balance-of-payments statistics. For the past two decades trade in services has grown faster than merchandise trade. Developing countries have a keen interest in many services areas including tourism, health and construction. According to the World Travel and Tourism Council, tourism is the world’s largest employer accounting for one in ten workers worldwide. According to IMF data for 1999, tourism exports, estimated at US$443 billion, were 33% of global services exports and 6.5% of total exports.
The liberalization of trade in goods, which has been promoted through negotiations in the GATT over the past 50 years, has been one of the greatest contributors to economic growth and the relief of poverty in mankind's history. Following the catastrophic experience of the first half of the 20th century, Governments deliberately turned away from the policies of economic nationalism and protectionism which had helped to produce disaster, and towards economic cooperation based on international law. Growth in this period was not uniformly shared, but there is no doubt that those countries which chose deeper involvement in the multilateral trading system through liberalization benefited greatly from doing so.
There was no parallel movement of multilateral liberalization of services trade until the negotiation of the GATS and its entry into force in 1995. Since the services sector is the largest and fastest-growing sector of the world economy, providing more than 60% of global output and in many countries an even larger share of employment, the lack of a legal framework for international services trade was anomalous and dangerous—anomalous because the potential benefits of services liberalization are at least as great as in the goods sector, and dangerous because there was no legal basis on which to resolve conflicting national interests.
1. Economic performance
An efficient services infrastructure is a precondition for economic success. Services such as telecommunications, banking, insurance and transport supply strategically important inputs for all sectors, goods and services. Without the spur of competition they are unlikely to excel in this role – to the detriment of overall economic efficiency and growth. An increasing number of Governments thus rely on an open and transparent environment for the provision of services.
2. Development
Access to world-class services helps exporters and producers in developing countries to capitalize on their competitive strength, whatever the goods and services they are selling. A number of developing countries have also been able, building on foreign investment and expertise, to advance in international services markets – from tourism and construction to software development and health care. Services liberalization has thus become a key element of many development strategies.
3. Consumer savings
There is strong evidence in many services, not least telecoms that liberalization leads to lower prices, better quality and wider choice for consumers. Such benefits, in turn, work their way through the economic system and help to improve supply conditions for many other products. Thus, even if some prices rise during liberalization, for example the cost of local calls, this tends to be outweighed by price reductions and quality gains elsewhere. Moreover, governments remain perfectly able under the GATS, even in a fully liberalized environment, to apply universal-service obligations and similar measures on social policy grounds.
4. Faster innovation
Countries with liberalized services markets have seen greater product and process innovation. The explosive growth of the Internet in the US is in marked contrast to its slower take-off in many Continental European countries which have been more hesitant to embrace telecom reform. Similar contrasts can be drawn in financial services and information technology.
5. Greater transparency and predictability
A country's commitments in its WTO services schedule amount to a legally binding guarantee that foreign firms will be allowed to supply their services under stable conditions. This gives everyone with a stake in the sector—producers, investors, workers and users—a clear idea of the rules of the game. They are able to plan for the future with greater certainty, which encourages long-term investment.
6. Technology transfer
Services commitments at the WTO help to encourage foreign direct investment (FDI). Such FDI typically brings with it new skills and technologies that spill over into the wider economy in various ways. Domestic employees learn the new skills (and spread them when they leave the firm). Domestic firms adopt the new techniques. And firms in other sectors that use services-sector inputs such as telecoms and finance benefit too.
The creation of the GATS was one of the landmark achievements of the Uruguay Round. The GATS was inspired by essentially the same objectives as its counterpart in merchandise trade (GATT):
· creating a credible and reliable system of international trade rules;
· ensuring fair and equitable treatment of all participants;
· stimulating economic activity through guaranteed policy bindings;
· promoting trade and development through progressive liberalization.
While services currently account for over 60 percent of global production and employment, they represent no more than 20% of total trade (BOP basis). This seemingly modest share should not be underestimated, however. Many services, which have long been considered genuine domestic activities, have increasingly become internationally mobile. This trend is likely to continue, owing to the introduction of new transmission technologies (e.g. electronic banking, tele-health or tele-education services), the opening up in many countries of long-entrenched monopolies (e.g. voice telephony and postal services), and regulatory reforms in hitherto tightly regulated sectors such as transport. Combined with changing consumer preferences, such technical and regulatory innovations have enhanced the “tradability” of services and, thus, created a need for multilateral disciplines.