“Zeroing” In: The Future of a Questionable Anti-Dumping Methodology

“Zeroing” In: The future of a questionable Anti-Dumping methodology


Just last month, a WTO Panel ruled in favor of the US in a zeroing dispute case with Mexico (Link to Article). This is a fairly significant step for the US. Since the US began to impose its zeroing methodology, many WTO countries have rallied staunchly in opposition questioning the legality and fairness of this practice. So the question remains: how will zeroing be treated in the ensuing Doha Round negotiations?


Anti-dumping row roils WTO, isolates U.S.


http://www.reuters.com/article/reutersEdge/idUSL1044224620080110?sp=true


Jan 10, 2008


By Jonathan Lynn - Analysis


GENEVA (Reuters) - An arcane row at the World Trade Organization (WTO) pitting the United States against the rest of the group's members on how to deal with unfairly priced imports has raised temperatures like few other issues there.


The tussle has unnerved U.S. consumer and retail bodies, seen a WTO dispute panel ignore rulings by the body's top court and created another big hurdle in the WTO's long-running Doha round to open up world trade.


Trade experts said it was difficult to imagine the United States succeeding in embedding its controversial practice of "zeroing" in WTO rules.


The term refers to the practice of only taking into account imports priced at a lower level than in their home markets (dumped goods) and ignoring or "zeroing" any offset from imports which are priced higher than in their home markets.


Some trade experts believe the row can be defused as countries realize that in a changing economy they can equally be the target as well as the initiator of anti-dumping measures.


"Zeroing has been on the ropes for a long time because there have been multiple rulings against the U.S.," said Brendan McGivern, an expert in international trade disputes and a partner in the Geneva office of lawyers White & Case.


"It's wildly optimistic of the U.S. to think they'll get this back through negotiations," he told Reuters.


HEART OF THE SYSTEM


The dispute goes to the very heart of the global trading system umpired by the WTO to ensure that trade is fair for all.


It turns on the methodology for calculating the duties that countries are allowed to impose on imports that are sold at unfairly cheap prices in their markets.


Zeroing, now mainly used by the United States, leads to excessively high compensatory duties, other countries say.


The United States has now lost a dozen WTO disputes over zeroing, rulings strengthened on appeal in some cases by the WTO's top court, the Appellate Body.


Last month a key group of countries issued a statement denouncing zeroing for undermining the central goal of the Doha round -- trade liberalization.


Washington will therefore find it difficult to find supporters in the WTO, which operates by consensus, who will spell out a role for zeroing in a new deal when it has been ruled out of court in litigation, said McGivern, former head of dispute settlement in Canada's WTO mission.


Another case is brewing, with Japan unhappy that the U.S. has not dropped zeroing in line with an Appellate Body ruling last January.


As a result the United States has now abandoned zeroing in some cases. But it insists zeroing is allowed under WTO rules.


The head of the U.S. WTO mission, Peter Allgeier, denounced last month the "severely flawed legal reasoning" of the Appellate Body and told WTO members that a new trade deal would not get through the U.S. Congress without zeroing.


ENCOURAGED


The Americans have been encouraged by two things.


Firstly, the chairman of the Doha round talks on rules, which include anti-dumping, Guillermo Valles Galmes, issued a draft negotiating text at the end of November that allowed zeroing in certain circumstances.


Secondly, in the latest zeroing dispute at the WTO, a Mexican complaint about U.S. anti-dumping duties on stainless steel, the dispute panel last month ignored previous rulings from the Appellate Body and allowed zeroing in some cases.


Valles, who is Uruguay's WTO ambassador, saw his proposals on zeroing slammed by a range of countries from the European Union to India and Japan.


He is holding another round of negotiations in the week of January 21 where he expects key countries to propose the balance they say is missing from his paper.


Valles's proposals also upset the United States by retaining some bans on zeroing, introducing a limit of 10 years on anti-dumping measures instead of allowing them to run indefinitely, and calling for consumers as well as affected competitors to be consulted on the measures.


Valles points out that the negotiations on rules are different to the rest of the Doha Round. Whereas the long-term aim is to reduce tariffs and subsidies to zero, rules will always be there, evolving to meet changing circumstances.


"The challenge is for countries to imagine where they will be in 15 or 20 years," he told Reuters. "The object is that rules are used in a transparent and predictable way, with no country just a user or a target."


Indeed, some U.S. business lobbies are already calling on Washington to ensure that WTO rules such as zeroing cannot be abused to put up barriers against U.S. exports.


The National Retail Federation noted in November that the U.S. is now the third biggest target of anti-dumping actions.


And frequent targets China and India are increasingly bringing actions against other countries.

(Editing by Matthew Jones)