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Anti-dumping policy after the Uruguay Round - an appraisal.


In December, 1993, the round of multilateral trade negotiations known as the Uruguay Round was at last successfully concluded, seven years after it was launched at Punta del Este in Uruguay and three years later than it was scheduled to finish. This was the eighth and, almost certainly, the last round of GATT which is likely to take place on a similar basis. Up until the last minutes, it was uncertain whether any agreement would emerge. The final agreement was formally signed by the contracting parties at a gathering of Heads of State at Marrakech, Morocco and amidst great fanfare in April 1994. On January 1st, 1995, the provisions of the Agreement took effect, including the establishment of the World Trade Organisation (WTO) as the successor to the GATT.

Now that the ink is dry on the Uruguay Round Final Act and the formalities involved in setting up the WTO are largely complete, attention is bound to focus on the implementation of the Agreement and the effectiveness with which the WTO fulfils its mandate. The Agreement contains a number of important provisions both for improving existing market access in both industrial and agricultural products, for strengthening GATT rules in several important areas (anti-dumping, safeguards, subsidies) and for extending these rules to new areas (services, intellectual property rights, trade-related investment issues). A key aspect of the Agreement are the provisions for strengthening the GATT mechanisms for dispute settlement. A litmus test for the WTO in the first few years of its existence will undoubtedly be the effectiveness with which it resolves disputes arising between members and ensures that the recommendations of independent dispute panels are implemented.

One of the issues of outstanding importance will be the effectiveness of the new Agreement on Anti-Dumping Policy. The aim of this note is to assess the implications of the new Agreement for the future of Anti-Dumping Policy. Article VI of GATT defines dumping as a situation in which '...products of one country are introduced into the commerce of another country at less than the normal value of the products...' (GATT, 1979). This is 'to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry'. To combat dumping, countries may levy either an anti-dumping duty on the dumped product, providing that the rate of duty does not exceed the 'margin of dumping', or a countervailing duty where the product is being subsidised providing that this does not exceed the 'margin of subsidisation'. The margin of dumping is, broadly, the difference between a product's 'normal value' (defined further below) and the export price, while the margin of subsidisation is the amount of subsidisation bestowed on the export product. Anti-Dumping Policy is an aspect of trade policy which has attracted much interest among academic economists in recent years. An illustration of this was the appearance of a Policy Forum on Contingent Protection in the November 1995 issue of the Economic Journal. This successfully demonstrated why the growing use of contingent protectionist measures such as anti-dumping is so worrying from a policy standpoint. (Contingent protection is the term widely used to refer to Various forms of protection such as anti-dumping, safeguards, voluntary export restraints and other grey-area measures used to offset alleged injury to domestic producers caused by imports.) This note goes a step further and asks whether or not, in the light of the new Agreement on Anti-Dumping, the incidence of anti-dumping is likely to diminish.

The Growth of Anti-Dumping Actions

There is widespread assent among trade economists that, in recent decades, one of the most serious threats to global free trade has come from the increasing use (or misuse!) of anti-dumping policy by the leading trading regions such as the US and EU. According to Baldwin and Steagall (1994), from 1980 to 1990 there were 494 anti-dumping and 306 countervailing duty investigations by the United States International Trade Commission (USITC) compared with only 172 anti-dumping and 10 countervailing duty cases from 1970 to 1979. According to the GATT Secretariat, the number of anti-dumping investigations reached a peak of 251 cases in 1992-3 before falling back to 226 cases in 1993-4. Of course, this tells us nothing about the proportion of world trade subject to anti-dumping measures nor about the extent to which trade is reduced by countries employing the anti-dumping weapon. However, we do know that, when anti-dumping measures are taken, the effect on trade is likely to be considerable.

Anti-dumping measures invariably result in levels of protection vastly in excess of that afforded to domestic producers from tariffs. For example, work carried out by the World Bank calculated that nominal tariffs on United States manufacturing imports would average 23 per cent compared with actual rates of 6 per cent if the costs of anti-dumping duties were added to ordinary tariffs (reported in the Financial Times, 25.11.93). Morkre and Kelly (1994) found that over the period 1980-9 the average margin of dumping in the US was 33 per cent. Over the same period, Bourgeois and Messerlin (1993) found the average margin of dumping in the EC was 37 per cent. In the case of the EC, anti-dumping duties are frequently set below the estimated margin of dumping. However, over the same period, Messerlin and Reed (1995) estimated the average anti-dumping duty applied in the EC to be nearly 18 per cent. Moreover, the average margin of dumping appears to have been increasing over time (Messerlin and Reed, 1995). Conceivably, the continued use of anti-dumping measures could wipe out the entire liberalising gain from lower tariffs which the Uruguay Round Final Act provides for.

There are grounds for suspecting that the next decade might indeed witness a further increase in the intensity of anti-dumping activity. One reason is that the use of other forms of 'administered protection', in particular the use of grey-area measures such as voluntary export restraints (VERs), to provide domestic producers with emergency protection in the face of a sudden surge of imports from new competitors, will become more difficult. The new Safeguards Agreement provides for the phasing out of all VERs and other such measures deemed inconsistent with GATT over a four year period commencing 1st January, 1995, or the conversion of these measures into other forms which conform with GATT requirements. There is growing evidence to suggest that countries use anti-dumping as a device for tackling a sudden surge of imports to which domestic producers face difficulties in adjusting. Thus, the explosion of anti-dumping and countervailing cases in the US in recent decades has occurred alongside a reduction in the number of safeguard or escape clause cases (Baldwin and Steagall, 1994). To some extent, the new Safeguards Code creates improved incentives for producers to use Article XIX of the GATT (the Escape Clause) for resolving adjustment problems. These changes, however, are unlikely to prove sufficient to reduce the growing proclivity towards anti-dumping as the device for combatting any import competition which countries deem too great for their domestic producers to bear.

One of the most troubling developments in recent years has been the growing use made of anti-dumping policy by countries which hitherto have been mainly the victims of measures imposed by the advanced industrialised countries. Thus, two years ago, for the first time ever, Japan (in the past one of the primary targets of anti-dumping measures) imposed anti-dumping duties on imports of ferrosilicon manganese exported by over 100 Chinese companies. In August, 1995, the Japanese government announced its second use of anti-dumping measures, this time against imports of cotton yarn from Pakistan. Increasingly, developing countries have also become users of anti-dumping and not just recipients of measures imposed by the advanced industrialised countries. (Mexico, Brazil and South Korea have all taken anti-dumping measures against imports in recent years, while Thailand is reported to be in the process of introducing an anti-dumping policy.) According to the GATT Secretariat, before 1985 there were no cases of anti-dumping measures being introduced by a developing country. By 1990, there were no less than 41 cases (23 per cent of the total for that year) which were initiated in a developing country.

The Effects of Anti-Dumping Measures

However, the damage to trade which anti-dumping measures cause is not reducible to the effects of the measures actually imposed. Arguably as important are the harassment effects of anti-dumping policy. The threat of an investigation following a complaint to the anti-dumping authorities by domestic producers may be sufficient to deter small- or medium-size firms from entering a foreign market. Likewise, the fear of provoking a complaint may cause foreign suppliers to avoid an aggressive pricing policy designed to expand foreign sales and enlarge market share. The fact that an investigation will require the exporter to incur often substantial costs in providing the importing country with detailed information about export and domestic sales, along with the legal costs incurred if it chooses to fight the case, thus creates an effective barrier to entry to the foreign market. The fear of provoking an investigation may keep prices high by encouraging foreign suppliers to fix prices at levels close to those of domestic producers. There is now substantial evidence which exists showing a link between anti-dumping and the cartelisation of the domestic market (see Messerlin, 1991). This suggests that domestic producers sometimes use anti-dumping complaints as means of restricting foreign competition and reinforcing price-fixing agreements at home. By making price collusion easier, anti-dumping policy can make the efforts of the anti-trust authorities to achieve more competitive markets more difficult. A recent illustration of this was the decision of the European Commission to impose dumping duties on soda ash imports from the United States shortly after finding European producers guilty of operating a cartel (reported Financial Times, 19.4.95). (The measures dealt a lethal blow to European glass-makers for whom soda ash is a major raw material thus illustrating the damage which anti-dumping measures can often inflict on unprotected industries.) Paradoxically, the motive for dumping by exporters is often a lack of contestability in the domestic market of the exporting country. Goods are dumped abroad to avoid undermining monopoly prices in the domestic market.

It is of interest to note that, in the United States at least, anti-dumping policy first evolved out of the need to outlaw attempts by dominant producers to increase market power by a strategy of predatory pricing. Cases of predatory behaviour leading to anti-dumping measures are known to account for only a small proportion of all cases (See Messerlin and Reed, 1995). Nevertheless, one justification often given for anti-dumping is as a device for compelling the foreign country to open up its otherwise closed domestic market. This has been a constant charge against Japan and the newly-industrialising countries such as South Korea, Taiwan and Singapore which have often been the targets of anti-dumping actions in the developed countries. In theory at least, dumping requires the presence of high import barriers in the exporting country in order to segment the foreign and domestic market. Most models of dumping presuppose some element of concentrated market power in the exporting country. In fact, as Hoekman and Mavroidis (1994) have shown, anti-dumping is an inferior instrument for addressing foreign market closure because it fails to deal with the source of the problem. Nevertheless, there is a need to 'reconnect' anti-dumping with its original antitrust origins. One way of doing this would be to make lack of contestability of the domestic market an issue in the decision as to whether anti-dumping measures should be imposed. Thus, if anti-dumping measures are likely to reduce contestability in the domestic market, no case would exist for anti-dumping measures being introduced. Hoekman and Mavroidis (1994) go a step further and propose that lack of contestability in the exporting firm's home market (i.e. the foreign market) should also be made a requirement for anti-dumping.

Concern about the manner in which anti-dumping policy can be captured by rent-seekers for protectionist purposes arises from the ease with which dumping can be found to be taking place. Much of the problem is to be found in the procedures adopted by countries for calculating the 'margin of dumping'. The GATT Antidumping Code states that this should involve a comparison of the export price 'of the like product' with the 'normal value' made as far as possible 'at an equivalent level of trade' (normally taken to be the ex-factory level) (GATT, 1979). Only sales which have occurred 'in the ordinary course of trade' need be included which means that sales below costs of production can be omitted. It is intended that, where possible, the normal value is to be the domestic price of the product exported. Where, however, there are sufficient domestic sales, countries are permitted to use 'the highest comparable price for the like product for export to any third country' (the export value method) or 'the costs of production of the product in the country of origin plus a reasonable addition for selling cost and profit' (the constructed value method). In this case, the price with which the export price is being compared is essentially fictitious. In the case of non-market economies, the practise has arisen of using a 'surrogate domestic price' based on costs of production for the like product in another country with some addition for selling expenses plus profit. Such a comparison clearly has little or no relevance for any meaningful estimate of any actual dumping which may or may not be taking place, since it makes no allowance for differences in costs of production in different countries. Messerlin (1989) found that nearly 68 per cent of all anti-dumping cases initiated by the EU over the period 1980-5 used either the constructed value or surrogate country methods. For the United States, Devault (1990) found that only 45.6 per cent of all cases used the domestic price to estimate normal value. Over 18 per cent of all cases used the 'best information available', a procedure adopted where the foreign firm is unwilling to cooperate in providing adequate information and which therefore usually relies (at least, to some extent) on information provided by the petitioner.

Even the export price may bear little or no meaning to the true price because of the requirement that the two prices should normally be compared at the ex-factory level. This means that the export price must be reduced by the costs of transportation plus any import duties payable. Where, however, the product has been sold through a subsidiary company, the rules require that the export price be constructed 'on the basis of the price at which the imported products are first resold to an independent buyer'. To permit comparison at the ex-factory level, the export price must then be reduced by the amount of all costs incurred between importation and resale. This gives rise to a problem of how to allocate the overhead costs of the subsidiary and what allowance to make for the profit of the exporter's subsidiary. The effect of adopting this procedure may be to artifically deflate the true export price, creating dumping where in fact no dumping is occurring. In the past, a further problem arose because of the practise of excluding from the calculation any export sales which occurred at prices above normal value on the grounds that such sales were irrelevant to the question of whether dumping was occurring. This again adds a high degree of mythology to the determination of dumping. Hindley (1989) has shown how inconsistencies in the deduction of selling costs as between the export price and the normal value when a constructed value method is used imparts an inevitable bias in favour of finding dumping.

Substantial evidence now exists on the effects of anti-dumping policy on trade. In 1990, the National Consumer Council (NCC) estimated that EC anti-dumping duties raised prices on consumer electronic goods by 11 per cent for video cassette recorders, 13 per cent for compact disc players, 17 per cent for computer printers, 15 per cent for electronic typewriters and 11 per cent for imported photocopiers over and above what they would have been had duties not been imposed. The total cost to EC consumers was estimated at [pounds]1,170 million or roughly 5 per cent of total (projected) consumer expenditure on electronic goods (NCC/Grimwade, 1990). Messerlin (1989) estimated that, over the period 1980-85, EC anti-dumping measures with an average ad valorem equivalent of roughly 23 per cent reduced import quantities by 18 per cent after one year of the initiation of an investigation and by one-half of their initial level after five years. Estimates by the United States International Trade Commission found that anti-dumping measures reduced import quantities by 73 per cent and increased unit values by 32.7 per cent for imports with high dumping margins and by 21 per cent and 1.8 per cent respectively for imports with medium dumping margins (USITC, 1995).

One feature of most anti-dumping measures is that they are selective, invariably being targeted at the most efficient, least-cost producers of a particular product. One result of such measures therefore appears to be trade-diversion. Messerlin (1989) found a high level of selectivity in EC anti-dumping actions over the period 1980-85 with selectivity being more pronounced in anti-dumping actions against developing countries and newly-industrialising countries (NICs) in particular. The discriminatory nature of anti-dumping encourages exporters to shift production to uncontrolled countries. One result is that further complaints of dumping follow, leading to the extension of anti-dumping measures to other countries previously not subject to such measures.

A further way in which exporters may seek to circumvent anti-dumping measures is by setting up assembly operations (so-called screwdriver plants) inside the importing country. There now exists substantial evidence that anti-dumping measures have been a major factor stimulating increased Japanese direct investment in the EC. Heitger and Stehn (1990) found empirical evidence to support the view that higher trade barriers stimulated Japanese FDI in Western Europe. Barrell and Pain (1996) demonstrate that, more specifically, the incidence of anti-dumping measures has influenced the level of Japanese FDI in the EC. Barrell and Pain construct an equation in which other influences on the level of Japanese FDI such as market size and relative costs are incorporated alongside the incidence of anti-dumping. (The latter was estimated using, as the explanatory variable, the cumulated stock of anti-dumping cases in the EC relative to other markets such as the United States, but with an adjustment to allow for the fact that the effects of a case initiated are likely to diminish with time.) Their results find the impact of anti-dumping on Japanese FDI to have been greater in the latter half of the 1980s anti-dumping cases became more frequent in the EC relative to other markets such as the US. Defenders of anti-dumping policy in the EC sometimes justify its tough stance on dumping on the grounds that they induce barrier-jumping FDI. Better that Japanese companies produce inside the EC thereby adding to EC output and employment, the argument goes, than exporting from Japan at the expense of EC output and employment. Like the familiar terms-of-trade argument for a tariff, the argument can only ever hold for a single, large country acting in isolation. If all countries were to adopt such a policy, no one would gain and all countries would lose. As with any form of protectionism, there is, anyhow, a resource cost for the importing country as producers are forced to produce their goods in a location other than the one which they would choose in the absence of any interference.

The New Policy Regime and Its Likely Impact

The new Anti-Dumping Code (GATT, 1994) has established clearer and more detailed rules for the determination of dumping. Article 2.2.1 establishes stricter criteria for including sales below costs as not being 'in the ordinary course of trade' but fails to eliminate the practise altogether. They have to be over an extended period of time (normally one year), in substantial quantities and at prices which preclude the recovery of all costs within a reasonable period. There is also a new requirement that adjustment be made for the high start-up costs which face new products in the early stages of production although it is left unclear as to which costs are to be counted. New provisions in Article 2.2.2 tackle some of the least satisfactory aspects of the procedures used to obtain normal value from constructed value (for example, the use of notional percentages for selling costs and profit). Article 2.4.1 contains new measures to ensure that so-called 'exchange-rate dumping' is not subject to anti-dumping measures. (This occurs where the exchange-rate of the exporting country depreciates over the investigation period but exporters take time to adjust their export prices.)

In other respects, however, the Code fails to deal with some of the worst practices used by countries to find dumping. In particular, Article 2.4.2 appears to give specific authorisation to the practice whereby individual export prices are compared with a weighted average normal value in the calculation of the dumping margin. As noted above, since export prices found to be above normal value are excluded, this can result in dumping being found when in fact none was taking place. The new Code maintains that normally like should be compared with like i.e. a weighted average normal value with a weighted average of all export prices (or on a transaction to transaction basis). However, it then goes on to say that, in exceptional circumstances, normal value established on a weighted average basis may be compared with the prices of individual export transactions in exceptional circumstances. The latter may arise where 'the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods' and 'if an explanation is provided why such differences cannot be taken into account appropriately by the use of a weighted average-to-weighted average or transaction-to-transaction comparison'. However, as Hindley (1994) has argued, the provisions are almost certainly too weak to prevent the continuation of this practice as most countries will have no difficulty in finding plausible grounds for adopting the 'exceptional' procedure. Hindley (1994) sees these provisions as coming very close to authorising past practice with the inevitable upward bias which it imparts to the calculation of the dumping margin.

GATT rules require that the importing country should also demonstrate that dumping is causing 'material injury' to domestic producers. The reference to 'material injury' as opposed to the requirement that there be 'serious injury' as in the GATT Safeguards Clause (Article XIX) means that relief is easier. The major problem with the injury test is the difficulty of proving that dumping is the cause of the injury when there are other factors at work which are at least contributing to the difficulties. Investigating the application of the material injury test to anti-dumping cases in the EC between 1980-85, Messerlin concluded that 'the simple correlation between an upsurge - even in relative terms - of imports and a decline of domestic production is considered as an adequate material injury test' (Messerlin, 1989). A particular practice which has attracted much criticism has been that of aggregating the imports of different countries to determine whether or not material injury has occurred. So-called 'cumulation' makes it easier for importing countries to demonstrate injury and is particularly harmful towards smaller exporting nations. GATT rules also make clear that the mere threat of injury is sufficient to lead to anti-dumping measures. As Messerlin (1989) has pointed out, this acts as a strong deterrent against new exporters and may also discourage investment in additional capacity in newly-industrialising countries who fear that, by doing so, they might provoke a complaint by producers in overseas markets. The new Code permits cumulation but only where the margin of dumping is more than de minimis (defined as less than 2 per cent of the export price) and the volume of imports is 'not negligible'. The Code reiterates that there should be a causal relationship between dumped imports and injury to domestic producers, but provides little guidance as to how this is to be determined. There is also some tidying up of the provisions regarding 'threat of material injury', but these will do little to allay the fears of producers in newly-industrialising countries that investment in increased exporting capacity could trigger off an anti-dumping investigation in their foreign markets.

Other aspects of anti-dumping which have been much criticised concern the provisions for the imposition of anti-dumping measures in the event of a positive finding and proof of injury. Reference has already been made to the manner in which the mere threat of an investigation may deter small exporters from entering a particular market. Alternatively, it may encourage new entrants to set prices at the same level as established producers to avoid the risk of an investigation. Even if an investigation should eventually come down on the side of the exporter, the latter must incur legal costs in presenting its case before the anti-dumping authorities of the importing country. Failure to provide the authorities with information about costs, prices, volume of sales, etc, may mean paying a higher rate of duty. GATT rules permit the imposition of provisional duties for up to six months following a preliminary finding of dumping and sufficient evidence of injury. Devault (1990) found that only 36 per cent of all anti-dumping cases in the United States resulted in definitive duties being imposed, while 66 per cent lead to provisional duties being applied. Thus, anti-dumping has become one way in which domestic producers can, without too much difficulty, gain temporary relief.

The fact, too, that anti-dumping cases are often settled by exporters giving price undertakings to the importing authorities (in the EU but not the US) gives rise to another disturbing feature of anti-dumping. It may be used by domestic producers to introduce by legal means price-fixing arrangements with foreign producers which would otherwise be illegal (see Stegemann, 1989). Tharakan (1995) has found some evidence that the EU has used undertakings as a policy weapon by refusing undertakings to exporters in countries with whom the EU runs large bilateral trade deficits. Price undertakings are preferred by exporters because they provide an element of built-in compensation in much the same way as voluntary export restraints. The new Code stipulates somewhat stricter conditions before an investigation can be initiated. On the other hand, it codifies the earlier tacit understanding that employees or their representatives may make an anti-dumping complaint. Vague reference is made to the need to give opportunity to industrial users or consumers of the product to give evidence. However, the opportunity was missed to introduce a stronger requirement that the views of buyers should be actively solicited. This might have helped counter the bias of existing procedures in favour of the complainant.

A useful improvement is the introduction of the de minimis requirement providing for the termination of an investigation where either the margin of dumping or volume of dumped imports or injury are negligible. Article 9 of the Code contains some new and stricter procedures for reimbursing exporters who pay anti-dumping duties which turn out to be greater than the margin of dumping. Also, exporters from a country subject to anti-dumping measures who seek to enter the foreign market will no longer automatically pay the highest rate of duty applying to those exports as in the past. Article 9.5 requires that a review must be carried out at speed to determine the individual margin of dumping for such exporters. Finally, the new Code introduces for the first time a sunset clause placing a five year limit on the imposition of duties, although duties could be imposed beyond the period if, after a review, the importing country can demonstrate that expiry of the duty will lead to a recurrence of dumping and injury. Such a clause has been a part of EU legislation for some while and can be important for ensuring that duties do not remain in place well after they are needed. Apparently, over 10 per cent of US anti-dumping duties have been in place for more than 20 years. On the other hand, the experience of the EU shows that a sunset clause is hardly a panacea. Indeed, Messerlin (1989) has argued that the existence of a sunset clause may even encourage 'a race for undertakings' by exporters on the grounds that the quicker the exporter can gain acceptance of undertakings, the earlier it will be able to benefit from the sunset clause!

A key issue in the Uruguay Round negotiations was the issue of anti-circumvention. This refers to the provisions which a number of countries have in place (most notably, the Eu) for imposing additional anti-dumping duties where exporters seek to circumvent anti-dumping measures by setting up plants in third countries or 'screwdriver plants' in the importing country. The EU's anti-circumvention provisions were introduced in 1987 and allow duties to be imposed on imported components and parts where companies start up assembly operations following the opening of an anti-dumping investigation and where the value of imported parts or materials exceeds the value of all parts and materials by at least 50 per cent. Not only do these measures provide for a considerable extension of anti-dumping rules beyond the already dubious parameters within which anti-dumping policy operates. They also amount to an attempt by the importing country to compel foreign investors to source parts and materials locally rather than from abroad, thus adding a further layer of protectionism to the anti-dumping measures already in place. The 50 per cent local content requirement may amount to a considerable burden for a foreign company establishing operations in the EU for the first time. As is well known, the EU's anti-circumvention rules were the subject of a GATT complaint by Japan which led in March, 1990 to a panel ruling that the EU measures were incompatible with GATT rules.The Dunkel Draft Final Act (a draft version of an agreement written by Arthur Dunkel, the GATT Secretary-General, twelve months before a final agreement was reached and which acted as the basis for negotiating the final agreement in the final stages of the Round) would have amended the Code to allow action against circumvention only when the costs of parts imported for assembly were more than 70 per cent of total costs. This, however, was never agreed. Instead, the matter has been merely referred to the Committee on Anti-Dumping Practices for resolution. For the time being, countries are free to apply such measures as in the past (although presumably the EU's 1987 measures are still subject to the findings of the 1990 panel report). However, the option is open for any WTO member to challenge any anti-circumvention measures adopted in this respect by another member state and seek a ruling on their legality under existing rules as did Japan in relation to the EU's provisions.

How significant in total are these changes to the Anti-Dumping Code? Although the new Code clearly brings some improvements to existing rules, it leaves untouched many of the areas of abuse which have dogged anti-dumping policy in recent decades. In certain cases, it actually codifies particular undesirable practices which countries have been applying. A further concern is the extent to which it will prove possible for countries to enforce the new Code. If one country has a complaint against another country concerning the use of anti-dumping measures, it can bring this before the WTO for adjudication. However, under guidelines included at the insistence of the US, the task of the disputes panel will be limited to determining whether or not the facts were established in an unbiased and objective manner. This will make it difficult for an exporting country to secure a favourable panel ruling unless the importing country has acted in a way that is clearly GATT-inconsistent. (Schott, 1994). (Article 17 of the new Code states that the panel is required to determine 'whether the authorities' establishment of the facts was proper and whether their evaluation of those factors was biased and objective'. Providing it is satisfied on these points, the panel may not overturn the decision of the authorities. Where a particular provision of the Agreement is found to admit 'of more than one interpretation, the panel shall find the authorities' measures to be in conformity with the Agreement if it rests upon one of those permissible interpretations'.)

In general, it seems doubtful whether the changes brought in by the new Round will do much to deter domestic producers from bringing complaints against foreign producers. Anti-dumping is likely to continue to play an important role in restricting trade. Indeed, its importance looks set to grow as more countries make use of anti-dumping policy since the alternative of a voluntary export restraint arrangement with the exporting country is no longer available under the new Safeguards rules.

Messerlin and Reed (1995) perceive the main benefits of the new Code to be procedural changes which raise the costs of implementing anti-dumping procedures. There are tougher conditions which must be satisfied before an investigation can be initiated and there are new procedures intended to make it easier for interested parties (other than the plaintiffs) to present evidence. However, as they point out, paradoxically, this will favour the advanced industrialised regions (the United States and the European Community) whose well-established, highly experienced and more sophisticated legal systems can cope with the stricter rigours of the new Code better than countries establishing an anti-dumping policy for the first time.

The main weakness of the Code is clearly its failure to deal with those problems which lie at the heart of anti-dumping discussed above. In particular, the method of calculating the dumping margin with its built-in upward bias, the weakness of the injury clause and the failure to ensure a proper comparison of the costs and benefits of anti-dumping measures have all been left largely unresolved. The ease with which domestic producers can use the anti-dumping weapon for protectionist purposes therefore remains essentially unaffected.

Tariff revisions under the GATT are possible through activation of Article XIX but require the granting of compensation to trading partners. Resort to grey-area measures such as voluntary export restraints (VERs) has in the past provided a way out but these transfer large quota rents to exporters and have therefore come to be regarded as costly to the importing country. Anti-dumping is the preferred alternative given the relative ease with which a positive dumping finding can be found and injury to domestic producers demonstrated. The requirement that 'material injury' only be found in the case of anti-dumping, whereas imports must result in 'serious injury' to activate Article XIX further enourages this process. The phasing out of all grey-area measures over a four year period under the new Safeguards Agreement may well serve to increase the tendency for countries to resolve adjustment problems through anti-dumping. Although, in other respects, the new Safeguards Code provides improved incentives for countries to use the instrument specifically designed for this purpose, it is unlikely that these changes will do much to deter countries from making greater use of anti-dumping.


Anti-dumping was widely regarded as being the key issue in the Uruguay Round negotiations, and the one on which the success or otherwise of the Round might ultimately rest. This was a view held mainly by academic economists rather than one explicitly upheld by the GATT contracing parties collectively. (See for example, Hindley (1988), Davenport (1989), Messerlin (1989) and Bhagwati (1988).) The 1986 Punta del Este Ministerial Declaration which launched the Uruguay Round mentions anti-dumping only in the context of improving, clarifying or expanding agreements and arrangements negotiated in the previous Tokyo Round negotiations (A reproduction of the Ministeral Declaration is included in Finger and Olechowski (1987).) Although useful improvements have been made to the Code, it has to be said that the Round has largely failed in its attempts to bite this particular bullet. This seriously devalues the progress made in liberalising trade in other areas. It remains to be seen whether or not this will prove merely a minor aberration with minimal consequences for world trade or a serious failing which undermines the impact of the package when taken as a whole.


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Author:Grimwade, Nigel
Publication:National Institute Economic Review
Date:Feb 1, 1996
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