National Board of Trade- Antidumping in Four ... - Kommerskollegium

Kommerskollegium/National Board of Trade, Sweden: Report (2005-02-10) The Use of Antidumping in Brazil, China, India and South Africa

SWEDEN The Use of Antidumping in Brazil, China, India and South Africa – Rules, Trends and Causes A study by National Board of Trade with contributions from Dr. Welber Barral and Gilvan Brogini (Brazil), Krista Lucenti (Switzerland) Dr Aradhna Aggarwal (India), and Dr Colin McCarthy (South Africa).

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89 67 59

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1


1

INTRODUCTION................................................................................................................ 6

2

THE USE OF ANTIDUMPING BY DEVELOPING COUNTRIES.......................... 7

3

ANTIDUMPING IN BRAZIL ......................................................................................... 11

3.1

Brazilian Trade Policy....................................................................................................................................... 11

3.2

Use of Antidumping and Other Trade Remedies ......................................................................................... 14

3.3

Importing Country Issues................................................................................................................................. 16

3.4

Exporting Country Issues................................................................................................................................. 18

3.5

General Issues and the Doha Round............................................................................................................... 21

3.6

The Way Forward ............................................................................................................................................. 24

4

ANTIDUMPING IN CHINA ........................................................................................... 26

4.1

Chinese Trade Policy......................................................................................................................................... 26

4.2

Use of Antidumping and Other Trade Remedies ......................................................................................... 28

4.3

Importing Country Issues................................................................................................................................. 30

4.4

Exporting Country Issues................................................................................................................................. 32

4.5


5

ANTIDUMPING IN INDIA ............................................................................................. 35

5.1

Indian Trade Policy ........................................................................................................................................... 35

5.2

Use of Antidumping Measures......................................................................................................................... 39

5.3

Legal Framework for Antidumping Investigations...................................................................................... 42

5.4

Determination of normal value, export price and margin of dumping ..................................................... 44

5.5

WTO Dispute Settlement and India................................................................................................................ 47

5.6

Antidumping in Indian FTAs .......................................................................................................................... 48

5.7


6

ANTIDUMPING IN SOUTH AFRICA ......................................................................... 49

6.1

South African Trade Policy.............................................................................................................................. 49

2


6.2

Use of Antidumping Measures......................................................................................................................... 53

6.3

Countries and Products Affected .................................................................................................................... 55

6.4

Average Level of Antidumping Duties............................................................................................................ 56

6.5

Legal and Procedural Characteristics of the Antidumping Regime.......................................................... 57

6.6

Customs Union Aspects..................................................................................................................................... 60

6.7

The Crucial AD Concepts and Variables....................................................................................................... 61

6.8


7

SPECIAL AND DIFFERENTIAL TREATMENT...................................................... 64

8

COMPARISON AND CONCLUSION .......................................................................... 66

8.1

The Determinants of Antidumping................................................................................................................. 66

8.2

The Framework for the Use of Antidumping................................................................................................ 73

8.3

Conclusion and Recommendations................................................................................................................. 74

REFERENCES............................................................................................................................ 76 APPENDIX:1 CHINESE ANTIDUMPING CASES ............................................................ 79 APPENDIX: 2 BRAZILIAN ANTIDUMPING CASES ...................................................... 80 APPENDIX 3: WORLD BANK CLASSIFICATION OF COUNTRIES ......................... 81

3


Summary •

Since 1995 there is a general upward trend in both initiations and in the number of anti-dumping measures in force by developing countries. Of the four countries examined in this paper - Brazil, China, India and South Africa - India and China are among the new users of antidumping. Brazil and South Africa, on the other hand, have for a long time been traditional users. India is the largest user in relation to its imports.

•

The four countries examined targets developing countries to a lesser extent than industrialised countries do.

•

For all four countries rapid tariff reductions and increased market access during the 1990’s partly explain the increasing anti-dumping usage. In China and India an increase in imports might also explain the increased use of antidumping.

•

In India and South Africa especially, firms that have enjoyed a monopoly-like situation in their home markets prior to liberalisation have applied for antidumping protection post-liberalisation. In India antidumping petitions are often made by a one single domestic producer with a market share of above 90 percent.

•

The retaliation motive could also explain the use by these countries of antidumping, since these countries, especially China, are also frequent targets of antidumping investigations.

•

The EU is second only to China as the most frequent target of antidumping measures. As developing countries are increasing their imports from the EU they are also increasing their use of the antidumping instrument. There is thus a risk that the use of antidumping will affect European exports negatively.

•

Within the context of the Doha Round it is likely that the countries that consider themselves to be primarily targets of antidumping rather than users, among them Brazil and China, could agree to stricter rules.

•

The continued use of the antidumping instrument by industrialised countries undermines the good faith negotiations on special and differential treatment.

With this background the Board suggests that: •

The use of antidumping by new users is closely monitored.

•

Stricter rules on antidumping are negotiated as soon as possible, before the countries that used to be large targets of antidumping also become significant users.

4


•

Any changes to the rules on special and differential treatment of developing countries in article 15 of the Antidumping Agreement should be designed to diminish the ease with which countries are able to take measures against developing countries, rather than to make it easier for developing countries to impose measures against other countries. Pending such changes the EU should to the largest extent possible limit its use of antidumping against developing countries.

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1

Introduction

The use of antidumping has increased since the formation of the World Trade Organisation (WTO) in 1995. A novelty in this context is that developing countries have overtaken the traditional developed country users, such as the EU and the US, as the largest users. This new development leads to interesting questions particularly with respect to the use of the antidumping instrument by large developing countries. Why have these countries started using the antidumping instrument? What principles do they follow? Are they likely to continue using the instrument? What countries are the main targets? These are questions that this paper seeks to address. The purpose of this study is to investigate the underlying reasons for the increased used of antidumping. For the purpose of this study four developing countries, Brazil, China, India and South Africa, have been selected for case study. These have been chosen because they are large economies in their respective parts of the world, and because they are, in general, both large users and significant targets of antidumping. This paper is arranged as follows. The first chapter maps the use of the antidumping instrument since 1995, and describes the general trends. The following four chapters outline the use of antidumping, as well as the administrative setup, in the four developing countries chosen for case study. All four case studies follow a similar set up. Firstly the general trade policy is discussed, followed by description of the countries’ use of antidumping. The use of antidumping is discussed both from the importing country perspective (what industries are petitioning, how are measures decided, who investigates etc.) and from the exporting country perspective (how is dumping determined, against who and against what products). Chapter 7 examines the possibility for special and differential treatment of developing countries within the framework of the antidumping agreement. The final chapter compares the four case studies and draws some general conclusions. This paper has been prepared by the National Board of Trade with contributions to the four case studies written by Dr. Welber Barral and Gilvan Brogini (Brazil), Dr. Aradhna Aggarwal (India), Krista Lucenti (Switzerland), and Dr. Colin McCarthy (South Africa). The responsibility for the final text rests solely with the National Board of Trade.

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2

The use of Antidumping by Developing Countries

Since the formation of the WTO in 1995 there has been a global rise in the use of the antidumping instrument. This rise is generally attributed to the lowering of bound tariffs following the conclusion of the Uruguay Round and the resulting increased market access. Prior to 1995, the use of antidumping fell under the auspices of the GATT Antidumping Code (the Tokyo Round Code) but this code had only 30 signatories. With the creation of the WTO, all WTO members also became signatories to most of the Uruguay Round agreements, including the Agreement on Antidumping. This means that the agreement today sets the international standard for the use of antidumping. The data and figures collected from WTO reports must be read with caution as the reporting of antidumping measures in force is given by individual countries and vary in quality. There is an obligation for all parties to notify all initiations which makes the information on initiations more reliable than the information about measures in force. Table 1 below highlights the fact that the four countries investigated in this study accounted for 32% of the antidumping initiations between July 2003 and June 2004. The same table underscores the steady increase in developing countries’ share of initiations and their preeminent position with respect to the number of measures actually taken. Table 1 Antidumping initiations 1991/92-2003/04 (July/June) by reporting country Initiated by:

95/96

Brazil India China P.R. South Africa Developing countries2 Industrialised countries World total

96/97

97/98

98/99

99/00

00/01

01/02

02/03

03/04

No 1 5 141 84

% 1 3 9 56

No 19 20 11 98

% 10 10 6 49

No 12 11 23 98

% 5 5 10 43

No 12 38 32 158

% 4 13 11 54

No 17 26 11 115

% 8 12 5 52

No 10 37 20 132

% 3 12 6 42

No 16 76 0 2 194

% 5 25 0 1 64

No 9 67 17 5 158

% 4 28 7 2 66

No 8 37 22 10 132

% 3 16 9 4 56

65

44

102

51

132

57

132

46

106

48

181

58

111

36

81

34

102

44

149

100

200

100

230

100

290

100

221

100

313

100

305

100

239

100

234

100

Source: WTO Annual reports, www.wto.org

1 2

Notified only for the period July-December 1995 Countries according to World Bank classification. See Appendix 3

7


Table 2 illustrates which countries are targets of antidumping measures. China is by far the most frequent target evidenced by the fact that they were named the exporting country in 25% of all antidumping investigations initiated in 2003/04. Table 2 Antidumping initiations 1991/92-2003/04 (July/June) by exporter Target country:

94/95

Brazil India China P.R. South Africa Developing countries3 Industrialized countries World total

95/96

No 5 3 27 2 93

% 3 2 17

96/97 % 9 3 20

58

No 13 4 30 6 89

67

42

160

100

97/98 % 2 3 16

60

No 4 6 31 2 100

60

40

149

100

98/99 % 3 5 12

50

No 7 12 27 5 108

47

No 11 10 22 4 152

100

50

122

53

200

100

230

100

99/00 % 4 3 8

00/01 % 3 4 12

52

No 6 10 26 3 136

138

48

290

100

01/02 % 4 4 17

62

No 11 14 53 9 188

85

38

221

100

% 4 4 15

60

No 13 12 46 11 192

% 1 5 18

63

No 3 12 42 5 151

63

No 3 13 58 162

125

40

113

37

88

37

72

31

313

100

305

100

239

100

234

100

Source: WTO Annual reports, www.wto.org

More than 2500 antidumping investigations were initiated globally between January 1995 and June 2004. However not all of these investigations yielded definitive measures. The number of measures actually in force as of the 30 June 2004 was just under 1350. As Table 2 demonstrates, the yearly number of antidumping initiations has fluctuated between approximately 150 and 310 and shows no discernible trend. While the number of initiations is relatively stable, the measures in force have grown steadily from around 800 in 1995 to nearly 1350 nine years later. This suggests an increase in the rate of affirmative findings due either to an increase of actual “dumping” or to authorities being less vigilant about assessing what is material jury.

3

03/04

02/03

Countries according to World Bank classification, see Appendix 3

8

1 6 25 69


Another interesting trend is the shift in use between developing and developed countries. In 1990, less than 20% of all initiations were carried out by developing countries compared with over 60% today. This development, emphasized in the graph below, has also been reflected in the statistics of measures in force. In the beginning of the 1990’s, only four percent of all measures in force were imposed by developing countries. This figure has steadily climbed to a current level of above 50%. The most active users of the antidumping instrument since 1995 are India, the US, and the EU with 15, 14 and 11 percent of all initiations during the past 13 years. The countries examined in this study follow the general trend among the developing country antidumping users.

Graph 1 Number of antidumping measures in force as per 30 June each year Number of measures in force as per 30 June each year 1995-2004 Measures in force taken by Brazil, India, China, and RSA

250

1600 1400

200

1000

150

800 100

600 400

50

Total measures

1200

200 0 Brazil

1995 1996 1997 18

1998 1999 2000 2001 2002

2003 2004

20

23

23

35

42

52

53

56

54 216

India

5

8

19

39

73

91

121

150

210

China P.R.

0

0

0

0

0

0

0

17

29

56

South Africa

0

15

40

54

86

104

109

98

96

84

115

184

131

276

392

443

454

525

682

707

704

672

651

664

641

638

Developing countries Industrialized countries

690

591

665

665

W orld total

805

775

796

941

0

1 096 1 115 1 105 1 189 1 323 1 345 Ye ar

Source: WTO

Many measures are now directed against developing countries. As shown in the table below, of all measures imposed against WTO members since 1995, about 62% were directed against 9


developing countries. For the developing countries chosen for this study, the number of measures taken against other developing countries is slightly lower than this figure. Thus there is nothing indicating a high incidence of south-to-south measures by these countries. China is interesting in this regard as it has a much lower incidence of targeting developing countries, which could be explained by the fact that China naturally cannot target itself. For comparisons sake the figures for the EU are included below, as the intensive targeting of developing countries by the EU is partly the reason for why the world wide average of developing country targeting is high. Table 3 Antidumping measures imposed against developing countries 1995-2004 Brazil Proportion of total measures in force directed against developing countries Proportion of total measures in force directed against China

China

India

South Africa

EU

World

50%

29%

56%

49%

83%

62%

12%

0%

18%

12%

16%

15%

Source: WTO

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3

Antidumping in Brazil4

The rapid liberalisation of foreign trade in the early 1990s dramatically changed the Brazilian economy. International commitments, at the WTO and through regional agreements, lowered historically high tariffs, and led to an increase of imports into the Brazilian consumer market. These inflows were accentuated by a highly valuated currency, whose parity (until 1998) with the US dollar created more incentives for imports. This scenario led to a reaction from the Brazilian domestic industry who lobbied politically for the use of trade remedies. These pressures led to the creation of a trained federal bureaucracy empowered to investigate the occurrence of dumped and subsidised imports into Brazil. 3.1 3.1.1

Brazilian Trade Policy Tariff bindings in the Uruguay Round

Brazil bound all its tariff lines in the Uruguay Round. Bindings for agricultural goods vary from 0% to 55%. For some 168 agricultural items, the base rate was lower than the final bound rate. Bound rates for manufactured goods range from 0 to 35%.5 3.1.2

Tariff Protection

Brazil' s main trade instrument is still tariffs, whose structure and level are largely determined by a programme of convergence towards the MERCOSUR Common External Tariff (CET). Brazil has bound its tariffs but mostly at rates higher than applied rates. Some rates in the tariff schedule still exceed bound levels. A number of sectors, including sugar, automobiles and parts, capital goods, informatics, and telecommunication goods were temporarily excluded from the CET.6 The rates for the latter three product groups are scheduled to conform to the CET by the year 2006, at which time the maximum rates will be 14% for capital goods and 16% for informatics and telecommunication goods. Common sugar and automotive import regimes for MERCOSUR were adopted by 2001.7

4 The major proportion of this chapter has been written by Prof. Dr. Welber Barral and Prof. Gilvan Brogini 5 WTO, WT/TPR/S/75. 6 WTO, WT/TPR/S/75. 7 WTO document WT/COMTD/1/Add.4, 14 August 1996. These measures were adopted in 2001, and this is still a controversy between Brazil and Argentina.

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The Brazilian tariff schedule has 9,371 tariff lines at the eight-digit level, comprising rates of 0% to 35%. The following table identifies the applied MFN tariff averages for the year 2000: Table 4 Brazilian applied MFN tariff averages and range for bound rates by HS2 in 2000 MFN

Total / Average

Bound rates

No. of lines

Average tariff (%)

Range (%)

Standard dev. (%)

Range (%)

9,371

13.7

0-35

6.7

0-55

Source: WTO Secretariat estimates based on data provided by the Brazilian authorities.

All tariffs are ad valorem, levied on the c.i.f. value of the import, with the exception of some telecommunication goods for which the higher of an ad valorem or specific rate applies. The simple average applied MFN was 13.7% in 2000. The average applied MFN tariff is 12.6% for agricultural goods (WTO definition) and 13.9% for manufactured goods.8 Tariff dispersion, as measured by the coefficient of variation (standard deviation divided by the average), has fallen significantly, from close to 0.8 in 1996 to 0.5 in 2000. This fall reflects a reduction in tariff peaks and duty-free items, as well as the increased average tariff. Half of all tariff lines carry rates ranging from 14-21%; while 9% bear rates higher than 21%, mainly affecting dairy products, beverages and spirits, tobacco, textiles and clothing and nonelectrical machinery.

8

WTO, WT/TPR/S/75.

12


Graph 2 Frequency distribution of tariff rates in Brazil in 2000

P er cent

N u m b e r o f t a r if f lin e s 5 000

100

( 4 9 .9 % )

T o t a l n o . o f t a r if f lin e s : 9 ,3 7 1

4 500 4 000

90 C u m u la tiv e p e r c e n t

80

N u m b e r o f lin e s (% o f to ta l)

3 500

70

3 000

60 (2 5 .2 % )

2 500

50

2 000

40 ( 1 4 .5 % )

1 500

30

1 000 500

20

(8 .4 % )

10

(1 .5 % )

(0 .4 % )

0 D u ty free

> 0 -7

> 7 -1 4

> 1 4 -2 1

> 2 1 -2 8

0

>28

Source: WTO Secretariat calculations, based on data provided by the Brazilian authorities.

Brazil' s current tariff, based on the MERCOSUR CET, ranges between 0% and 20%. Each MERCOSUR member has an additional exception regime – a national list of products whose tariff rates are established in the members'tariff schedule. Brazil could maintain its exception regime until 2001.9 For Brazil, the rates for some goods were increased temporarily (19972000) to 23%.10 Brazil phased out its Regime of Final Adjustment to the Customs Union (a list of goods including items considered to be especially sensitive and thus exempt of duty-free treatment within MERCOSUR) and as a result, as of mid-2000, all imports from MERCOSUR entered Brazil duty-free. 3.1.3

Tariff preferences

Brazil extends preferential import duty rates on imports from other member countries of Latin American Integration Agreement (LAIA) and MERCOSUR, and to Chile and Bolivia, which are associate members to MERCOSUR. Brazil grants concessions under the Global System of Trade Preferences among Developing Countries (GSP).

9

This list of exceptions was later reduced, but it still exists. WTO, WT/TPR/S/75.

10

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3.2

Use of Antidumping and Other Trade Remedies

The WTO Agreements are incorporated into the Brazilian legal system by means of a Presidential Decree,11 and have the same hierarchical level as federal laws, but subordinate to the Federal Constitution. As they are also approved by Congress, they take precedence over subsequent legal instruments (decrees, ministerial orders). Other federal laws adapted and completed the enforcement of the WTO Agreements within the Brazilian legal system. Federal Act no. 9019, dated 30 March 1995 establishes the administrative procedure for antidumping investigations, and defines the competent authorities to conduct investigations on dumping and subsidies. Prior to the implementation of the Uruguay Round Antidumping Agreement, Brazil was a signatory to the Tokyo Round Codes and incorporated them into domestic legislation.12 Despite this, the first antidumping measure was taken by Brazil in 1988. Since then, AD has become Brazil’s major trade defence instrument used for protection of domestic industries. The table below shows the use of the various trade defence instruments (antidumping, countervailing measures and safeguards). Numbers include both initiations and reviews, based on national sources. 3.2.1

AD measures taken by Brazil

The following table highlights the number of measures taken by the Brazilian authorities against imports. The number of measures peaked in 1993 and 1998 and has been fairly consistent for the past few years. Table 5 Use of trade instruments in Brazil (1988-2003) AD CVD SG

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 4 0 2 9 8 27 11 5 17 15 22 18 10 18 16 17 0 0 0 2 2 1 7 0 0 0 0 0 0 1 0 1 - - - - - - - 0 1 0 0 1 0 1 0 1

Total 199 14 4

Source: 2003 DECOM Annual Report

11

Decree no. 1355, dated 30 December 1994, followed by Congress Decree no. 30/94, dated 15 December 1994 Congress Decrees no. 20 and 22, dated 5 December 1986, followed by (Presidential) Decree no. 93941, dated 16 January 1987, and Decree no. 93962, dated 22 January 1987.

12

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3.2.2

Main affected industries/products

The following table identifies the sectors targeted in the majority of Brazilian trade remedy cases. As can be seen chemicals is by far the most affected product category. Table 6 Use of trade remedies in Brazil Agricultural Products Chemicals Steel and Steelrelated Textiles and apparel Other non-metal industries Manufactures Total

Investigations (A) 25

Share in A

Share in B

11.8%

Measures and undertakings in force (B) 6

81 54

38.2% 25.5%

23 8

43.4% 15.0%

11

5.2%

3

5.7%

17

8.0%

3

5.7%

24 212

11.3% 100%

10 53

18.9% 100%

11.3%


3.2.3

Targeted countries

The following table demonstrates a remarkable concentration of AD measures against exports from China and the United States. Russian and Indian exports have also been targeted by Brazilian authorities. Table 7 AD and CVD Investigations and Review, by Country (as of December 2003) Countries

United States China India Russia South Africa Mexico Germany Kazakhstan Total

Dumping Initiations Reviews 29 4 21 9 6 5 7 3 5 2 4 2 4 1 3 2 164 35

Subsidies Initiations 2 0 2 0 0 0 0 0 14


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3.2.4

AD measures against Brazil

The tables below highlights the number of times Brazilian products have been targeted by trade remedies adopted by other trading partners. The first table refers to both initiations and reviews and the second one deals with measures in force against Brazilian exports. Table 8 Investigations and reviews against Brazilian exports Argentina

Canada

EC

India

Mexico

7 0

16 3

2 0

5 0

3 0

AD

CVD

South Africa 5 0

Turkey

USA

Total

1 0

27 5

66 8


Table 9 Measures and Undertakings in force against Brazilian exports (as of 31.12.03) AD and CVD

Argentina

Canada

EC

India

6

6

1

4

Mexico South Africa 2 3

Turkey

USA Total

0

19

41


Campos & Vito (2002) estimate that the negative impact of US trade remedies against Brazilian exports reached US$ 2 billion within a decade (1991-2002). The steel exports accounted for 76 % of all investigated Brazilian products. For every four AD/CVD petitions filed in the US against Brazilian exports, three targeted Brazilian steel products. 3.3 3.3.1

Importing Country Issues Antidumping Investigations

The Secretary of Foreign Trade (the Head of SECEX) decides on initiating an antidumping investigation. Since the Secretary of Foreign Trade’s decision on initiation is grounded in the findings reached by the Department of Trade Defence (DECOM), the decision is not very politicised. Under the same conditions, the Secretary of Foreign Trade is also responsible for the decision to initiate a review process. DECOM, a branch of SECEX, is the competent investigating authority and operates according to Decree 1602, which is based on the WTO Antidumping Agreement. DECOM, after concluding the investigations,

16


recommends that the Head of SECEX terminate the investigation without imposing any measures or that the Chamber of Foreign Trade (CAMEX) impose an antidumping measure. Before concluding an investigation, DECOM can also reach a preliminary determination on the existence of dumping, injury, and causal link and then recommend to CAMEX – not the Head of SECEX – to adopt provisional measures. The final decision on the imposition of antidumping and countervailing measures (and the approval of undertakings), is taken by CAMEX.13 Table 10 Timetable of an investigation in Brazil Preliminary examination of application Initiation Preliminary determination Final determination

20 days after the submission of the application14 Within 30 days from communication informing the applicant of preliminary examination15 A minimum of 60 days from the initiation Within one year after initiation16

All acts containing determinations, final or preliminary, related to the investigation, will be published in the Diario Oficial (Official Gazette) immediately after the decision by the competent authorities. 3.3.2

Injury Factors

With respect to injury factors, the Brazilian legislation follows the AD Agreement. In some cases, DECOM has, in addition to the injury factors listed in the AD Agreement, considered whether market reduction or technological obsolescence has occurred in the affected industry17. DECOM has also considered the variation on tariff, the reduction of the consumer market, the entrance of new competitors, and imports from other sources.18 A third determination of injury was based on the rapid build-up of stocks of the dumped imports, which led to the conclusion of injury, once compared with the reduction of market share.19

13

According to Decree no. 4.732, dated 06/10/2003. Decree 1602/95, Article 19. 15 Decree 1602/95, Article 21. 16 Decree 1602/95, Article 39. 17 DECOM, Investigation no. 52100-069040/2002-11 (Steel blade for stone cutting from Italy). 18 DECOM, Investigation no. 52100-008067/2001-57 (Glyphosate from China). 19 DECOM, Investigation no. 52100-007526/2001-85 (Ammonium nitrate from Estonia, Russia and Ukraine). 14

17


3.3.3

Public Interest clause

CAMEX may, under exceptional circumstances and for reasons of national interest, decide even when there is evidence of dumping and of the resulting injury, to suspend the measure or (if a price undertaking has been negotiated) to disapprove such price undertaking.20 CAMEX may decide “in favour of the imposition of measures at an amount different than the one recommended,”21 which may be read as a permission to decide on the imposition of a measure at a “zero” level. This occurred in the soda ash case, where a measure was not applied even though DECOM had recommended the imposition of measure. Until the present date, the public interest clause has been used twice to suspend a measure, namely: 1. Investigation on the imports of soda ash (barrilha) from Bulgaria, Poland and Romania.22 In this case, the public interest clause was used. It was alleged that the imposition of an antidumping measure could dramatically affect the glass and cleaning industries. 2. Investigation on the imports of bicycle tires from India and China.23 In this case, the national interest clause was invoked alleging that the measure could negatively affect Brazilian relations with India and China. 3.4 3.4.1

Exporting Country Issues Methods for calculating the dumping margin

The transaction-to-transaction methodology for determining dumping margins has never been used in Brazilian practice. Similarily the provision that allows for a comparison of a weighted average normal value with individual export prices has, to date, never been invoked in an investigation. Normal value is set by home market sales prices when the quantity of home market sales constitutes five percent or more of the product sales to Brazil.24 The investigating authority will examine all commercial transactions which occurred in the investigation period, and compare these with export prices. The weighted average export price is calculated and takes 20

Decree 1602/95 Article 64.3 Decree 1602 22 DECOM, Investigation no. 52100-000016/1996-11. 23 DECOM, Investigation no. 52100-085489/2002-27. 24 Decree no. 1602/95, Article 5.3. 21

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into account the prices effectively practiced on sales to the Brazilian domestic market (although price adjustments may be made before the calculation of the weighted average).25 3.4.2

Treatment of non-market economies

China was granted Market Economy Status by Brazil (along with 20 other countries) in November 2004.26 Prior to this, China was treated as a non-MES, the legal impact of which is that the normal value will be obtained from a third country market economy. In investigations against Chinese imports, DECOM has used - as normal value: (a) the export price from the US to Canada;27 (b) export price from the US to Japan,28 or (c) the constructed price of bicycle tires in Chinese Taipei.29 Yet, in other cases, DECOM has: (d) obtained an average price for garlic, comparing Argentinean export prices and the domestic cost of production30 (e) used producer costs from a Mexican company of padlocks,31 or (f) used the pricing list of a Colombian producer of electric fans.32 Russia was granted Market Economy Status by Brazil in 2003.33 3.4.3

Lesser duty rule

There is no mandatory lesser duty rule in the Brazilian domestic legislation. In practice, Brazilian authorities favour the view that prices of the like product in the domestic market and the prices of the imported product must be taken into account. In this sense, DECOM may consider the prices that should have been used by the domestic industry under normal conditions of trade. In particular, DECOM has considered lowering this price if the dumping margin results in excessive protection to the domestic industry.34 Thus, DECOM

25

Decree no. 1602/95, Articles 8 and 9.2. China Broadcast http://en.chinabroadcast.cn/2004/2004-11-13/[email protected] accessed on 6 December 2004 and http://news.bbc.co.uk/1/hi/world/americas/4008499.stm. 27 DECOM, Investigation no. 52100-037511/2001-41 (Colour and black pencils from China). 28 DECOM, Investigation no. 52100-019469/2002-96 (Mushrooms from China). 29 DECOM, Investigation no. 52100-085489/2002-27 (Bicycle tires from China, Chinese Taipei, Thailand and India). 30 DECOM, Investigation no. 52100-000085/2000-84 (Garlic from China). 31 DECOM, Investigation no. 52100-000087/2000-18 (Padlocks from China). 32 DECOM, Investigation no. 52100-000053-200098 (Table electric fans from China). 33 Administrative Order no. 33 (2003). 34 DECOM, Investigation no. 52100-085489/2002-27 (Bicycle tires from China, Chinese Taipei, Thailand and India). 26

19


has considered, e.g. the ideal domestic prices35 as a basis for the dumping margin, or a lower price even when the foreign industry has not presented the requested information.36 3.4.4

Average level of antidumping duty

There is a remarkable variation on the AD duties applied by Brazilian authorities. There duties have ranged from 4.7% (bicycle chains from Czech Republic) to 301.5% (pens from China). The average AD duty is roughly 40%. 3.4.5

Average time for measures

The average time for measures that have already expired in Brazil is five years (69.2% of the total). Only three measures have expired before that time (one which lasted only one month) and only one has lasted more than that (10 years). However for those 30 measures still in force, 16 measures, or 53%, have been so for more than five years. In fact, four of these measures have been in force for more than 10 years (among them, the case that has been taken by India to the WTO dispute settlement system). 3.4.6

Price undertakings

Price undertakings were used in place of duties in investigations (or reviews) in over 10% of cases. These undertakings have involved only six countries: Argentina, Uruguay, Chile, United States, France, and Denmark. This underscores the fact that price undertakings have been used mainly when the exporting countries are MERCOSUR-members or associated members. This occurred in three of the four investigations which resulted in price undertakings. 3.4.7

FTA/RTA rules

In the Free Trade Area of the Americas (FTAA), which is being negotiated among 34 countries of the Western Hemisphere, a regional antidumping agreement is also a contentious issue. Brazil, along with other South American countries, has presented proposals to reduce the leeway on the use of trade remedies, especially antidumping measures. The FTAA negotiations have stalled, however, and the chapter on antidumping is a long succession of brackets, evidencing the huge disagreement among trade partners on accepting even the inclusion of such agreement in the FTAA legal framework. 35 36

DECOM, Investigation no. 52100-069040/2002-11 (Steel blade for stone cutting from Italy). DECOM, Investigation no. 52100-007526/2001-85 (Ammonium nitrate from Estonia, Russia and Ukraine).

20


3.4.8

Judicial Review

Any interested party can have recourse to the Brazilian judicial system in what concerns the application of specific provisions of the legal instruments on trade defence. Judicial recourse should pertain to the application by the investigative authority of a specific provision, and may be based on due administrative process, legal interpretation, or offence to upper rules (including constitutional principles). Thus, judicial review in Brazilian legal system is remarkably broad, which explains why some trade measures have been reviewed by means of recourse to the Judiciary, including appeals to the Superior Court of Justice.37 3.4.9

Disputes at the WTO

Brazil has been taken to the WTO dispute settlement system by India, on 9 April 2001, over the measures against imports of jute bags.38 India raised complaints against: (i) the determination by the Brazilian government to continue to impose antidumping duties on jute bags and bags made of jute yarn from India, based on an allegedly forged document regarding dumping margin attributed to a non-existing Indian company; (ii) Brazilian refusal to reconsider the decision to continue antidumping duties despite the fact that the non-existence of that company was brought to the notice of the authorities; (iii) non-consideration of the new evidence regarding cost of production, domestic sales prices, export prices, etc., of Indian jute manufacturers, and refusal to initiate review of the decision to impose antidumping duties; (iv) the general practice of Brazil regarding review and imposition of antidumping duties; and (v) Brazilian antidumping laws and regulations. This dispute is pending consultations.39 3.5 3.5.1

General Issues and the Doha Round Studies on the effect on the local economy

Most published studies on trade remedies focus on the impact of other countries’ measures on Brazilian exports, rather than on the impact of Brazilian measures on the 37

The Superior Court of Justice (STJ) is the highest federal court in Brazil, and appeals to its jurisdiction shall be grounded on the violation of federal law or international treaties (1988 Brazilian Federal Constitution, article 105). Cases: STJ, MS 4516/DF, 13.Nov.96 [revoked AD measures on procedural grounds]; MS 5628/DF , 06.Nov.98 [refused claim for revocation of AD measures]; MS 7045/DF 22.Nov.00 [did not concede claim for nullification of AD measure]; STJ, MS 8236/DF, 29.Sep.02 [asserted its jurisdiction to review administrative acts related to trade measures]; STJ, MS 8913/DF, 25.June.03 [did not suspend AD measure against non investigated company]. 38 WTO, DS/229. 39 WTO 17 April 2001, G/ADP/D35/1, G/L/447, WT/DS229/1

21


local economy.40 Other studies have analysed the Brazilian regulation on trade remedies, in contrast with the national regulation on the economy.41An interesting exception to this is the work of Naidin (1998), who demonstrates that, like a majority of countries around the world, Brazil’s use of antidumping measures increased as the country deepened its trade liberalisation programme in the 1990s. Nevertheless, its work does not present a general model to evaluate the impact of this tendency on the local economy. 3.5.2

Political view on the use of antidumping

Trade defence measures are relatively new to Brazil (early 1990s), and still unknown to most policymakers. Recent political debate and media coverage on the topic relates mostly to the imposition of measures against Brazilian exports (e.g. the recent AD measure imposed by the U.S. against Brazilian exports of shrimps), while little attention is called to the Brazilian use of these measures. 3.5.3

Brazil’s position in the Doha negotiations

Brazil sees reform of the AD Agreement as a vital issue during the Doha Round. Brazil is an active member of the “Friends of Antidumping” Group, and its proposals reflect an increasing (and sometimes misleading) perception that Brazilian exports are increasingly targeted by trade defence instruments. Some Brazilian proposals are summarised below: a) Lesser duty: Brazil has proposed to amend ADA Articles 9.1, 9.3 and 9.4 to provide for the mandatory application of the lesser duty rule. Moreover, Brazil has proposed that in Annex III, Article 2.4, including the prohibition of zeroing, applies mutatis mutandis to the calculation of the lesser duty level.42 b) Sunset reviews: Brazil has proposed that a Member should not be allowed to initiate a new antidumping investigation, either on its own initiative or based on a petition, until a date no sooner than one year following the termination of the antidumping measure, unless there are exceptional circumstances that justify the initiation in a shorter period, which shall not be less than six months.43 40

A good example is Lima-Campos & Vito (2002). See Barral (2002), Guedes & Pinheiro (2001). Avila & Lima (2002) present an analysis of U.S. measures against Brazilian exports of steel. 42 WTO, TN/RL/W/119. 43 WTO, TN/RL/W/76. 41

22


c) Facts available: Brazil has proposed to amend Article 6.8 to explicitly state that “facts available” are to be used only for the purpose of substituting missing or rejected information. Brazil proposes to amend Annex II.1 to provide that authorities may not resort to “facts available” in an investigation or review unless the authorities have made all reasonable efforts to obtain the necessary information from the respondents. 44 d) Reviews: Brazil has proposed that the provisions of Articles 2 (Determination of Dumping), 3 (Determination of Injury), 4 (Definition of Domestic Industry), 5 (Initiation and Subsequent Investigation), and 6 (Evidence) should also apply to the reviews, whenever applicable, under Articles 9.3, 9.5 and 11.2, with the exception of the specific rules concerning these reviews. In particular, the de minimis rule and/or its threshold in Article 5.8 should be applied to these reviews to the extent that it is appropriate. Brazil has proposed to specify that the request for Article 9.3 reviews can only be made by exporters or importers. In addition, Brazil has proposed that the margin of dumping in an Article 9.3 review shall be based on all imports from a specific exporter that were entered into the importing Member for not less than one year, and not on an individual import basis. Brazil seeks to improve the rule so that the reviews are not unfairly extended to the prejudice of the responding parties. Finally, Brazil would like to clarify, through the development of harmonised indicative lists relating to the assessment of dumping and the “likelihood of injury” under Article 11.2, that the burden of proof is on those parties advocating the continuation of the antidumping order.45 e) Price undertakings: Brazil has proposed to reduce the national authorities’ discretion to refuse offers of price undertakings, such as requiring authorities to provide, in a public notice, the criteria and reasons for non-acceptance of a price undertaking offer.46 f) Special treatment (ADA art. 15) for developing countries: Specify the obligations of developed countries when investigating exports originating from developing countries. Developed country authorities should advice to exporters involved in the process of the possibility of price undertakings, and the obligation rests on the investigating authorities to

44

WTO, TN/RL/W/93. WTO, TN/RL/GEN/10. 46 WTO, TN/RL/GEN/2. 45

23


take the initiative to explore constructive measures before the imposition of the preliminary duties.47 3.6

The Way Forward

Brazil, barely aware of trade defence instruments before the Uruguay Round, has become one of its main users in the international trade arena. This change may be explained by the: o Rapid reduction of tariffs (although still relevant in some industries); o Growth of imports of finished products after the Uruguay Round and the Real Stabilization Plan in mid-1990s; o Increased imports that created a strong incentive for the domestic industry to present complaints against foreign competitors; o Increased organisation of pressure groups, as a consequence of democratisation. In the administration of the investigations by Brazilian authorities, there does not appear to be any bias against particular countries or in favour of selected industries. A large number of countries are covered by antidumping investigations, while there is a proportional distribution of investigations among industries, with a light concentration on the chemical sector. A significant number of investigations have been directed against exports from China; whether this trend will be maintained after the Chinese accession to the WTO is still a pending question. It is clear from this analysis that a reduction of trade measures is not foreseeable in the near future. On the contrary, a recent document issued by the Ministry of Development (Brazil, 2003a) traces a strategy aimed at divulgating the use of these measures, accelerating the pace of investigations (to be concluded within 10 months), and prioritising the use of specific duties (as opposed to ad valorem duties). At the same time, Brazilian products also suffer from AD measures abroad. An industry historically affected by AD measures is steel, which has competitive prices and technology but suffers from almost permanent measures applied by both the United States and the European Community.

47

WTO, G/ADP/AHG/W/127.

24


Thus, the conclusions by Naidin (in 1998) are still valid: Brazil’s use of antidumping measures increased as the country deepened its trade liberalisation programme in the 1990s. However, compared to the United States, where almost the entirety of antidumping investigations involve the application of provisional duties, in Brazil only 46% of the cases resulting in the application of antidumping duties involved provisional measures. In sum, Brazil’s antidumping legislation and procedures are similar to that of other WTO Members

25

4

Antidumping in China48

Chinese exports have long been the target of antidumping measures not only because of their competitiveness but also because of China’s Non-Market Economy Status (NME) and the low participation of Chinese exporters in the investigations initiated by foreign governments.49 The question posed by legal practitioners and academics alike is whether China, following its accession to the WTO in November 2001, will follow the path taken by other developing economies; that is, to use antidumping measures to protect its domestic industries and to effectively “pay back” foreign companies for years of protectionism.50 4.1 Chinese Trade Policy Following its commitments under the WTO agreements (and indeed prior to its accession), China has been reducing the general level of tariff-protection. In the negotiations for membership to the WTO, China committed itself to bind tariffs for all products in its schedule on market access for goods. By 2000, it was reported that China had roughly 7000 eight-digit tariff lines based on the sixdigit Harmonised System (1996-version). For more than 3000 of these positions, the MFN tariff rate exceeded 15% and the simple average of China’s import duties amounted to 16.4%. The following two graphs highlight the sharp decreases in MFN tariff rates between 1996 and 1997 and again between 2001 and 2003 for all goods (Graph 3) and for industrial goods and textile and clothing (Graph 4).

48

The major proportion of this chapter has been written by Trade Consultant Krista Lucenti, PhD Candidate. 49 Liu and Vandenbussche (2002) contend that Chinese companies have largely ignored demands for information from the EC, and in cases where they did provide it, it was often incomplete or untimely. The authors maintain that by and large, the response rate and the degree of cooperation of Chinese companies are low. This absence of cooperation allows an investigating authority to use the “best fact available” practice. 50 Messerlin (2004); Cloutier and Chen Interview (2004)

Graph 3 MFN Tariff Rates, 1996-2004 25

Average Tariff %

20

15 Simple Avg Weighted Avg 10

5

0 1996

1997

1998

1999

2000

2001

2003

2004

Year

Source: TRAINS database, WITS. Note: Data missing for 2002.

Graph 4 MFN Tariff Rates, Industrial Products and Textiles and Clothing, 1996-2004 35

30

Average Tariff %

25

20

Simple Avg Industrial Wgtd Avg Industrial Simple Avg Text & Clot Wgtd Avg Text & Clot

15

10

5

0 1996

1997

1998

1999

2000

2001

2003

2004

Year

Source: TRAINS database, WITS Note: Data missing for 2002.

The average MFN tariff rates, for all goods, decreased from nearly 24% in 1996 to 17% in 2000 and to 10.5% in 2004. For industrial goods, the MFN rates fell 56% between 1996 and 2004 and by 60% for textiles and clothing.51 The weighted average (weighted by the amount of trade) has also decreased significantly in the past eight years. For most industrial goods, the target level for most products will be reached in 2005. Motor cars and parts thereof (target date

51

TRAINS database, World Integrated Trade Solution (WITS), World Bank

27

June 2006), certain chemicals, e.g. some unfinished plastics (2008), and synthetic woven fabrics (2010) are exempted from this rule. Among the tariff commitments of special interest is the acceptance of both the Information Technology Agreement which provides for duty free entry of a long row of IT-products and – for most products – the Chemical Tariff Harmonisation Agreement setting tariff rates at 0%, 5.5% or at 6.5%. 4.2

Use of Antidumping and Other Trade Remedies

The first AD case was initiated by the Chinese authorities in December 1997 against imports of newsprints from the United States, Canada, and Korea.52 Since then, the number of cases initiated and measures applied has increased overall.53 The following graph highlights this trend:

No. of Measures and Investigations

Graph 5 China – Total number of Antidumping Measures and Investigations, 1997- 2003 40 30 20 10

7

3

6

0

0 1997

1998

22

30

17

1999

2000

2001

2002

2003

Ye ar

Source: MOFCOM

In addition, the range for duties applied is quite large and the maximum level is quite high relative to other countries (up to 144%). Table 11 Average Minimum and Maximum duties in China, 1997- Aug 2004 Provisional duties (%)

Provisional duties (%)

Definitive duties (%)

Definitive duties (%)

Average Minimum

Average Maximum

Average Minimum

Average Maximum

11.8*

76.9

9.3

65.8

* Averages for provisional and definitive duties calculated as the mean of the duties applied, across all products,

between 1997 and August 2004. Source: MOFCOM

The majority of these cases were initiated against foreign exporters of chemicals, and to a lesser extent, of steel, textiles, and light industrial products. For a complete list of investigations and measures, see Appendix 1. Interestingly, as one legal practitioner points out, 52 53

Public Notice No. 4/1997 (1997-12-10) With the exception of slight dips in 1998, 2000 and 2003.

28

in most of the cases where dumping and injury were found and affirmative measures were taken, these industries were in steady development (consumption was increasing).54 In contrast, Chinese exporters have been the largest target for AD investigations and measures. Between 1995 and mid-2004, a total of 386 cases were initiated and definitive measures were imposed in 272 of these investigations.55 In particular, Chinese exporters have been hit more often (in absolute terms) by developing countries than by developed countries. Between 1995 and mid-2004, India imposed nearly as many measures as the United States and the EC combined. The following graph identifies this trend: Graph 6 Total number of Antidumping Measures taken against Chinese exporters, by country, Jan 1995- June 2004

Number of measures

60

57

50

39

40

33

30

30 22

20

13

11

11

10

South Africa

P eru

Venezuela

Brazil

10 0 India

U.S.

Argentina

EC

T urkey

Importing Country

Source: WTO Antidumping database. www.wto.org

Another way of determining the intensity of usage by a country is to weigh it by the value of imports from China. The larger the value, the more intense China is being hit by AD measures (given the size of trade between the two countries). These figures support the claim that developing countries (particularly Mexico, and to a lesser extent Turkey, Argentina, and India) not only initiate more investigations in absolute terms but also relative to the value of their imports from China. The following table, reproduced from Messerlin (2004) identifies this trend:

54

Dr. Wang Xuehua, Beijing Huanzhong and Partner, Interview with Kommerskollegium, 3 September 2004, China 55 WTO Antidumping database. www.wto.org

29

Table 12 Share of Antidumping Measures in Force against Imports from China, 1995-2002 (% of total antidumping measures in force by user country) Country or group

Industrial countries Australia Canada European Union United States Developing economies Argentina Brazil India Mexico South Africa Turkey All other Total number Percent of all antidumping measures

1995

1996

1997

1998

1999

2000

2001

2002

Average share 1995-2001

Average Number by value of imports from Chinaª

9.0 7.6 20.7 12.8

4.3 7.7 21.7 13.7

10.0 10.3 23.2 15.1

8.2 10.8 23.0 14.6

7.7 8.3 20.8 14.5

4.5 8.5 19.4 16.5

5.1 10.6 19.4 18.5

7.9 10.8 15.8 18.0

7.0 9.1 21.2 15.1

0.7 1.8 1.0 1.7

33.3 14.3 38.5 33.3 8.3 13.5 34.0 143 17.8

20.0 14.3 46.7 28.3 27.6 13.5 28.8 148 18.0

30.3 21.7 33.3 40.7 28.6 14.7 26.2 180 21.2

35.9 28.6 27.3 38.4 23.2 17.6 22.5 193 20.9

31.1 28.9 32.8 36.3 19.5 17.1 18.9 202 19.9

21.4 25.6 22.3 35.1 18.8 14.3 12.8 179 18.3

15.6 22.4 25.2 44.3 19.1 25.0 15.5 199 19.5

20.0 20.4 27.1 41.8 22.5 40.0 -

26.8 22.3 32.3 36.6 20.7 16.5 22.7 174 19.4

10.0 4.7 10.7 60.3 12.0 4.4 -

- = not available ª Per $1,000 of imports from China. Source: Messerlin (2004)

In addition to this phenomenon, Prusa (2003) finds evidence that new users account for about 60% of all cases against Asia-Pacific nations, and that more than half of these cases are initiated by other Asia-Pacific nations. The intra-regional nature of the cases leads the author to suggest that regional trade agreements, which would ban the use of AD between signatories, would help Asia-Pacific nations to curb antidumping. China has initiated one safeguard investigation against steel (which has now been terminated) but has not yet taken any definitive safeguard measures. 4.3

Importing Country Issues

In March 1997, China’s antidumping law, officially known as the Antidumping and AntiSubsidy Regulation of the People’s Republic of China (the Regulation), implemented Article 30 of the Foreign Trade Law (effective July 1994).56 In addition, before China’s accession to the WTO, it enacted several new regulations and rules in order to comply with the Antidumping Agreement (ADA). Following its accession, the old regulations were replaced 56

Almstedt and Norton (2000). Originally sourced from CCH, China Law for Foreign Business, para. 19-586.

30

by newer regulations (December 2001 and March 2004), and additional guidelines.57 There are three authorities concerned with antidumping activities: The Ministry of Commerce (MOFCOM), the Tariff Commission under the State Council, and the Customs General Administration. Within MOFCOM, there are two internal agencies involved in an AD investigation: the Bureau of Fair Trade (“BOFT”), responsible for the determination of the dumping margin; and the Investigation Bureau of Injury to the Industry (“IBOII”), responsible for the determination of domestic injury. Both bureaus determine causation but the BOFT is the agency responsible for taking the decision to initiate an investigation. MOFCOM is also responsible for the termination, imposition of provisional duties, or the acceptance of a price undertaking. The Tariff Commission is responsible for the adoption of definitive antidumping duties and the Customs office collects the duties. With respect to the dumping and injury determination, the approach taken by MOFCOM is modelled on the provisions specified in ADA. In addition, the procedures for the complaint and initiation, the investigation, the preliminary determination, final determination, undertakings, and reviews are also modelled on those laid out in the ADA. With respect to the public interest clause, since this only came into effect June 1, 2004, it is not clear yet how public interest will be investigated as there are no guidelines governing the application of the clause.58 According to Messerlin (2004), China’s AD regulations are similar to standard rules and practices with the exception of three59 features: 1) Many details are left to case-by-case practice and guidelines; 2) The regulations include all the protectionist biases inherent in the WTO’s provisions;60 57

See G/ADP/N/1/CHN1 and G/ADP/N/1/CHN2 at www.wto.org Dr. Wang Xuehua, Beijing Huanzhong and Partner; interview with Kommerskollegium, 3 September 2004, China 59 The fourth feature was omitted since it related to problems occurring prior to reform in 2003. 60 These include, but are not limited to, “use of the concept of a major proportion of the industry as the threshold level for accepting complaints (a condition that domestic monopolies, oligopolies, or cartels fit much more easily than competitive industries); possibility of ex officio initiation of cases by the Chinese authorities; screening of complaints by the antidumping office, exposing the office to strong and hidden pressures by vested interests; possibility of withdrawal by petitioners, facilitating private collusion between petitioners and defendants; cumulation of imports, facilitating demonstration of injury and widening the geographical scope of protective measures; recourse to constructed normal values when comparable prices are unavailable in the exporting country, enabling manipulation of costs and reasonable profits; a broad definition of the confidentiality of information, 58

31

3) The inclusion of an ambiguous provision in the regulations (Article 56) which could open the possibility for China to use AD rules as a retaliatory instrument: “Where a country (region) discriminatorily imposes antidumping measures on the exports from the People’s Republic of China, China may, on the basis of the actual situations, take corresponding measures against that country (region).”

4.4

Exporting Country Issues

The following chart provides information about issues of concern to exporting countries. Table 13 Exporting Country Issues in China Issue

Method for calculating the dumping margin

Market economy status Mandatory lesser-duty rule Average time for investigation Language of Submissions Average level of antidumping duty Percentage of measures taken Average time for measures Price undertakings Withdrawals of petition No injury found Expiry Reviews Publication of decision FTA/RTA rules for antidumping Dispute settlement

Response

Modelled on the approach outlined in the AD agreement i.e. domestic market price in the exporting country, 3rd country export price, or the constructed value. To date, the 3rd party export price has not been used. China has no special rules for non-market economies. No Maximum 18 months. No timelimit for taking provisional measures (like EC 9 month timelimit), but normally between 8-11 months. Chinese Equal to the dumping margin. Quite high relative to other countries (up to 144%). Measures have been taken in almost all cases. Of completed cases (21), 19 have resulted in definitive duties. Five years from the date of the preliminary or final determination (according to the law but too early to tell) 2 cases (Stainless steel, Polyvinyl chloride “PVC”) 1 case (Diphenylmethane Diisocyanate “MDI”) 2 cases (Polystyrene, Lysine) 1 case (Newsprint); continuation of duty Yes. In MOFCOM Gazette (online) but only in Chinese. Yes. Articles 4 and 7 of CEPA-HongKong and CEPAMacau stipulate that antidumping measures should not be used between members. China has not been taken to the WTO DSB for its use of antidumping nor has it challenged any measures.

Sources: Wang, X. and Wang, L; interviews (2004); MOFCOM

limiting the rights of defendants; the possibility of imposing undertakings as antidumping measures and the requirement that antidumping duties be borne by importers (the so-called no absorption provision); the possibility of imposing retroactive antidumping duties where there is a ‘history’ of dumping (that is, recurrent antidumping complaints); and the possibility of taking ‘appropriate’ measures should foreign firms try to circumvent the antidumping measures.” Messerlin (2004: 118-9)

32

4.5

General Issues and the Doha Round

As part of China’s accession protocol in 2001, it was determined that its use of the antidumping instrument would be continuously reviewed during a transitional period. These reviews have generated criticism towards China’s implementation of the ADA, particularly with respect to issues of transparency in the Chinese antidumping proceedings. More specifically, it has been claimed that MOFCOM does not readily publish its findings, that it does not provide a public reading room where non-confidential versions of the information in any proceeding are given, and that it does not readily notify new rules and regulations concerning antidumping.61 China normally rebuts these complaints and maintains that it does follow the rules of the ADA. China has not been a very active participant in the Rules Group Negotiations under the Doha Agenda, nor in the ad hoc working groups on implementation and anticircumvention. In fact, China has acted thus far more as an observer than as an active participant. Though the Chinese delegation is fairly small, they have nevertheless presented two contributions, one on fisheries and one of a general nature covering antidumping. The latter paper focuses on issues surrounding the initiation of investigations and on price comparisons. In addition, China has also contributed to a paper62 which expresses the concerns of developing countries with respect to the use of antidumping in textiles and clothing and to S & D treatment more generally. However, China’s greatest concern is its status as a non-market economy. Since Russia’s graduation in 2002 by the U.S. and the EC, China is now the most notable country to still be considered a non-market economy. This has had a significant effect on the levels of dumping found in investigations of Chinese exports. An EC-investigation into China found that, due to problems with state interference, accounting procedures, applicability of property and bankruptcy law and discriminatory banking sector rules preventing the rational allocation of capital, it was unable to grant China market economy status at this time. One perhaps positive effect of the non-market economy status is that it prevents the U.S. from initiating an anti-subsidy measure against China. There is no similar restriction in the EU, though the ease by which dumping can be found in investigations against 61 62

For an overview of US questions to China concerning this see WTO-doc G/ADP/W/441. WTO doc. TN/RL/W/48/Rev. 1

33

China could suggest that anti-subsidy measures would be less favoured by the EU investigating authorities. However, Canada has recently launched its first ever antisubsidy investigation against China so this could point to a shift in approach. Brazil has recently granted China MES in return for greater access to China' s market for chicken and beef products. The beef deal alone is expected to be worth US $600m a year for Brazil. In addition, Brazil received a commitment from China to order at least 10 aeroplanes from Embraer, as well as an offer of US $5bn to US $7bn worth of investment to improve Brazil' s roads, railways and ports. Given that Brazil has imposed only 10 measures on Chinese exports and has a low co-efficient (4.7) for the number of measures per value of imports, this deal seems quite sweet for Brazil. Yet China, already a large importer of Brazilian soy beans and mineral ores, sees Brazil’s unexplored territory as a potential solution for its own growing need for raw materials.63

63

http://news.bbc.co.uk/1/hi/world/americas/4008499.stm.

34

5

Antidumping in India64

Prior to 1991, India had a highly restrictive trade regime. In concurrence with the objective of attaining self-reliance, the domestic industry was given a high level of protection through import controls and high duties. After 1991, India opened the economy to market forces. Contingent protection measures were also initiated during this period. The first antidumping case was initiated in India in 1992. Until 1997, the number of AD initiations increased slowly. Since 1997-98 however, there has been a rapid increase in these cases. Currently, India is one of the most active users of the AD tool. During 2001-2003, India’s share in the world trade was only 0.7% but its share in AD initiations was over 20%. In 1997, India also started using safeguard measures. By October 2003, it became one of the top users of safeguard measures with 15 initiations. CVD measures however, are not used in India. Table 14 shows the patterns of usage of contingent protection in India. The bulk of contingent protection falls on the instrument of antidumping.

Table 14 Use of contingent protection measures in India No. of Initiations 01.95- 12.2003 Antidumping measures Safeguards Countervailing duties Total

379 15 nil 394

Source: WTO statistics collected from semi-annual reports

5.1

Indian Trade Policy

The economic reforms initiated in India in July 1991 saw the progressive removal of import licensing and the phased reduction of tariffs through the 1990s. The reforms lowered tariff rates and did away with import licensing on all but a handful of intermediate inputs and capital goods items. But consumer goods, accounting for approximately 30% of the tariff lines, remained under licensing, and were not freed of licensing until the late 1990s.

64

This chapter has been written by Dr. Aradhna Aggarwal, Indian Council for Research on International Economic Relations

5.1.1

Tariff rates

In 1990-91, the highest tariff rate stood at 355%, the simple average of all tariff rates at 113%, and the import-weighted average of tariff rates at 87%. These rates were lowered substantially during the early 1990s. The peak rate fell to 85% in 1993-94 and to 65% in 1994-95. Importweighted average of tariff rate also declined to 56% in 1994-95 (Mehta, 2003). Importweighted average tariff rate in the industrial sector, which stood at 56%, was not significantly different from the overall tariff rate average. The implementation of the Uruguay Round (UR) accelerated the process of tariff reductions. In the Uruguay Round, India committed to bind tariff lines for 62% of its industrial products. In the pre-UR era (i.e. before 1995), the binding was applicable to only three percent of lines. These tariff commitments at the UR led to an increase in import coverage under bound rates from nine percent in the pre-UR to 68% in the post-UR era and reduced India’s tradeweighted average tariff from 71% to 32% (Mehta and Aggarwal, 2003). Unbound items included automobiles (applied tariff rate 60%), footwear (38%), and textiles and clothing (35%). A significant number of changes were made in the industrial classification of tariff lines in 1996. These changes were made due to the Information Technology Agreement renegotiations with principal trading partners. The binding ratio for non-agricultural products as per the new classification is 70%. Table 15 India’s bound tariff structure (Jan 1, 2001) Binding Tariff Rates Number of bound lines

0-5 5-10 10-15 15-20 20-25 25-35 35 + Total 147 27 53 253 723 1394 2130 4629

Source: WTO Integrated Database

Applied tariff rates are lower than the bound rates. Analysis for the year 2001 shows that applied rates in that year were lower than the binding rates in more than two-thirds of the tariff lines65 (Mehta, 2003). Average tariff of unbound items was also below 35%. Unbound tariff rates were 35% or below in all the 1403 cases except 16 cases. Graph 7 documents the average, weighted, and peak tariff rates in India. It shows that the peak rate and average and import weighted rates continued to decline sharply in the past few years.

65

At 6-digit level

36

Graph 7 Indian Average Applied (MFN) Rates for Industrial Goods 1995-96 to 2001 60

50

Percentage Tariff Rate

40

Simple Average Import-Weighted Peak Tariff rate

30

20

10

0 1995-96

1996-97

1997-98

1998-99

1999-00

jan-00

feb-01

Period

Source: Mehta (2003)

In the year 2004, the maximum applied tariff rate for non-agricultural products stands at 20 percent. Thus, starting in 2004-05, the top tariff rate on industrial goods will be 20 percent.66 Table 16 documents the estimates of the effective rates of protection (ERP) for 45 broad industry groups classified into three user-based sectors. The numbers demonstrate that the ERP increased during the 1980s, perhaps due to the fact that a number of items during the 1980s were freed of import licensing. In order to turn quota rents into tariff revenue, the Government of India raised tariff rates substantially. During the 1990s, however, protection rates declined across all industry groups. The decline was sharp during the late 1990s. Table 16 Effective Rate of Protection in Indian industry (%) 1980-2000 Intermediate Goods Capital Goods Consumer Goods All - Industries

1980-85 147.03 62.77 101.51 115.11

1986-90 149.18 78.45 111.55 125.93

1991-95 87.58 54.23 80.55 80.18

1996-00 40.13 33.30 48.28 40.43

Source: Das (2003)

66

Some mega tariff lines are in addition to this peak rate.

37

5.2.2. Non Tariff Barriers Table 17 presents the trends in import coverage ratio and indicates that 61% of the tariff lines were free to import as of April 1996. The share of free lines increased sharply and by 2001, Quantitative Restrictions (QRs) were completely eliminated. However, it is important to note that five percent of the tariff lines that are currently maintained under QRs are permissible under the Articles XX and XXI of the GATT on grounds of health, safety and moral conduct. As the following table highlights, the use of NTBs has been drastically reduced. Table 17 Indian Import Coverage Ratio – 1996 to 2001 (% of lines, at 10 digit level) Prohibited Restricted Canalised SIL Free Total

1996 0.6 29.6 1.3 7.6 61.0 100

1997 0.6 22.8 1.3 10.2 65.2 100

1998 0.6 22.7 1.3 9.0 66.5 100

1999 0.6 11.6 0.4 8.7 78.8 100

2000 0.6 9.5 0.3 2.2 87.3 100

2001 0.6 4.7 0.0 0.0 94.7 100

Source: Government of India, 2001-2

5.1.2

Overall trade protection

The import penetration ratio reflects the combined effect of both tariff and NTB reductions. It is calculated as the ratio of industry imports to domestic availability. Table 18 shows how the import penetration rates did not exhibit any perceptible changes till the late 1990s. In the late 1990s, however, there was an improvement in the import penetration ratios across all four sectors. Table 18 Import Penetration Rates in Indian manufacturing sector ( % ) Intermediate Goods Capital Goods Consumer Goods All - Industries

1980-85 0.11 0.12 0.04 0.10

1986-90 0.13 0.12 0.04 0.11

1991-95 0.15 0.12 0.04 0.12

1996-00 0.18 0.19 0.10 0.16

Source: Das (2003)

Evidently, the protection levels for Indian manufacturing declined substantially during the 1990s when the Government of India introduced a systematic and comprehensive package of liberalisation. Decline in the protection level was however much sharper during the late 1990s.

38

5.2 5.2.1

Use of Antidumping Measures AD cases reported by India

The use of contingent protection measures has increased since 1992. Table 19 shows that the total number of AD initiations increased markedly after 1996-97. Since 1992-93, India has initiated 153 antidumping investigations, calculated on a one-product one-case basis. Table 18 shows that the number of initiations accelerated in the late 1990s, coinciding with the acceleration of tariff reductions and QR removals. Table 19 Antidumping investigations by India 1992-2003 Year 92/3 No. of 2 initiations Final 2 findings Terminated

93/4 1

94/5 6

95/6 5

96/7 5

97/8 14

98/9 13

99/00 19

00/1 28

01/02 30

1

6

5

5

13

12

19

25

29

1

1

1

3

2

02/03 Total 30 153 18ª

134

ª12 cases are under investigation Source: Government of India (2003)

Of the 153 investigations initiated, only eight cases were terminated without measures being taken. One case was terminated due to no injury. The reasons found for other terminations were the withdrawal of application by the domestic industry (three cases), relationship between the exporter and petitioner by way of imports (one case), low dumping margin (one case), unsatisfactory industry standing (two cases), and non-properly documented application (one case). Thus virtually any case that is initiated stands a good chance of getting AD protection.

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5.2.2

AD cases against Indian exporters

Indian exporters are also facing a large number of antidumping cases. Since 1980, 82 cases have been initiated against Indian exporters. As table 20 demonstrates, 76% of the AD cases and 87% of the anti-subsidy cases were initiated after the financial year 1997-98. Table 20 AD and CVD cases against Indian exports 1980-2003 No. of AD cases initiated against Indian exporters No. of CVD cases initiated against Indian exporters

80/81 0

90/91 94/95 98/99 99/00 00/01 01/02 02/03 1 1 16 13 7 13 7

1

0

0

8

6

4

8

1

Total 82 32

Source: Government of India (2003) 5.2.3

Main Affected Product Groups

Table 13 shoes a sector-wise break up of cases initiated by India, and gives the general trend that chemicals is the most affected product group. Table 21 Sector-wise break up of cases initiated by India during 1992-2003 Product category Chemicals and Petrochemicals Pharmaceuticals Fibres/ Yarn Steel or other metals Consumer goods Other Total

Number of Cases – India 70 28 14 14 13 14 153

% of total cases 45.8 18.3 9.2 9.2 8.5 9.2 100.0

Source: Government of India (2003)

5.2.4

Initiators’ Characteristics

Of 58 cases examined, 46 cases were cases where the petitioners’ market share was 50% or more. In around 75% of cases (43), the number of petitioners was between one and three. In 77% of such cases, the market share of the petitioners was 50% or more. In 45% of total cases, there was a sole petitioner and on average his share was 74%. Of the 58 cases, there were only two cases in which the number of petitioners exceeded six. Clearly, the petitioners were the dominant producers in their industry.67

67

See also Aggarwal (2002)

40

Table 22 Distribution of Petitioners’ market share in Indian antidumping petitions No. of petitioners 1 2 3 4 5 6 above 6

25-50 %

50-75 %

75-90%

90% and above

8 1 1 2 0 0 0

2 5 4 2 0 0 0

1 0 0 2 4 1 2

15 5 1 0 1 1 0

Total number of cases 26 11 6 6 5 2 2

Source: Author’s calculations based on the information provided by the Government of India

5.2.5

Targeted countries

Table 23 depicts a country-wise break-up of AD cases initiated by India while table 24 examines the cases reported against India. Table 23 Share of top 10 countries in AD cases reported by India, 1992-2003 Cases initiated China Taiwan EC Korea Japan USA Singapore Russia Thailand Indonesia Others Total

66 25 24 24 19 18 18 14 12 11 107 338

% of total initiations 19.5 7.4 7.1 7.1 5.6 5.3 5.3 4.1 3.6 3.3 31.7 100.0

Measures imposed 47 15 18 17 15 11 12 9 9 9 72 234

% of total measures 20.1 6.4 7.7 7.3 6.4 4.7 5.1 3.8 3.8 3.8 30.8 100.0


Table 24 Country-wise break up of AD / CVD cases reported against India, 1992-2003 EC USA South Africa Indonesia Canada Brazil Others Total

AD cases 27 14 11 6 5 4 15 82

Subsidy 14 6 6 5 1 Nil 32


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5.3

Legal Framework for Antidumping Investigations

5.3.1

The legislation

The Antidumping legislation was introduced in India in 1985 when the Custom Tariff (Identification, Assessment and Collection of Antidumping Duty on Dumped Articles and for Determination of Injury) Rules 1985 were framed. This rule was amended in 1995 and forms the legal basis for antidumping investigations and for the levying of antidumping duties. These laws are in consonance with the WTO Agreements on Anti Dumping and Anti Subsidy/Countervailing measures. Since 1995, three amendments have been incorporated68 into the rules. Antidumping measures in India are administered by the Directorate General of Antidumping and Allied Duties (DGAD) functioning in the Department of Commerce in the Ministry of Commerce and Industry. A person not below the rank of a joint secretary heads it. The total staff strength of the DGAD is thus 21/22 persons. While the Department of Commerce recommends the antidumping duty, it is the Ministry of Finance, which levies such duty by a Notification (of the Ministry of Finance). 5.3.2 o

Arrangement to notify the recommendations of the Designated Authority

The

Designated

Authority

notifies

its

recommendations

with

respect

to

Initiation/Preliminary Findings/Final Findings etc. through the Government of India, Gazette. o

Press Information Bureau, Ministry of Commerce & Industry also issues a Press Release on the subject from to time.

o

NIC, Ministry of Commerce and Industry makes available the details with respect to recommendations of the Designated Authority on its web-site http://commin.nic.in/doc.

On receipt of recommendations from the Designated Authority, the Central Government (i.e. Ministry of Finance, Dept. of Revenue) notifies the imposition of antidumping duties through Government of India, Gazette.

68

These were introduced in 1999 (vide Notification No. 44/1999), 2001 (vide Notification No. 28/2001) and 2002 (vide Notification No. 1/2002).

42

5.3.3

Appeals

The law provides that an order of determination of existence, degree, and effect of dumping is appealable before the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). An appeal against the order of CEGAT can be made to the Supreme Court of India. Various High Courts also hear these matters under their writ jurisdiction. Since 1992-93 interested parties have filed 52 cases in the CEGAT, 25 cases in various high courts and 10 in the Supreme Court. 5.3.4

Stages and timeframe

Table 25 Stages and time frame of AD investigations in India Procedural Stage

Law

Preliminary findings Provisional Duty

No such duty before the expiry of 60 days from the date of initiation

Period of provisional duty

The provisional duty will remain in force only for a period not exceeding six months, extendable to nine months under certain circumstances. One year not extendable beyond six months Within three months of the date of publication of final findings

Final finding Levy of duty Withdrawal of duty (if final finding is negative)

Within 40 days of the date of publication of final findings

Normal time taken in practice 90-105 days of the initiation of investigation Imposed within four-six weeks of the date of issue of provisional findings Remains in force for a period not exceeding six months One year not extendable beyond six months Within three months of the date of publication of final findings


5.3.5

Lesser duty rule

Under the Indian law (as amended in 1999), the Government is obliged to restrict the antidumping duty to the lower of the two i.e. dumping margin and the injury margin.

43

5.3.6

Price undertakings

There are only five price undertakings currently in force. These include Hexamine from Iran, White Cement from UAE, Potassium Carbonate from Taiwan, Lead Acid Batteries from Korea and Black & White Photographic Paper. 5.3.7

Public interest clause

In India, the examination of public interest is not mandatory. In practice however, there have been instances where the DGAD recommended the duty but the Ministry of Finance did not impose it keeping in view the broader public interests. These cases include, for instance, the Newsprint case against the USA, Canada and Russia, P. Tert Butyl Catechol case against France, PSF case against Korea, Thailand, Taiwan and Indonesia, and Trimethoprim case against China. 5.3.8

Review Cases

Table 26 Profile of Indian review cases 1992-93 to 2002-03 Review Mid term Sunset New shippers

Completed Duties eliminated/ cases terminated 6 3 2

Duties continued 17 6 2

In-progress

Total

4 6 3

27 15 7


5.4 5.4.1

Determination of normal value, export price and margin of dumping Normal value

Since India is an inconsequential trade partner of most countries, exporting firms abstain from investing on defense. Therefore, the DA is faced with a major problem of non-response or incomplete /inaccurate / inconsistent information on prices and costs provided by the exporters. It has also been observed that many exporters do not cooperate citing concerns over confidentiality. In a majority of the cases therefore, normal value needs to be constructed. In a large number of cases, investigating authority, for constructing normal values, rely on the best available information. Table 27 provides information on the method of normal value calculation in 59 cases ( between 1997 and 2003) covering 176 exporters. In only 33 of the 176 cases, the normal value was based on the actual

44

price information. In all other cases it was constructed. While constructing the normal value the authority relied mainly on the cost of production method. The use of the export price to the third country has been quite infrequent. In over 50 percent of the cases, best available information was used. Best available information is used mainly to procure the cost data. Table 27 Normal value calculation in 59 Indian cases 1997-2003 Calculation Method Actual Price Best available information 1) Price 2) Cost 3) Not classified Cost Construction on the basis of the exporters’ information Export Price to other countries Total

Number of cases 33 91 16 63 12 50 2 176

Source: Author’s calculations based on information in Government of India Gazette

5.4.2

Treatment of the Non-market Economy

In countries with non-market economies (among them China) the designated authority shall consider on a case-by-case basis whether the companies are operating under market conditions. A specified criterion has been laid down in the law for the guidance of the authority. 69 5.4.3

Principles for determination of injury

There is no mathematical model for determining the existence of injury. An analysis has been made of the movement of 15 economic indicators as examined by the authority in 59 AD investigations between 1997 and 2003 tabulated below. In almost all the cases, price and profitability have shown downward movement while volume and the share of imports have gone up. The other important indicators assessed in most cases are the volumes of sales, market share and capacity utilisation. Employment, growth of the domestic industry, return to investment, productivity and wage rates are not considered in injury assessment in most cases.

69

See further Stoler, Andrew L. : “Treatment Of China As A Non-Market Economy: Implications For Antidumping And Countervailing Measures And Impact On Chinese Company Operations In The WTO Framework”

45

Table 28 Indian injury-assessment based on 59 AD investigations during 1998-2003 Economic indicators where negative trends reflect injury Upward Adverse affect No Change Not considered Total movement (% of (% of total (% of total (% of total cases) total cases) cases) cases) Price 3.4 96.6 0.0 0.0 100 Profitability 0.0 93.2 0.0 6.8 100 Volume of sales 27.9 57.4 0.0 14.8 100 Market share 0.0 53.3 0.0 46.7 100 Capacity utilisation 0.0 49.2 10.2 40.7 100 Return on 0.0 22.0 0.0 78.0 100 investment Employment 0.0 16.9 15.3 67.8 100 Loss of contract 0.0 10.2 0.0 89.8 100 Productivity 1.7 5.1 0.0 93.2 100 Growth of domestic 0.0 3.4 0.0 96.6 100 industry Return on capital 0.0 3.4 0.0 96.6 100 employed Wage rate 1.7 0.0 10.2 88.1 100 Share of imports 67.8 3.4 0.0 28.8 100 Closing stock 50.8 5.1 3.4 40.7 100 Source: Author’s calculations based on information in Government of India Gazette

5.4.4

Antidumping duties: AD valorem equivalence of antidumping

Antidumping duties in India are not ad valorem but rather in the form of variable and specific duties. In 2002, however, the government of India commissioned a study to calculate ad valorem equivalence of the duties. Findings of this study are summarised in table 29. Table 29 Ad valorem equivalence of Indian antidumping duties (1992-93 to 2000-2001) 0