How to balance the conflicting interests under the Anti-dumping Agreement?

1. How to balance the conflicting interests under the Anti-dumping Agreement? Young Jae, Cho

2. Dumping & Anti-dumping • Dumping • Dumping is exporting at prices below those charged on the domestic market • International Price Discrimination • Scale of economy, Product Life Cycle, etc. • The effects of dumping • Distortion of Free Market Economy Principle • Export of unemployment, etc. • Anti-dumping • Level playing field • Domestic producers’ (DPs’) interests • Even DPs with monopoly profit • Regulation of monopoly profit is on Anti-trust (AT) law aiming at consumer’s welfare • In integrated market (advanced FTA), AT tends to replace AD • Workers’ interests (job)

3. Anti-dumping Agreement (ADA) • What ADA secures for interested parties • Domestic producers (DP) : legitimate right for remedy • Investigating authorities (IA) : quasi-judicial power • Foreign exporters (FE) : due process right • Possibilities of abuse by interested parties • Domestic producers : strategic construction of petition ex) standing, definition of industry, product scope, sunset review, etc. • Investigating authorities : excessive discretion ex) zeroing, facts available, NME, etc. • Foreign exporters : evasive tactics ex) targeted dumping, circumvention, absorption, etc. • Adjudication (Dispute Settlement), New Rule Making (DDA)

4. Guidelines for DDA negotiation & Major issues • Guidelines for DDA negotiation • Reflecting WTO jurisprudence • Balancing conflicting interests among DP, IA, FE while ensuring legitimate rights but disciplining abuse or moral hazard • Shifting the focus from member countries to 3 parties might help outcome of negotiation depend more on rationality than on political bargaining • Considering technical feasibility • Remove undue burden on DP, FE as well as IA • Some major issues to be dealt with in light of the Guidelines • Dumping & Import : Zeroing, Targeted Dumping, De minimis, Negligibility, etc. • Domestic Industry & Injury : Standing, Definition of domestic Industry, Injury Margin, Non-attribution, Causation, etc. • Sunset Review : Automatic Termination, Standard, etc. • Product Scope : Substantive rules, Procedural rules, etc.

5. Dumping & Import • Zeroing & Targeted Dumping (TD) • Under ADA & WTO jurisprudence, prohibited except for TD • Art. 2.4.2 (fair comparison, all comparable export transactions), Art. 9.3 (not exceed DM), etc. • Need other exceptions than TD? • In case that, in sunset review, IA calculates DM and adjusts duty rate, FEs might try to adjust export volume & price to get low or no DM during the period of original duty • However, zeroing could be applied pursuant to Art. 2.4.2, assuming Art. 2 applies to Art. 11 • TD, detour to zeroing • Significant difference in export prices among different purchasers, regions or time periods • Pattern of export prices (a regular form or order in which a series of things occur) • Explanation as to why A-A or T-T is not appropriate, or A-T is necessary • Need to further clarify requirements for TD because zeroing is likely to move its battleground to TD in the near future

6. Dumping & Import • De minimis : raising the standard (2%) • Pros : business practice/ abuse/ margin of error/ no material injury, etc. • Cons • FE’s room for TD  IA’s frequent resort to TD ex) 5%: 1/2 export (10% DM), 1/2 export (0% DM) • Commercially meaningful, cumulative effect, etc. • Negligible volume • Basis of 3% : total imports of the like product (LP)  domestic market of LP • Negligibility for the impact of dumped import on domestic market rather than on total import • Impact of dumped imports on the other imports • Repealing cumulative standard of 7 % • Encouraging DP to include as many small sources as possible • However, repealing cumulative standard of 7% along with changing the basis of 3% might restrict DP’s legitimate right to petition

7. Domestic Industry & Injury • Standing & Definition of Domestic Industry • Support by 50% out of domestic producers expressing support or opposition in terms of output & 25% of total production of domestic industry (Art. 5.4) • Domestic industry refers to the domestic producers as a whole of the like products or to a major proportion of the total domestic production of those products. (Art. 4.1) • What are the loopholes & how to deal therewith? • Need dual standards for standing? • Both are based upon proportion of total production • 50% & 25% are too low? • Arguably not, considering many producers expressing no opinion • Alternatively, a single standard ex) support by 50% of total production of domestic industry • Relation between standing & ‘a major proportion’ as the domestic industry? • Not clear, but probably would pass WTO jurisprudence if IA includes 25% or more of total domestic production for injury determination • But, what if IA includes less than 25% of total domestic production? • If a single standard for standing(50%) & apply it to the definition of domestic industry, better representation for both petition & injury determination • In Art. 4.1, a major proportion  the major proportion, i.e. 1/2

8. Domestic Industry & Injury • Lesser Duty & Injury Margin • Desirable that the duty be less than the margin if such lesser duty would be adequate to remove the injury to the domestic industry (Art. 9.1) • Lesser Duty Rule (LDR) • Very difficult to measure injury caused by dumping because it could take various forms ex) profit, market share, employment, operating rate, etc. • However, AD is to remedy injury caused only by dumping • A legal fiction to regard the gap between DP’s P & FE’s P (or between DP’s actual P & DP’s non-undercut P) as injury caused by dumping • Calculation of Injury Margin (IM) • Need a lot of assumptions • Even more complicated in relation to non-attribution & causation • Alternatively, provide for essential factors in calculating injury margin ex) FE’s P & DP’s P in the market, average profit rate in the industry of DP, the degree of suppression of DP’s P due to FE’s P, etc.

9. Domestic Industry & Injury • Non-attribution & Causation • Injuries caused by other factors not attributed to the dumped imports (Art. 3.5) • Need to Separate & Distinguish other factors? • Desirable in principle, but how? • Given current causation standard, however, little difference be it Quantitatively or Qualitatively • Affirmative determination if there is injury & dumping is a cause thereof • Standard of Causation comes before Non-attribution • Improvement of standard of causation • Dumping be the primary cause or one of the major causes of material injury? • Need weigh dumping against other factors? • Relevant issue • IM & LDR might be able to play 2nd causation role, complementing flaws of current causation • Need to improve at least one out of Causation & LDR

10. Sunset Review • Automatic termination • If no automatic termination, DP may use sunset review repeatedly • Worse, if IA gives sympathetic consideration to DPs • However, if automatic termination with no possibility of extension, FE may keep dumping or absorbing duty especially under the prospective assessment • Examples of extension, assuming possibility of extension • 5yrs + 3yrs (continuation only) • 5yrs + 3yrs (continuation, recurrence) • 5yrs + 5yrs (continuation only) • 5yrs + 5yrs (continuation, recurrence) • Additional standard for sunset review • Continuation, Art. 3.2, 3.4, 3.5 can generally apply because injury continues • Recurrence, might need additional standard • Loose, recurrence if AD duty applied & injury recovered • Tight, recurrence only if it is ‘clearly foreseen & imminent’ • Intermediate, likely to recur in the ‘foreseeable future’

11. Product Scope • Product Under Consideration (PUC) & Product Scope (PS) • No direct provision for PUC/PS • Like product is a product alike to all respects to PUC, or a product of characteristics closely resembling those of PUC (Art. 2.6) • PUC, not just about definition or description but about scope of a product • Under PUC, many sub-models, sub-types, market segments, etc. • Legal implication of PUC/PS • Affects overall AD proceedings i.e. Standing, DM, Injury, imposition of AD duty, etc. • Subject to legal assessment, severally and jointly • Interested parties’ behaviors • DP : expansion of PS, selective PS (arbitrary line drawing) • FE : circumvention by minor alteration • IA : excessive discretion

12. C1 C2 C1 C2 C1 C2 [Case 1] [Case 2] [Case 3] Product Scope [Example of Selective PS] C1, C2 : Generally Accepted Criteria Of Categorization, C1> C2 • While all the products in the PS share the same basic physical characteristics with each other, the above examples have the following problems. • [case 1,2] PS singles out fragmented market segments • [case 3] PS disregards C1 ex) C1: Physical characteristics, C2: Color

13. Product Scope • Substantive rules for PS • Rule 1 : A single product in one AD investigation • Rule 2 : Sharing of the same basic physical characteristics among sub-items • Rule 3 : PS not in conflict with generally accepted criteria in the industry/market • “Selective PS” is prohibited • If no clear dividing line, all sub-items shall be a product • Exception? ex) Exclusion of certain sub-items for public interest • Even if allowed, in the stage of imposition of AD duty, not in the stage of investigation • Procedural rules for PS • Amending PS • Exclusion as in case1 & Inclusion as in case2 • Time limit for amending • Exclusion, by final decision to impose AD duty • Inclusion, within certain period after the initiation