7:59 AM Nov 29, 1993

US WANTS EXTENSIVE CHANGES IN ANTIDUMPING RULES

Geneva 27 Nov (Chakravarthi Raghavan) -- Just 17 days before the Sutherland deadline to 'lock' various texts in the Draft Final Act, the United States has put forward extensive amendments to the draft text on rules for anti-dumping and counter-vailing measures, with similar changes in the text on subsidies.

The changes proposed by the US would strengthen the hands of major importing countries to protect their domestic industry against competitive imports, particularly from developing countries, and negate the promises of a rule-based multilateral trading system and its security for exporters and trade.

Several recent studies and documents, including by the GATT, UNCTAD, World Bank and other international organizations as well as academics like Jagdish Bhagvati have all brought out that AD and CV measures have now become an extensive instrument of selective protection and trade harassment in the industrialized countries.

According to published data, compiled by UNCTAD on basis of reports to the GATT committees, as of mid-1992 there 757 outstanding cases of AD actions of which the US accounted for 246, the EC for 210, Australia 115 and Canada 65.

There were during same period 126 countervailing measures (on grounds of dumping or subsidies) of which the US accounted for 88 and Australia 15.

During the same period, outstanding AD cases against imports from developing countries amounted to 363 of which 96 were by the US, 117 were by the EC, 51 by Australia, 40 by Canada, 27 by Mexico, 18 by Canada and 8 by Brazil. There were 81 countervailing measures of which 67 were by the United States.

The large number of actions in the US between 1986/87 and 1991/92 were related to steel imports -- where the actions and measures eased when the exporting countries entered into voluntary export restraints but resumed when these VERs ceased. The actions in the EC were related to textiles and clothing sector.

A major objective and attempt of the developing countries and the smaller industrialized countries in the Uruguay Round negotiations has been to bring the free-wheeling actions of the major entities in the way they have used these instruments in GATT and the Tokyo Round code under greater multilateral disciplines -- both in terms of clear rules and in a credible dispute settlement system to ensure the rights of the small and the weak against the majors.

On 26 November, at the TNC, GATT Director-General Peter Sutherland said in order to conclude the substantive negotiations and approve the package of accords on 15 December at the TNC, the texts in the DFA would have to be finalised and cleared by 13 December.

The same afternoon, the US would appear to have circulated to delegations its proposals for extensive changes in the AD text -- 16 pages of amendments and nine pages of explanations.

These eleventh-hour proposals, one negotiator said, has to be seen in the context of the fact that the AD text in the DFA has been one of the texts with a long negotiating history, where negotiators have been known to have been deadlocked for weeks and months as between use of a 'the' and an 'a'.

The US proposals for changes cover socalled standard of review (to reduce the power of GATT panels on matters of facts and interpretations in AD dispute cases), anti-circumvention provisions, the sunset clause, cumulation of imports from different sources, the parties within a country which can make a complaint against dumped imports, calculation of 'below cost sales' in domestic or third country markets to assess fact of 'dumping', price averaging for comparison of prices, criteria for 'profits' to arrive at a constructed value of an imported product.

The United States mission to GATT is holding over the weekend a series of bilateral consultations with a number of key countries to explain the rationale of its proposals and to press for support, advising many of the delegations that without these changes the Uruguay Round accord would not go through the Congress.

Sutherland has asked Michael Cartland of Hong Kong, as a 'friend of the chair' to coordinate consultations in the rules area, and the antidumping and countervailing measures agreement is one such.

Sutherland has been publicly coming down on the US and EC to produce substantive results at their 1 December meeting in Brussels between Mickey Kantor and Leon Brittan on the range of issues and differences between the two, and emphasizing that these agreements have to be multilateralised.

However, some participants fear that in the coming days, with the kind of coordination/consultation processes at work -- with Sutherland not taking a direct hand but acting through 'friends of the Chair' and the secretariat -- whatever the US and EC privately agree in terms of textual changes, whether in agriculture or other areas, is likely to surface as 'Sutherland texts', with those critical forced to take a stand and deny consensus and thus take responsibility for failure.

Neither of the two majors, in this view, will bring from Brussels (where Kantor and Brittan are to meet and consider the package that their officials have been working on in Washington) any joint package or proposals and convince others to take it, but get most of these to percolate to others via the secretariat.

Though the US has taken the initiative in antidumping area, several Third World countries suspect that this has the 'sympathy' of the EC which, while not initiating the changes would be happy to see them succeed.

Changes in anti-dumping, textiles and clothing (longer duration for phase-out) and other US demands would not be opposed by the EC and the price that the Third World would be asked to pay for the concessions on agriculture that the US might make to the EC.

There are also reports that both the US and EC, at some stage, would get Sutherland to propose that in view of the deadlock or lack of consensus, the Tokyo Round code should be accepted and put into the Uruguay Round agreement -- leaving open for future further negotiations the new rules.

The US in its note circulated to delegations has said that it was not "initially a demandeur" in the anti-dumping negotiations, but that once it became clear that the (Tokyo Round) Antidumping code would undergo substantial revision and reform, it advanced its own proposals.

An EC official recently indicated in Geneva that while US proposals for changes in the AD draft texts would weaken the 'rule-based' system and security, they could all live with the Tokyo Round code as a fall-back option.

Given that both these two major entities have been misusing and abusing the Tokyo Round provisions as a major trade policy instrument for selective protection and trade harassment, their willingness to live with the Tokyo Round code is not surprising.

But this option had been rejected by the large number of major developing countries and the smaller industrialized countries at the various stages -- in the runup to the 1990 Brussels ministerial meeting, in the post-Brussels negotiations leading to the tabling of the DFA by the previous GATT head, Arthur Dunkel in December 1991, and in the subsequent discussions.

It is not clear whether the developing countries, particularly the Asean and other Far Eastern economies, will stick to this position or cave in to the US demands as they have already done in other areas.

The US draft proposals for changes cover a wide spectrum of the rules:

Standard of Review: Amendments to the AD text on dispute settlement has two major thrusts. A GATT panel on a dispute is not to reweigh the facts made available to domestic authorities, but merely determine whether the evaluation of the facts was reasonable. Also, in interpreting the provisions of the agreement, where it is ambiguous or does not specify how the obligation is to be performed, the panel can only determine whether the decision of domestic authorities is 'outside the range of actions' consistent with the obligations.

In most of the determinations in the US, on anti-dumping complaints, the domestic authorities have acted on what are described 'best information available' -- an euphemism for the information provided by their domestic enterprises -- ignoring the information of the exporter.

The US proposals on standard of review, along with the proposals for wider 'discretion' to be given to domestic authorities in several areas including in calculations of dumping margins, comparison costs and in cumulation, will virtually end the role of GATT panels in this entire area -- allowing them to intervene only when complainants prove mala fides.

Anti-circumvention: A second proposal relates to socalled anti-circumvention provisions to enable, without any further or new investigations, levy of dumping duties on parts and components exported to a country for further assembly or completion, once a dumping has been found in respect of the product as a whole. In somewhat widely worded language about 'historical suppliers' and 'related suppliers', the duties on components could relate to those from the country where the product has been judged to have been 'dumped' or from one or more third countries.

The DFA text itself has some provisions on this, namely assembly or completion within the importing country of components and parts from the exporting country. But the US proposals will widen the scope for importing countries to take actions on parts and components from the exporting country for assembly in the importing country or assembly in a third country before export to the importing country. The 'requirements' before action can be taken in the DFA are now made into mere 'criteria for consideration' -- which with the standard of review would virtually place any decision of the US for example beyond challenge.

Sunset: The present text requires importing authorities to periodically review their ad/cv measures and revoke them if not found necessary. But in any event, definitive antidumping duties are to be terminated no later than five years unless it is determined that the continued imposition of the antidumping measures are necessary to prevent continuation of recurrence of injury by dumped imports.

The US proposals would change the presumption in favour of termination and the need for a positive finding of continued injury, but would enable the importing country to continue the original anti-dumping measure, after a review, for 'good cause' and with the further stipulation that no interested party will have the burden of proof that injury is or is not likely to continue or occur.

Standing for complaints: The GATT provisions and the AD text require complaints before domestic authorities to be initiated by or on behalf of domestic industry. The US proposal would have any application to be viewed as initiated by or on behalf of domestic industry if it is supported by domestic producers collectively accounting for more than 50 percent of domestic production of the like product by domestic industry either supporting or opposing the application, but those supporting a complaint is less than 25 percent of domestic production.

And domestic 'producers' initiating or supporting a complaint could include 'employees' of domestic industry.

This somewhat convoluted wording could mean that if domestic producers (a few producers, and employees accounting together for say 26 percent of domestic production, support a complaint, and 25 percent or producers oppose it), the application would still be seen as having more than 51 percent needed to have a an investigation going.

Cumulation: Under the existing text dumping actions are to be terminated if the volume of imports is less than one percent of the importing country's domestic market or dumped margin is less than two percent of normal value. However imports from countries that individually account for less than one percent of the importing country domestic market could be cumulated if they account for more than 2.5 percent of the market.

The US would do away with the de minimis requirement of 2.5 percent volume of the market -- allowing cumulation from more than one country if the dumping margin is more than two percent of normal value, the volume of imports from each is not 'negligible' and a cumulative assessment is 'appropriate'.

The de minimis margin of dumping will also be reduced from one percent of normal value to 0.5 percent of export price.

In making calculations about 'dumping' -- whether they are below or above the prices charged in normal transactions in domestic markets of the exporting country, or in coming to a 'constructed value' of the costs -- the US proposals will expand the scope of the inquiring authorities to find dumping via calculation of costs and reasonable margins of profits are to be made.