Geneva, Nov (Chakravarthi Raghavan) -- Several developing countries have made a strong bid for changes in the WTO's Agreements on anti-dumping and subsidies and countervailing duties to ensure equity and symmetry in the operation and use of these agreements to promote development.
The views were presented at the informal General Council meetings in October, which had been mandated by the 2rd Ministerial meeting of the WTO in Geneva in May, to undertake a preparatory process for the 3rd Ministerial meeting, in 1999, and address among others the issues of "implementation", "built-in agenda" and "future work already provided for in the Marrakesh agreements and decisions."
A number of developing countries focused on these rules areas, both as substantive issues, as well as in terms of giving effect to the Special and Differential Treatment principles in the WTO agreements.
Discussions on these are to be resumed at future meetings, but the WTO members are yet to agree on a consensus on how to do it.
Anti-Dumping Agreement: Brazil, India, Indonesia (for ASEAN), Egypt for Africa, South Korea, were among those who focused on this.
Brazil: "The abusive and disproportionate use of anti-dumping measures by some developed countries is also a way to frustrate expectations created during the Uruguay Round (UR). In the period 1987-1997, developing countries were responsible for only 31% of investigations opened. At the same time, they were affected by 62% of the investigations. "This situation is even less acceptable given the concentration of measures in some specific sectors where developing countries have developed a competitive industry. One major trading partner (a reference to the USA), for example, in the last ten years, has opened 173 investigations in the steel sector, nearly half of all investigations opened by this member. Our concern is accentuated by concrete indications that this outlook tends to aggravate in the near future."
Egypt: Exports of developing countries are facing more frequent AD and CV measures, and their frequent use against exports from developed countries has become a matter of serious and growing concern. The uncertainty and restrictiveness of these measures have created trade disruption affecting not only particular consignments, but longer-term trade in targeted products. Benefits of trade liberalization has been considerably neutralized by use of AD measures against competitive
exports in a number of products.
Enterprises from developing countries, particularly the SMEs, don't have technical and legal capacity nor resources to mount an effective defense, and the assistance that developing country governments can provide these enterprises to defend their cases is very limited.
At the same time, the liberalization efforts of developing countries have made their markets more contestable. But many of the developing country governments lack expertise, capability and resources to effectively use AD and CV measures to protect legitimate concerns of their domestic industries.
Art. 15 of the agreement calls for special regard to the situation of developing countries by developed countries in applying AD measures. But no information is available on the actual implementation of this. The article also calls for "constructive remedies" to be explored. But
no information is also available on the implementation of this provision. The agreement does not lay out how the objectives of Art. 15 are to be achieved, and the special dispensations provided have not accrued to developing countries. Detailed and binding guidelines should be laid down to implement this Article so as to protect the trade interests of developing countries and prevent trade harassment. There is a need to raise the de minimis dumping margin and de minimis volume
of imports below which injury should be considered insignificant.
India: Art 15 of the AD agreement calls for special regard for the situation of developing countries and for exploring constructive remedies before applying anti-dumping duties. But the AD measures are being virtually used as "weapons" by certain developed countries to deny access to products of developing countries. Actions on the same product have been repeatedly initiated by certain developed countries, creating uncertainty and unpredictability in the market, militating against the GATT principles. Clear guidelines should hence be laid down to make sure that Art.15 provisions are translated into practice.
Towards this end, the prescribed de minimis dumping margin of 2% of export price, below which no AD duty is to be imposed, which is the same for developing and developed countries, and unrealistically low. For developing countries -- many of whose exports are produced by labour intensive small and medium enterprises, and where imposition or even threat of imposition of AD duties has a serious adverse effect on the functioning of such units, resulting in fall in production, heavy unemployment and decline in incomes and increases in poverty levels -- the de minimis margin should be raised, to reflect the disadvantages that the industry in such a country suffers visavis comparable production in developed countries. In India, for e.g., it has been estimated, that the disadvantage suffered by Indian industry due to differential costs of working capital, financing cost of excise duty refunds, intangible infrastructure costs, sales tax on local bought outs and octroi amount to about 17 percent. The inherently high prices sometimes maintainable in domestic markets are not sustainable in exports, where prices reflect reduced levels of profitability for the
exporter. While the extent of disadvantage varies from country to country, its assessment could be cumbersome and contentious. An across-the-board higher de minimis for all developing countries should be fixed to adequately reflect the higher price levels in such countries.
Art. 5.8 of the AD agreement provides that the volume of "dumped" imports shall be normally regarded as negligible if the dumped imports from a country is less than three percent, and countries individually accounting for less than three percent account for more than seven percent. In view of liberalisation of global trade, and of more and more developing countries entering untapped markets for them, these percentages should be increased respectively to 7 and 15 percent respectively.
AD investigations are against specific exporters, and the impact and resulting duties are felt by developing country exporters, who are very small in size and operations, and the cost of defending their interests is prohibitive. Hence, investigations against developing country exporters should be initiated only if it has the support of 50% of the domestic industry of the importing developed country producers, and no investigation should be initiated for a period of 365 days from finalisation of a previous investigation for the same product resulting in non-imposition of duties. If it is established that circumstances have changed drastically, such investigations should be initiated only if it has the support of atleast 75% of domestic industry. Stricter criteria should be applied for such repeated investigations, and period of investigation should not less than a year. Guidelines should be established defining the parameters of "establishing", "drastic" change of circumstances and "stricter criteria" to be applied.
Art. 9.1 allows for imposing AD duties when all requirements have been fulfilled, but says that the duty should be less than the dumping margin if the lesser duty is adequate to remove injury to the domestic industry. But a large number of developed countries, who are also active users of this instrument, apply duties to the fullest extent of dumping margin, resulting in a higher level of production to the domestic industry. There should be a special provision in the rules to make mandatory the "lesser duty rule" when a developed country is investigating alleged dumped imports from a developing country. The norms and criteria should be established to operationalise the "lesser duty" route in terms of "adequacy" to remove "injury".
The AD agreement has severely limited the role of WTO dispute panels, enjoining them from overturning conclusions of authorities of the importing country if they had evaluated the facts properly, objectively and without bias -- even if the panel on the same facts reaches a different conclusion. Since developed countries are increasingly resorting to use of AD duties against developing countries, the same standards of review applicable to disputes relating to other covered
agreements should be apply to anti-dumping.
Indonesia (for ASEAN): The AD agreement, unlike others, does not provide for any substantive review nor specific scope for amendments. The annual review under Art.16 has been reduced to a "routine exercise", while problems relating to implementation of the agreement proliferate. These should be addressed.
* Art. 2.4 of the agreement, requires comparison between export prices and normal value should be fair. But it also provide for exceptions, and the exceptions have virtually become the rule - resulting in artificially high dumping margins;
* Art. 3 on determination of injury is still not procedurally defined, leaving room for discretion, contributing to unfair use of such measures;
* only lip service is often paid to the "lesser duty rule" under Art. 9.1., with very few AD actions resulting in a "lesser duty adequate to remove the injury to the domestic industry";
* Art. 15 concerning developing country members continues to be effectively non-operative; and special regard is seldom accorded to developing country members in application of AD measures and constrictive remedies are almost unheard of;
* the "standard of review" provision in Art. 17 unduly circumscribes the role of WTO dispute panels - and is in complete contrast to the powers extended to panels under Art. 11 of the DSU. There is no reason why a different, and more restrictive standard of review must pertain to adjudication of WTO disputes in the anti-dumping area.
South Korea: Considering the proliferation of AD actions in recent years, the provisions of the Agreement should be seriously reviewed in the context of implementation, as well as in the future round of negotiations. Too frequent, some might say abusive, recourse to AD actions is often due to the ambiguity and vagueness of some of the provisions of the Agreement. This problem deserves immediate attention, and Korea will go over this issue in further detail at a later stage of the preparatory process.
Agreement on Subsidies and Countervailing Measures:
Egypt: This agreement, and the S&D treatment there, is of great importance to developing countries since certain subsidies are critical to the process of development.
The provisions of the Agreement relating to presumption of serious prejudice and to non-actionable subsidies being applied provisionally for five years, are to be reviewed in mid-1999 to decide whether they are to be extended or in a modified form. Given that the financial capacity of developing countries to provide subsidies is limited and that their development, particularly in the industrial sector, may require subsidies, these should be categorised as non-actionable under
Art. 8. These subsidies may include measures such as cheaper finance, financial support for advanced technology and subsidy for diversification efforts or market development etc.
India: There is an in-built imbalance in the Agreement. Subsidies normally used in developed countries (R & D, regional development and adaptation to environmental standards) are considered non-actionable. But subsidies usually used by developing countries for development, diversification and upgrading of their industries are actionable. This imbalance has to be removed by making the latter range of measures also non-actionable.
Art. 27.2 of the Agreement provides a special dispensation for developing country members specified in Annex VII, and to other developing countries for a period of 8 years. But the subsidies
maintainable under this article are nevertheless subject to countervailing measures, in accordance with provisions of Art.VI of GATT 1994. Thus the special dispensation of Art. 27.2 is negated by the
provisions allowing countervailing measures. It is hence necessary that countervailing measures be not allowed to be used by developed country members against subsidies maintained by developing countries under the Art. 27 dispensation.
Other provisions of the subsidies agreement also need to be altered to take account of the interests of developing countries:
Industry in developing countries face more disadvantages than counterparts in developed countries - among others for reasons of the high cost of capital, low levels of infrastructure development, inadequate integration and organization of the economy, poorly developed information networks. Recent thinking among economists recognises need for a more active role for the state. In order to offset the many disadvantages that developing countries and LDCs among them encounter, the de minimis level, below which countervailing duties may mot be imposed, now fixed at 3% for developing countries should be scaled up to a more realistic level; The agreement provides that if the volume of the subsidized imports from a developing country is less than 4% of imports of a product, the investigation should be terminated unless the volume of imports of like product from all developing countries account for 9% of total imports.
The CV investigations should be terminated when imports from a developing country are less than 7 percent, irrespective of the cumulative volume of imports of the like product from all countries.
Alternatively, if a safeguard is needed for developed countries against a surge of subsidized imports from a number of developing countries at the same time, the de minimis volume of cumulative imports should be raised to atleast 15 percent.
even if the investigation by a developed country reaches the conclusion that the export prices have an element of subsidy, the duties should be restricted to amount by which the subsidy exceeds the de minimis level.the definition of "inputs" under footnote 61 of Annex II of the agreement should be widened to include all inputs which are financially, not necessarily physically, incorporated in the cost/price of export products. This will allow for remission of import charges on capital goods when used for export production. Also, consumables other than those prescribed under current definition should be included - so that duties and import charges can be rebated by developing countries without being considered subsidies. aggregated and generalised rates of duty remission should be allowed for developing countries even though individual units may not be able to establish the source of their inputs. This is necessary as export production units in developing countries are very small in size, compared to their counterparts in developed countries, and consequently do not have the necessary expertise to maintain elaborate systems of accounting of inputs.para K of Annex I states that export credit at rates below those which the granting authority actually has to pay for funds so employed would be considered as export subsidy. Developing country members should get special dispensation, and such export subsidies should not be considered as subsidies so long as the rates at which they are extended are below LIBOR.taxes can be collected in many developing countries, including India, at different levels. Customs duties, income-tax, excise duties on production of goods etc are levied and collected by the central government. The state governments may charge sales tax on sales within their respective states, while local authorities often collect municipal or other taxes including octroi, cess etc. The impact of such taxes vary from state to state, and even from district to district within a state. Goods produced in the country suffer from a number of these taxes at various stages of production. While some of them like excise duties are taken care of by a system of abatements at every stage of production, others remain unabated - in addition to a large number of other taxes that have to be absorbed as a cost of manufacture.Even though the GATT agreement permits neutralisation of all taxes, several remain un-neutralized in many developing countries because of the plethora of taxes and multiplicity of collecting agencies. The developed countries get over this problem by using the VAT system, whose introduction in developing countries will take time because of the complexities and costs involved. Such countries should be allowed to neutralise the cost escalating effect of such taxes by partial or
full remission of direct taxes.