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TWN Info Service on WTO and Trade Issues (Dec07/03)

10 December 2007


The following article was published in SUNS dated 5 December 2007 and is reproduced here with permission.  Any reproduction requires the permission of SUNS (sunstwn@bluewin.ch).

Best regards
Martin Khor
TWN


Trade: WTO Rules text curbs fisheries subsidies, tightens AD rules
Published in SUNS #6380 dated 5 December 2007
Geneva, 4 Dec 2007:  By Kanaga Raja

The Chairman of the WTO Negotiating Group on Rules, Ambassador Guillermo Valles Galmes of Uruguay, has circulated what he calls a "Draft Consolidated Chair Texts of the AD and SCM Agreements" that includes new provisions to discipline fisheries subsidies and imposes a number of measures aimed at tightening the rules on anti-dumping.

The comprehensive 93-page document issued on 30 November (TN/RL/W/213) contains draft texts that are presented in the form of proposed revisions to the existing Agreements on Anti-Dumping (AD) and Subsidies and Countervailing Measures (SCM).

In presenting it as draft legal texts to stimulate "serious reflection" by Participants on broad parameters of possible outcomes to the negotiations, the Chairman said: "There are no brackets and no blanks, not because I expect or ask Participants to agree to the texts at this stage, but indeed because I consider that they are bracketed in their entirety."

Citing the need to achieve a balance in the negotiations, the Chair said: "Thus, while all Participants will, I believe, find that a number of their demands have been taken into account in these texts, every Participant will also find things that they do not like, and even that they dislike intensely."

The Chair stressed that "These texts are not the end of our negotiating process but only the first step in a new phase involving further intensive discussions within the Group."

The Rules Group will have its first discussion on the texts on 12-14 December. Further meetings are scheduled for the weeks of 21 January and 11 February. The Chair said that his intention is to circulate a revised text in February.

On the issue of anti-dumping, a key element in the negotiations, the text addresses the controversial practice of "zeroing".

The term "zeroing" is used when a member, in anti-dumping investigations, for comparison values, uses values of exports below the "normal" value, but ignores exports where prices are above the "normal" value.

In what appears to be a concession to the United States, the text expressly allows the practice of zeroing in several limited circumstances.

In a number of AD disputes that have been brought up against the United States, where the US has used the "zeroing" methodology in its calculation of dumping margins, dispute panels and the Appellate Body have repeatedly ruled that the practice of zeroing in anti-dumping investigations was contrary to the WTO agreements.

The US has been strongly disputing this, and specifically has proposed changes to the rules to permit such "zeroing". And in the US Congress, key Senators and Congressman, including the chair of the House Ways and Means Committee (dealing with trade agreements), have told the US Trade Representative that unless the WTO rules are changed to allow "zeroing", Congress would not be able to accept any trade agreement out of the Doha talks.

The US administration has now no Trade Promotion Authority to negotiate trade agreements.

Mr. Chakravarthi Raghavan, Editor Emeritus, who has been monitoring and analysing for three decades the GATT and WTO and trade negotiations, says that this proposal is aimed at reversing successive rulings of the Appellate Body and is a complete surrender to the "demands" for Congressional lobbies in the US, in line with the recent letters to the USTR by key Senators and Congressman, including the Chair of the House Ways and Means Committee, under whose remit fall any Congressional consideration of trade accords.

Some US experts have viewed it as a partial concession. However, in comments on the proposed rules changes on "zeroing", posted on the International Economic Law and Policy blog, Susan Evans, a trade law expert, says that the Chair's proposal is not a compromise but is the US position and represents one hundred percent what the US wants, and surely emanates from the US.

The proposed method permits dumping margins to be inflated several times over and makes a nonsense of the existing provisions on targeted dumping, which have been correctly interpreted by the Appellate Body. The US would get market access at bound tariff rates; but could use superior trade defence resources to impose prohibitive additional duties whenever it pleases. So much for free trade.

Another trade law specialist, Mr. Sungjoon Cho, agrees with this and says that the proposal aims to override the Appellate Body jurisprudence on zeroing, which will set a bad precedent.

According to trade officials, the limited circumstances where zeroing is allowed are: imposition or collection of duty, and review of anti-dumping duties, including "sunset" (Article 2.4.3 iii and Article 9.3.2). The practice is not allowed in the initiation of an investigation.

According to the Chair's texts, Article 2.4.3 states: "When the authorities aggregate the results of multiple comparisons in order to establish the existence or extent of a margin of dumping, the provisions of this paragraph shall apply:

(I) when, in an investigation initiated pursuant to Article 5, the authorities aggregate the results of multiple comparisons of a weighted average normal value with a weighted average of prices of all comparable export transactions, they shall take into account the amount by which the export price exceeds the normal value for any of the comparisons.

(ii) when, in an investigation initiated pursuant to Article 5, the authorities aggregate the results of multiple comparisons of normal value and export prices on a transaction-to-transaction basis or of multiple comparisons of individual export transactions to a weighted average normal value, they may disregard the amount by which the export price exceeds the normal value for any of the comparisons.

(iii) when, in a review pursuant to Articles 9 or 11, the authorities aggregate the results of multiple comparisons, they may disregard the amount by which the export price exceeds the normal value for any of the comparisons."

The entire Article 2.4.3 (with sub-paras i, ii and iii) is a new one. The present Article 2.4 (after which the Chair's draft text inserts the new Art. 2.4.3 above) says: "A fair comparison shall be made between the export price and the normal value. This comparison shall be made at the same level of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the same time. Due allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability. In the cases referred to in paragraph 3, allowances for costs, including duties and taxes, incurred between importation and resale, and for profits accruing, should also be made. If in these cases price comparability has been affected, the authorities shall establish the normal value at a level of trade equivalent to the level of trade of the constructed export price, or shall make due allowance as warranted under this paragraph. The authorities shall indicate to the parties in question what information is necessary to ensure a fair comparison and shall not impose an unreasonable burden of proof on those parties."

While the text allows for certain instances of the use of the practice of zeroing, it also appears to tighten the rules on anti-dumping by including provisions for terminating anti-dumping duty orders after ten years; having investigating authorities take into account the views of interested parties that include consumer organizations; and a periodic review of members' anti-dumping policy and practices.

According to trade officials, under current rules, anti-dumping duties may be extended after an initial five years if a "sunset review" finds justification for an extension.

However, under the proposed new rules, all anti-dumping duties are to be terminated ten years after the date of imposition, irrespective of "sunset review" findings.

This is set out in Article 11.3.5, which says: "Any anti-dumping duty extended beyond the end of the initial five year period following a review in accordance with paragraph 3 [relating to determination of injury] shall be terminated on a date not later than ten years after the date of the imposition of the anti-dumping duty."

The new texts also now recognize the legality of anti-circumvention measures (Article 9bis). The new Article 9bis provides that the application of an anti-dumping duty may be extended to other products that are exported to circumvent that duty.

Article 9bis1 states: "The authorities may extend the scope of application of an existing definitive anti-dumping duty to imports of a product that is not within the product under consideration from the country subject to that duty if the authorities determine that such imports take place in circumstances that constitute circumvention of the existing anti-dumping duty."

Trade officials said that Members will also now be required to establish procedures that would "take due account of representations made by domestic interested parties whose interests might be affected by the imposition of an anti-dumping duty." (Article 9.1).

The Chair's text says: "Each Member whose national legislation contains provisions on anti-dumping measures shall establish procedures in its laws or regulations to enable its authorities, in making such decisions in an investigation initiated pursuant to Article 5, to take due account of representations made by domestic interested parties whose interests might be affected by the imposition of an anti-dumping duty."

The "domestic interested parties" shall include industrial users of the imported product under consideration and of the domestic like product, suppliers of inputs to the domestic industry and, where the product is commonly sold at the retail level, representative consumer organizations.

A new Annex III provides for periodic review (similar to trade policy reviews of members) of members' anti-dumping policy and practices.

According to the proposed Annex, the review shall be conducted on the basis of the following documentation: (a) a factual report, to be drawn up by the Secretariat on its own responsibility; and (b) if the Member under review so wishes, a report supplied by that Member.

The first cycle of reviews shall begin one year after the date of entry into force of the results of the Doha Development Agenda. During the ensuing five years, the Committee shall review the anti-dumping policies and practices of the 20 Members with the most anti-dumping measures in force as of the date of entry into force.

The list of the Members to be reviewed during each subsequent five-year review period shall be established on the basis of the number of original investigations initiated during the most recent five-year period for which information is available.

On fisheries subsidies, another crucial issue in the rules negotiations, the Chairman's document has proposed a new Annex VIII to the Agreement on Subsidies and Countervailing Measures that contains a set of rules to discipline fisheries subsidies.

According to a posting by Marc Benitah, a well-known US trade lawyer, on the International Economic Law and Policy blog, for the first time, the concept of environmentally harmful subsidies has been brought in and this has been attributed to the efforts of many non-governmental organizations such as the World Wide Fund for Nature as well as institutions such as the OECD.

According to the Chair's text, subsidies that shall be prohibited include:

"(a) Subsidies the benefits of which are conferred on the acquisition, construction, repair, renewal, renovation, modernization, or any other modification of fishing vessels or service vessels , including subsidies to boat building or shipbuilding facilities for these purposes.

(b) Subsidies the benefits of which are conferred on transfer of fishing or service vessels to third countries, including through the creation of joint enterprises with third country partners.

( c) Subsidies the benefits of which are conferred on operating costs of fishing or service vessels (including licence fees or similar charges, fuel, ice, bait, personnel, social charges, insurance, gear, and at-sea support); or of landing, handling or in- or near-port processing activities for products of marine wild capture fishing; or subsidies to cover operating losses of such vessels or activities.

(d) Subsidies in respect of, or in the form of, port infrastructure or other physical port facilities exclusively or predominantly for activities related to marine wild capture fishing (for example, fish landing facilities, fish storage facilities, and in- or near-port fish processing facilities).

(e) Income support for natural or legal persons engaged in marine wild capture fishing.

(f) Price support for products of marine wild capture fishing.

(g) Subsidies arising from the further transfer, by a payer Member government, of access rights that it has acquired from another Member government to fisheries within the jurisdiction of such other Member.

(h) Subsidies the benefits of which are conferred on any vessel engaged in illegal, unreported or unregulated fishing."

The Annex also provides for several general exceptions. Subsidies exclusively for improving fishing or service vessel and crew safety shall not be prohibited, provided that:

(1) such subsidies do not involve new vessel construction or vessel acquisition;

(2) such subsidies do not give rise to any increase in marine wild capture fishing capacity of any fishing or service vessel, on the basis of gross tonnage, volume of fish hold, engine power, or on any other basis, and do not have the effect of maintaining in operation any such vessel that otherwise would be withdrawn; and

(3) the improvements are undertaken to comply with safety standards.

Also not prohibited are subsidies exclusively for: (1) the adoption of gear for selective fishing techniques; (2) the adoption of other techniques aimed at reducing the environmental impact of marine wild capture fishing; (3) compliance with fisheries management regimes aimed at sustainable use and conservation (e. g., devices for Vessel Monitoring Systems); provided that the subsidies do not give rise to any increase in the marine wild capture fishing capacity of any fishing or service vessel, on the basis of gross tonnage, volume of fish hold, engine power, or on any other basis, and do not have the effect of maintaining in operation any such vessel that otherwise would be withdrawn.

The Least Developed Countries are exempted from the new disciplines. According to trade officials, developing countries are given flexibilities, especially for small-scale fishing in their territorial waters.

Also, access fees for the right to fish in the territorial waters of developing countries are allowed provided there are safeguards against over-fishing.

With regards to subsidies and countervailing measures, Article 6 ("Serious Prejudice"), Article 8 ("Identification of Non-Actionable Subsidies") and Article 9 ("Consultations and Authorized Remedies"), which have lapsed since 1999, the Chair's text has brought them in.

But it is not clear whether the Chair is proposing their re-institution. The US, within the Rules group, has a proposal to include these as Prohibited Subsidies, but specifically excludes Agriculture from its scope. +

 


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