"Free Sample of Memorandum of Understanding Selling of Shares"
Seminar on Trade Remedies and the WTO Chamber of Commerce of Serbia Richard King White & Case LLP Brussels Belgrade 29 and 30 November 2004 www.whitecase.com GENERAL PRESENTATION OF THE WTO AGREEMENTS IN THE PERSPECTIVE OF THE ACCESSION TO THE WTO Page 2 Effects of WTO Accession on Trade Remedies Bound tariffs MFN/National Treatment required Imposition of Trade Measures subject to the WTO Agreements Enforceable dispute settlement Page 3 International Trade Trends: Increasing International Use of Trade Remedy Laws Changing Trade Laws o Three Important Trends in Trade Regulation The lowering of tariffs and the elimination of barriers in the context of multilateral trade agreements The growth of regional trading blocks with preferential trading rights that further reduce tariffs and non-tariff barriers to regional partners The standardization of trade rules through international codes and the implementation of trade laws based upon those standards Page 4 International Trade Trends: Increasing International Use of Trade Remedy Laws Historical Perspective o Prior to 1970, high tariffs and non-tariff barriers were the methods to regulate trade International trade opportunities were limited by high tariff walls No international standards or recognized procedural rights Most cases were handled diplomatically To protect domestic industries, countries had remedies such as high tariffs, licenses and quotas Page 5 International Trade Trends: Increasing International Use of Trade Remedy Laws o The GATT Tokyo Round Agreements in 1979: the new age in trade regulation Tariff rates were reduced, making certain industries vulnerable to imports A new agreement on countervailing duties Antidumping agreement expanded To protect domestic industries, certain developed countries, such as the United States, Canada, E.G., Australia, relied on unfair trade laws Page 6 International Trade Trends: Increasing International Use of Trade Remedy Laws o The Uruguay Round Agreements: Further significant changes in global trade regulation Further reduction of global tariffs Further implementation and standardization of rules – antidumping, safeguards, subsidies and countervailing measures, services, agriculture, textiles and clothing, market access, government procurement, import licensing, pre-shipment inspection, rules of origin, standards, technical barriers to trade, and intellectual property rights Tariff reductions led more countries to implement trade laws to protect domestic industries Enforceable dispute settlement also was implemented Page 7 Number of Countries Initiating Antidumping Investigations : 1983 - 1998 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 1983- 1984- 1985- 1986- 1987- 1988- 1989- 1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Page 8 AD Measures In effect Globally By Year 1983 - 1998 1000 900 800 700 600 500 400 300 200 100 0 1983- 1984- 1985- 1986- 1987- 1988- 1989- 1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1194 1995 1996 1997 1998 Page 9 Presentation of the WTO Antidumping Agreement Page 10 International Trade Remedy Laws The WTO Antidumping Agreement (Agreement on Implementation of Article VI of the GATT 1994): o Established international disciplines for the conduct of antidumping proceedings o Some countries make the provisions of the WTO Antidumping Agreement directly enforceable o Other countries implement the WTO Antidumping Agreement via domestic legislation Page 11 International Trade Remedy Laws The Antidumping Law o What is an Antidumping Duty? An import duty assessed (or minimum import value) designed to offset injurious dumping Requirements: Dumping Material injury or threat of material injury, or "material retardation“ Causation Page 12 Definition of Dumping (Article 2.1) Dumping is defined as the export of a product at a price less than its normal value “Normal value:” the preferred basis is o the comparable price, o in the ordinary course of trade, o for the like product o when destined for consumption in the exporting country Normal value is the price for domestic sales in the exporting country Page 13 Definition of the term "like product" (Article 2.6) A "like product" is a product which is identical, i.e. alike in all respects, to the product imported If there is no identical product, the term "like product" can be interpreted to mean a product which, although not alike in all respects, has characteristics closely resembling those of the imported product Page 14 "Ordinary course of trade" The Agreement does not define the term "ordinary course of trade” Sales at below-cost prices may be considered “outside the ordinary course of trade” (see Article 2.2.1 ) Some countries regard sales between related parties as outside the ordinary course of trade Page 15 Situations in which domestic prices may be rejected as the basis for normal value (Article 2.2) When o there are no sales of the like product o in the ordinary course of trade or when such sales do not permit a proper comparison o because of a particular market situation (term not defined; not often used) o or the low volume of sales in the domestic market of the exporting country the normal value is taken to be either o the export price to a third country or o constructed value Page 16 Low volume of sales (footnote 2 to Article 2.2) Domestic sales in the exporting country are normally considered sufficient (or “viable”) if such sales constitute 5 per cent or more of the sales to the importing country. A lower ratio nevertheless may be acceptable. Page 17 Definition of the export price to a third country and constructed value (Article 2.2) The export price to a third country is: o the comparable price o of the like product o when exported to an appropriate third country, Constructed value is cost plus profit: o the cost of production in the country of origin, plus o a reasonable amount for administrative, selling and general expenses, plus o a reasonable amount for profits Page 18 Alternatives for Normal Value under the AD Agreement DOMESTIC PRICES IN THE EXPORTING COUNTRY EXPORT PRICE TO CONSTRUCTED VALUE A THIRD COUNTRY IN THE EXPORTING COUNTRY Page 19 Constructed export price (“CEP”) (Article 2.3) (transactions between related parties) Where there is no export price (e.g. because there are no domestic sales), or Where it appears that the export price is unreliable because of association (or a compensatory arrangement) between the exporter and the importer The export price may be constructed on the basis of the price at which the imported products are first resold to an independent buyer Page 20 Fair comparison between normal value and export price (Article 2.4) The comparison must 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 must be made for differences which affect price comparability, including differences in: o Conditions and terms of sale o Taxation o Quantities o Physical characteristics o Levels of trade, and o Any other differences which are demonstrated to affect price comparability Page 21 Normal value and D Export Price must be compared appropriately NORMAL ADJUSTED Adjustments VALUE NORMAL VALUE EXPORT PRICE Adjustements ADJUSTED PRICE Page 22 Methods of calculating the margin of dumping (Article 2.4.2) The Agreement provides for three specific methods for calculating the margin: o normal value per transaction versus export price per transaction o weighted average normal value versus weighted average export o price o weighted average normal value versus export prices per transaction However, the use of the third method is limited to circumstances which cannot be taken into account appropriately by using the first two methods. Page 23 Summary and recap – What is Dumping? The Antidumping Law o Dumping = Export Price < Normal Value Export Price - Net price of the product sold in the export market Normal Value - In most cases, the net price of sales in the exporter's local market Page 24 “Net” export price and normal value The Antidumping Law o "Net Price" Net of discounts and commercial rebates Net of movement expenses Net of selling expenses For "constructed export price," net of selling expenses in the importing market and value added in the importing market Page 25 Sample Dumping Margin Calculation Dumping calculation regarding imports of a single product (« model 1») Gross price € 1.50 per unit Gross price € 1.50 per unit Movement expenses Movement expenses € 0.25 € 0.50 Selling expenses Selling expenses € 0.25 Cost of production € 0.25 € 0.90 = Net price = Net price € 1.00 € 0.75 Company A’s Normal Value: Export Price Company A’s home market price CIF / Export price = € 85 Dumping margin / Model 1 = (Net home market price – Net export price) / CIF export price = (€ 1.00 – € 0.75) / € 0.85 = 29.4 percent Page 26 Definition of Injury Page 27 Introduction The margin of dumping is determined for each exporter investigated (in accordance with AD Agreement art. 6.10; AD Act art. 49) In contrast, injury is determined by industry and by country investigated (in accordance with AD Agreement art. 3; AD Act Section III) Page 28 Meaning of the Term "Injury" (AD Agreement art. 3 n.9; AD Act art. 19) The term "injury" has three meanings: Material injury to a domestic industry ("current or present injury") Threat of material injury to a domestic industry ("future injury") Material retardation of the establishment of a domestic industry Page 29 Definition of the term "domestic industry" (AD Agreement art. 4.1; AD Act art. 24) "Domestic industry" has two meanings: the domestic producers as a whole of the like products, or the producers whose collective output constitutes a major proportion of the domestic production of the like products Page 30 Exclusion of Certain Domestic Producers From the Definition of Domestic Injury When producers are related to the exporters or importers or are themselves importers of the product investigated, the term "domestic industry" may be interpreted as referring to the rest of the producers. The term "related" is defined in terms of "control." Page 31 Basic Principles for the Determination of Injury The determination of injury must be based on positive evidence and involve an objective examination of: the volume of the dumped imports the effect of the dumped imports on prices in the domestic market for like products, and the consequent impact of these imports on domestic producers of like products. Page 32 Rules for Analyzing the Volume of Imports and Their Effect on Prices (AD Agreement art. 3.2; AD Act art. 20(i)) Volume: a significant increase in dumped exports, either in absolute terms or relative to production or consumption in the importing country. Price: significantly lower than the price of the like product ("price undercutting") or have forced down the price of the like product ("price depression")/or prevented price increases which would otherwise have occurred ("price suppression"). Page 33 Cumulation of Injury Page 34 Definition of the Term ("Cumulation") Cumulative assessment consists in determining injury by taking all the imports investigated jointly into account, in this case for dumping. The cumulative assessment referred to in the AD Agreement relates to the cumulation of imports from more than one country. The cumulative assessment of imports from different exporters in the same country is not regulated explicitly by the AD Agreement. In the case of countervailing duties, the cumulative assessment of imports from more than one country is regulated by Article 15.3 of the SCM Agreement. Page 35 Rules for Cumulative Assessment (AD Agreement art. 3.3) Cumulative assessment is permissible provided that the following tests are satisfied: The margin of dumping established in relation to the imports from each country is more than de minimis, i.e., not less than 2 per cent, in accordance with the definition given in Article 5.8 of the Agreement The volume of imports from each country is "not negligible", i.e., not less than 3 per cent of the total volume of imports of the like product, unless imports which individually account for less than 3 per cent collectively account for more than 7 per cent of such imports. A cumulative assessment is appropriate in light of the conditions of competition between the imported products and the like domestic product. Page 36 Economic Impact Page 37 Rules for Analyzing the Impact of the Imports on Domestic Producers of the Like Product (AD Agreement art. 3.4; AD Act art. 21) The examination of the impact must include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry involved in the investigation. Page 38 Rules for Analyzing the Impact of the Imports on Domestic Producers of the Like Product (AD Agreement art. 3.4) Article 3.4 of the Agreement specifically mentions 16 variables o productivity o market share o margin of dumping o domestic prices o actual and potential decline in sales o inventories o output o employment o wages o negative effects on cash flow o utilization of capacity o profits o return on investments o investment o ability to raise capital o growth The Agreement notes that this list is not exhaustive and that no one or several of these factors is decisive. Page 39 Causality Page 40 Causal Relationship It must be demonstrated that the dumped imports cause injury through the effects of dumping. The interpretation of these words is controversial. They can be interpreted as meaning that it must be demonstrated: that the dumped imports cause injury or that injury caused by the dumped imports originated from the fact that they are dumped. Page 41 Causal Relationship The Agreement is silent on how a causal relationship can be established between the dumped imports and the injury (it only says that this relationship must be demonstrated). Nor does the Agreement deal with the methods that could be used to demonstrate the existence of a causal relationship. Page 42 Causal relationship Many countries demonstrate the existence of a causal relationship simply by establishing a "symmetry in time" between the dumped imports and injury. Some countries have applied economic causality tests between the prices of the imports and domestic prices. Other countries apply econometric "causality" tests between the prices of the imports investigated and domestic prices. Page 43 Other Factors Page 44 Examination of Other Alternative Factors Causing Injury (AD Agreement art. 3.5; AD Act art. 21) The causal relationship analysis should take into account any known factors other than the dumped imports which are injuring the domestic industry. Injuries caused by these "other factors" must not be attributed to the dumped imports. The Agreement illustrates the concept of "other factors" with examples such as: the volume and value of imports not sold at dumping prices contraction in demand competition between foreign and domestic producers changes in patters of consumption developments in technology export performance and productivity of the domestic industry Page 45 Threat of Material Injury Page 46 Determination of a Threat of Injury (AD Agreement art 3.7; AD Act art. 22) Threat of injury is “future injury” that must be clearly foreseen or imminent. “Future injury” derives from an expectation that the current circumstances will change creating a situation in which dumping would cause injury. Page 47 Determination of a Threat of Injury (AD Agreement art 3.7; AD Act art. 22) A determination of a threat of injury must be based on facts and not on “allegation, conjecture or remote possibility.” Antidumping measures may be levied if the national authority determines that such measures are necessary to prevent the clearly foreseen an imminent material injury to the domestic industry. Page 48 Procedural Aspects Page 49 Basis for filing applications ( Articles 5.1 and 5.4) Investigations normally are initiated upon a written application submitted by or on behalf of the domestic industry “By or on behalf of the domestic industry:” The application must be supported by domestic producers whose collective output constitutes o more than 50 per cent of the production of the domestic producers expressing a position on the application (either support or opposition) AND o at least 25 per cent of total domestic production “Domestic production" means the production of the like product attributable to the domestic industry Page 50 Initiation ex officio (Article 5.6) In special circumstances, the authorities may initiate an investigation ex officio (without having received a written application) The authorities must have sufficient evidence of dumping, injury and a causal link Page 51 Supporting evidence for initiation (Article 5.2) An application must include evidence of dumping, injury and a causal link Simple assertion unsubstantiated by relevant evidence cannot be considered sufficient to meet these requirements The information contained in the application should be such as is reasonably available to the applicant Page 52 The application should contain: o the identity of the applicant o a description of the volume and value of the domestic production of the like product o A list of all known domestic producers of the like product, and their volume and value of production o a complete description of the allegedly dumped product o the names of the country or countries of origin or export in question o the identity of each known exporter or foreign producer o a list of known importers o information on the normal value o information on export prices (or constructed export prices) o information on the evolution of the allegedly dumped imports o information on the effect of those imports on domestic prices of the like product o information on the consequent impact of the imports on the domestic industry, as demonstrated by relevant factors and indices having a bearing on the state of the domestic industry Page 53 Authorities’ Examination of the evidence ( Article 5.3) The accuracy and adequacy of the evidence provided in the application must be examined to determine whether there is sufficient evidence to justify the initiation of an investigation Rejection of an application (Article 5.8) The authorities must reject an application as soon as they are satisfied that there is not sufficient evidence of dumping or injury Page 54 Avoidance of publicity before investigation (Article 5.5) Unless a decision has been made to initiate an investigation, any publicizing of the application must be avoided Prior notification of the government of the exporting country (Article 5.5) Before proceeding to initiate an investigation, the authorities must notify the government of the exporting country concerned Page 55 Public notice and explanation of determinations: General Principles Public notice must be given of any initiation of an investigation (Article 12.1) and of any preliminary or final determination Public notice must also be given of the acceptance of a price undertaking, of the termination of such an undertaking, and of the termination of a definitive anti-dumping duty, as well as of the initiation and completion of reviews pursuant to Article 11 Such notices must set forth, in sufficient detail, the conclusions reached by the authorities on all issues of fact and law (Article 12.2) Page 56 Notification requirements Member countries and other interested parties known to the authorities must be notified of the initiation of an investigation (Article 12.1) and any subsequent determinations (Article 12.2) Page 57 Time-limit for concluding investigations (Article 5.10) Except in special circumstances, investigations shall be concluded within one year, and in no case more than 18 months, after their initiation Page 58 Guarantees of "due process" (Articles 6.2, 6.1, 6.1.2, 6.4 and 6.9) Throughout the investigation all interested parties shall have a full opportunity for the defence of their interests All interested parties must be given notice of the information which the authorities require and ample opportunity to presenting writing all evidence which they consider relevant Subject to the requirement to protect confidential information, evidence presented by one interested party must be made available promptly to other interested parties participating in the investigation Interested parties should have opportunities to see the information used by the authorities in the investigation and to prepare presentations on the basis of that information Before a final determination is made, the authorities must inform the parties of the essential facts which form the basis for the decision whether to apply definitive measures. Such disclosure should take place in sufficient time for the parties to defend their interests Page 59 Verification of information supplied during the course of an investigation (Article 6.6 and 6.7) The authorities must satisfy themselves as to the accuracy of the information supplied by the parties The information received may be validated by carrying out investigations ("verifications") in the territory of other Member countries, provided that the following conditions are satisfied: o The Agreement of the exporters involved is obtained o The Government of the Member country in question is notified and does not object The reports describing the results of the verifications must be made available to the parties to which they pertain Subject to the obligation to protect confidential information, these reports may also be made available to the applicants Page 60 "Facts available" (Article 6.8) Preliminary and final determinations may be made on the basis of the facts available when an interested party: o refuses access to necessary information o does not provide it within a reasonable period or o significantly impedes the investigation Page 61 Collection of anti-dumping duties: General Principles (Article 9.2) Anti-dumping duties are assessed per supplier They must be collected o In the appropriate amounts; and o On a non-discriminatory basis -- I.e., on all imports found to be dumped and causing injury (except where a price undertaking has been agreed) Page 62 Treatment of exporters not included in the examination (Article 9.4) When individual margins have not been determined for some exporters, the duties applied to such exporters shall not exceed the weighted average of the margins of dumping established on an individual basis o However, these calculations should exclude, on the one hand, any zero and de minimis margins and, on the other, margins established on the basis of the facts available Page 63 Reviews Refund reviews: The amount of anti-dumping duty shall not exceed the margin of dumping; refund reviews must be carried out upon request New shipper reviews: The authorities must promptly carry out a review for exporters affected by antidumping duties who do not have an individual margins because they did not export the product during the period of investigation “Interim” reviews An anti-dumping duty should remain in force only as long as and to the extent necessary to counteract dumping which is causing injury “Expiry” reviews: Anti-dumping duties lapse five years after being imposed if the authorities do not initiate an Article 11 review within 5 years Page 64 Recap of AD procedures: What must authorities do? 1. Review the application; decide whether to initiation an investigation 2. Prepare the questionnaires for exporters importers domestic producers 3. Issue supplemental questionnaires if necessary 4. Analyse and tabulate the questionnaire responses 5. verification – typically, send expert officials to the interested party’s offices to veryfy the accuracy and completeness of the questionnaire replies. Page 65 Recap of AD procedures: What must authorities do? 6. Calculation of dumping margin 7. injury and domestic interest analysis (if applicable under domestic law) 8. Provisional measures, if applicable 9. Disclosure of essential facts 10. Opportunity for written and oral comments by interested parties 11. issue of definitive measures – in case of positive dumping and injury findings and positive decision of Community interest. Definitive measures may be less than dumping margin (“lesser duty” rule) 12. Assessment of duties; reviews Page 66 Presentation of the WTO Agreement on Safeguards Page 67 Overview and Purpose of the Safeguard Law Article XIX of GATT 1994 (the "Escape Clause") allows WTO Members to provide temporary protection to domestic industries facing increased import competition. This temporary protection is known as "safeguards." The Safeguard Agreement sets forth specific procedures for implementing Article XIX. Page 68 Purpose of Safeguard Measures The purpose of safeguard measures is to prevent an emergence of injury incurred from increased imports. Safeguard measures afford domestic companies time to improve their position relative to the imports shift their resources to other fields Page 69 Definition of Domestic Industry (Safeguard Agreement art. 4.1(c)) Domestic industry means: Domestic producers of as a whole of the like or directly competitive products; or Domestic producers of like or directly competitive products, of which combined output constitutes a major proportion of the total production of the domestic industry. Like product means: Products which are identical in all respects; or Products whose characteristics significantly resemble those of imported products. Page 70 Increased Imports Safeguard measures may be applied only when a product is being imported in such increased quantities and under such conditions as to cause or threaten to cause serious industry to the domestic industry. (Safeguard Agreement art. 2.1). The increased quantity warranting a safeguard measure may be either an absolute increase or an increase relative to domestic production. (Safeguard Agreement art. 2.1). Page 71 Serious Injury or Threat of Serious Injury (Safeguard Agreement art. 4.1) Serious injury means a significant overall impairment of the position of a domestic industry. Threat of serious injury means a serious injury that is clearly imminent. Determinations of the existence of threat must be based on facts and not on conjecture or remote possibility. Page 72 Comparison of the Safeguard Injury Test and Antidumping Injury Test The Safeguard Agreement injury test was intended to be greater than the injury test in the Antidumping Agreement. However, ultimate discretion was left with the administering authority. This discretion may lower the burden for a showing of injury. Page 73 Criteria for Assessing Injury and Threat of Injury (Safeguard Agreement arts. 2.1, 4.2(a)) All relevant factors of an objective and quantifiable nature must be considered. The Agreement provides an illustrative list of the relevant factors: rate and amount of the increase in imports of the product concerned in absolute or relative terms, share of the domestic market taken by the increased imports, and changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment. Page 74 Causality (Safeguard Agreement art. 4.2(b)) Safeguard measures are not permitted unless there is a finding of the existence of a causal link between the increased imports of the product concerned and the serious injury of threat thereof to the domestic industry. If factors other than the increased imports are causing simultaneous injury to the domestic industry, the injury from such other factors may not be attributed to the increased imports. Page 75 Primary Safeguard Remedies (Safeguard Agreement arts. 5.1, 6) Two primary safeguard remedies: Quantitative import restrictions (e.g., import quotas), and Increased import duties. Page 76 Quantitative Restrictions (Safeguard Agreement art. 5.1) Quantitative import restrictions normally must be limited to restricting only the injurious imports. A measure shall not reduce the quantity of imports below the level of a recent period which shall be the average of imports in the last three representative years. If there were no imports during the past three years, available statistics should be used. This requirement may be ignored only when there is clear justification that a different level (i.e., lower than the pre-import surge level) is necessary to prevent or remedy serious injury. Page 77 Import Quotas (Safeguard Agreement art. 5.2(a)) Safeguard measures shall be applied to a product being imported irrespective of its source (Safeguard Agreement art. 2.2). Safeguard measures must be applied on a MFN basis. If achievable, an agreement with all exporting countries regarding the allocation of shares of the import quota should be reached. If such an agreement is not reasonable practicable or exporting countries cannot agree to a quota allocation, the exporting countries should receive a quota share proportional to the total value or volume of their shipments during a previous representative period. Page 78 Departures from the Prescribed Methods of Allocating Quotas (Safeguard Agreement art. 5.2(b)) If the imports from certain exporting countries have increased at a disproportionate rate in relation to the total increase in imports, the standard methods for allocating quotas may be disregarded. Any departure from the prescribed quota allocation methods must comply with the Safeguard Agreement. Mandatory consultations under the auspices of the Committee on Safeguards Demonstration that: o imports from certain countries increased disproportionately; o the reasons cited from departing from the prescribed quota allocation methods are justified; and o the conditions of the departure are equitable to all suppliers of the concerned product. Page 79 Departures from the Prescribed Methods of Allocating Quotas (Safeguard Agreement art. 5.2(b)) o No departures from the prescribed quota allocation methods in the case of threat of serious injury. o No departures permitted from the prescribed time limits (art. 7.1). Page 80 Increased Import Duties/Provisional Safeguard Measures (Safeguard Agreement art. 6) Provisional measures available for critical circumstances where delay would cause damage which would be difficult to repair. Preliminary determination that there is clear evidence that increased imports have caused or are threatening to cause serious injury. Only in the form of tariff increases. Increased tariffs must be refunded if the final determination is negative. Duration of provisional measure not to exceed 200 days. Time of provisional measure counts toward the time limits. Page 81 "Degressivity" Requirement (Safeguard Agreement art. 7.4) If the expected duration of a safeguard measure is over one year, the measure shall be liberalized progressively at regular intervals during the period of application. If the expected duration of a safeguard measure exceeds three years, the measure must be reviewed not later than the mid-term of the measure. If appropriate, the measure should be withdrawn or the pace of liberalization should be increased. The Agreement does not prescribe the extent or schedule of a phase-out. Page 82 Duration of Safeguard Measures (Safeguard Agreement art. 7) Safeguard measures may be imposed only for such period as may be necessary. The initial period of a safeguard measure may not exceed four years. A safeguard measure may be extended if such measure continues to be necessary to prevent or remedy serious injury; and there is evidence that the industry is adjusting. Page 83 Duration of Safeguard Measures (Safeguard Agreement art. 7) Under the Agreement, the total period for a safeguard measure (including the period of any provisional measure) imposed by non-developing country WTO Members shall not exceed eight years. (Safeguard Agreement art. 7.3) The Safeguard Agreement permits developing countries to impose safeguard measures for periods up to ten years. (Safeguard Agreement art. 9.1). Page 84 Limitations on the Reimposition of Safeguard Measures (Safeguard Agreement arts. 7.5, 7.6) After a safeguard measure is terminated, a new measure cannot be reimposed immediately. Generally, a new safeguard measure may be imposed until a period equal to half of the time period for which the original measure was in effect has elapsed and the period of non- application was at least two years. Note that for non-developing countries this period is equal to the time period for which the original measure was in effect. (Safeguard Agreement art. 7.5). Page 85 Limitations on the Reimposition of Safeguard Measures (Safeguard Agreement arts. 7.5, 7.6) If the original safeguard measure was 180 days or less, a new safeguard measure may be imposed if: at leased one year has elapsed since the date of introduction of the safeguard measure; and a safeguard measure has not been applied on the same product more than twice in the five year period immediately preceding the date of the introduction of the measure. Page 86 The Price of Safeguard Measures: Compensation (Safeguard Agreement art. 8) Unlike antidumping measures or countervailing duty measures, WTO Members imposing safeguard measures must compensate the affected exporting countries. The relevant WTO Members may agree on any adequate means of trade compensation to compensate for the adverse affects of the safeguard measure. If no agreement is achieved with 30 days of consultations, the affected country may unilaterally suspend the application of substantially equivalent concessions or other WTO obligations with respect to the country imposing the safeguard measure to compensate for the adverse affects of the safeguard measure. Page 87 The Price of Safeguard Measures: Compensation (Safeguard Agreement art. 8) There is a three year suspension of the collection of compensation or retaliation in cases where the safeguards are based on an absolute increase in imports. Where the safeguards are based on a relative increase, the affected WTO Member may seek compensation immediately. Page 88 AD vs. Safeguards – economic rationales Safeguard measures may be applied only when a product is being imported in such increased quantities and under such conditions as to cause or threaten to cause serious industry to the domestic industry. Measures are intended to give the domestic industry time to restructure and prepare for foreign competition. No proof of “unfair trade” needed. Dumping measures are applied only when dumping and subsequent injury occur. Purpose: to ensure “level playing field” for domestic and foreign companies. The Safeguard Agreement injury test was intended to be greater than the injury test in the Antidumping Agreement. Page 89 AD vs. Safeguards – advantages and disadvantages AD is targeted at problem countries, while safeguard measures stop imports from all sources. The use of AD can be directed against certain countries, while safeguard measures are erga omnes. AD lasts at least five years, the level of protection is constant throughout this period. Safeguard measures last not more than four years and must be reviewed at mid-term. AD has a lower injury standard than safeguards WTO Dispute Settlement Body so far has overturned all safeguards it has considered. Page 90 Presentation of the WTO Agreement on Subsidies and Countervailing Measures Page 91 The Countervailing Duty Law The WTO Agreement on Subsidies and Countervailing Measures (the "SCM Agreement"): o Establishes international disciplines for provision of subsidies o Establishes disciplines for the conduct by the importing country of countervailing investigations and reviews, and the imposition of countervailing measures Page 92 The Countervailing Duty Law Key concepts include: o Definition of Subsidy There is a "financial contribution" by a government A "benefit" is thereby conferred, and The subsidy is "specific” Page 93 The Countervailing Duty Law What is "specific"? o Export subsidies o Domestic content subsidies o Subsidies limited to a designated geographical region, o Subsidies specific to an enterprise or industry or group of enterprises or industries, whether de jure (explicit limitation or non-objective criteria) or de facto (by application) Page 94 The Countervailing Duty Law Categories of Subsidies (Subject to WTO Dispute Settlement) 1. PROHIBITED SUBSIDIES: Export subsidies; and Domestic content subsidies Page 95 The Countervailing Duty Law 2. Actionable subsidies: Specific subsidies that cause "adverse effects" to the interests of other members. "Adverse effects" include Injury to the domestic industry “Nullification or impairment" of WTO benefits, or “Serious prejudice" Subsidies are presumed to cause "serious prejudice" where subsidises are provided for debt forgiveness; or subsidies are provided to cover a firms operating losses Page 96 Standards for serious prejudice the subsidy impedes the imports of a like product from another Member the subsidy impedes the exports of a like product of another Member to a third country market the subsidy results in significant price undercutting in the same market or significant price suppression, price depression or lost sales in the same market the subsidy results in an increase in the world market share of the subsidizing Member in the subsidized product as compared to the average share it had during the previous period of three years and this increase follows a consistent trend over a period when subsidies have been granted Page 97 The Countervailing Duty Law Countervailing Duty Actions in the Importing Country o Subsidy + Injury = Countervailable Subsidy Page 98 The Countervailing Duty Law What is a Countervailable Subsidy? Export Subsidy o Country A provides a cash benefit of 10 percent of the f.o.b. value of any export There is a financial contribution by a government, only provided to exporters o Country B provides an income tax exemption for export earnings There is a financial contribution by a government There is a financial benefit (if there was taxable income), only provided to exporters Page 99 The Countervailing Duty Law What is a Countervailable Subsidy? Domestic Subsidy o Country A provides an income tax exemption limited to the steel industry There is a financial contribution by a government There is a financial benefit (if the company has taxable income), only provided to a specific industry o Country B provides inputs to the steel industry at a price lower than the market price There is a financial contribution by a government and a financial benefit, only provided to a specific industry Page 100 The Countervailing Duty Law What is a Countervailable Subsidy? Domestic Subsidy o Country A provides an income tax exemption limited to the steel industry There is a financial contribution by a government There is a financial benefit (if the company has taxable income), only provided to a specific industry o Country B provides inputs to the steel industry at a price lower than the market price There is a financial contribution by a government and a financial benefit, only provided to a specific industry Page 101 The Countervailing Duty Law What is Not a Countervailable Subsidy? o Country A provides a line of credit at the market rate to the steel industry There may be a financial contribution by a government, provided on a specific basis No financial benefit to the company o Country B provides police and fire protection NOT provided on a discriminatory basis Page 102 The Countervailing Duty Law What is Not a Countervailable Subsidy? o Country C provides a tax holiday to new industries in the country, depending upon the number of industries that receive such benefits and how the government uses its discretion to provide such benefits o Country D reduces the corporate tax rate from 40 to 35 percent There may be a financial contribution by a government NOT provided on a discriminatory basis Page 103 Legal Frameworks of the WTO and the European Union: Differences and Similarities Page 104 EU Antidumping Legislation and Procedures The EU implemented the WTO AD, SCM and Safeguards Agreements via Regulations The EU Regulations generally track the WTO Agreements However, there are some differences between the EU Regulations and the WTO Agreements Page 105 EU Basic AD Regulation (Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community) Main differences from the WTO Antidumping Agreement: 1. “Lesser duty rule” Optional under the WTO Anti-Dumping Agreement Mandatory under the EU AD Regulation Page 106 « Lesser Duty Rule » Dumping Margin / Company A Injury Margin / Company A € 1.00 € 0.80 € 0.75 € 0.75 Net Export Price / Net Normal Value Net Export Price / Non injurious Community net price = (€ 1.00 - € 0.75) / € 0.75 = (€ 0.80 - € 0.75) / € 0.75 = 33.33 percent = 6.25 percent Antidumping Measure for Company A: 6.25 percent. Page 107 EU Basic AD Regulation (Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community) Main differences from the WTO Antidumping Agreement: Community/domestic interest Optional under the WTO Anti-Dumping Agreement Mandatory under the EU AD Regulation Page 108 EU Basic AD Regulation (Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community) Main differences from the WTO Antidumping Agreement: Negligible imports: WTO ADA: Import share test. Imports are negligible if less than 3 percent of total imports, unless all negligible countries exceed 7 percent EU: Import share test PLUS market share test. o The European Commission must conduct an analysis of the Community interest. No such requirement can be found in the WTO ADA. o Negligible imports: Imports from a country are negligible if they represent less than 1 percent of Community consumption (unless such countries collectively account for more than 3 percent). This is in addition to the WTO negligibility rule (3 percent/7 percent of total imports) Page 109 EU Safeguards Legislation and Procedures Page 110 EU Safeguards in General “Global” or general safeguards apply to imports from all WTO Members. There are separate safeguards provisions for: non-WTO members; and Goods of Chinese origin (agreed to in China’s Protocol of Accession to the WTO) Page 111 The EU Safeguard Regulation The EU’s WTO Safeguard Regulation does not reproduce precisely the language of the WTO Safeguards Agreement. For example: Article 2 of (b) The WTO Agreement refers to “such increased quantities, absolute or relative to production.” In contrast, the EU Regulation refers to “such greatly increased quantities….”. (d) Also, Article 2 of the WTO Agreement sets forth the requirement that imports be in increased quantities “and under such conditions as to cause or threaten to cause serious injury…” In contrast, the EU Regulation requires that imports be in greatly increased quantities , “and/or on such terms or conditions as to cause, or threaten to cause, serious injury.” Page 112 Institutional Organizations for Trade Remedies Page 113 Some WTO Members have extensive trade remedy organizations (such as the EU and the U.S.) Others have small or medium-sized permanent authorities Others assign trade cases within an existing governmental structure on an ad hoc basis. Page 114 Organization chart of DG Trade A B C D E F G F-H. WENIG K. FALKENBERG F. LE BAIL I. WILKINSON R. PETRICCIONE J. AGUIAR MACHADO Development and Development and Industrial trade issues. Co-ordination of WTO Services. Resources. Interinstitutional Trade defence management of free trade management of trade Trade and OECD matters. Agricultural trade relations and and economic partnership relations with candidate relations with industrial Dispute settlement and questions. communications agreements with ACP countries, countries of the countries. Market Trade Barriers Sustainable policy. Information countries, CIS, Balkans, Mediterranean, access. Regulation development technology Latin America, GCC and Iran. and South Export-related trade GSP. and South-East Asia. policy. Conseiller: A. DALVIN A.1 B.1 C.1 D.1 E.1 F.1 G.1 B. PRAGNELL P. KLEIN H. STANDERTSKJOLD G. FRONTINI CATTIVELLO - J. CLARKE - Human, administrative Trade defence Negotiation and management Trade aspects of Standards and Co-ordination of WTO, Trade in services; and financial resources; instruments: of trade and free-trade European certification, TBT OECD, Trade Related GATS. Investment. external service; general policy, agreements with Latin neighbourhood policy. Assistance; programming complaints office America, GCC and Iran. GSP Trade relations with GATT; 133 Committee. candidate countries, and countries of the CIS and Balkans A.2 Page 115 O. DE LAROUSSILHE C.A: W. MUELLER C.A: H. HOUBEN C.A.:L. RUBINACCI C.A: I. KIOUSSI C.A.: C.A: A. JESSEN Organization chart of DG Trade Interinstitutional relations and B.2 C.2 D.2 E.2 F.2 G.2 communications policy C.A: S. KOFLER N. MAC DONALD C. MAERTEN P. MEYER R. PLIJTER I. GARCIA BERCERO J. SCHAPS Trade defence Negotiations and instruments: Economic partnership management of trade or Dispute settlement and Agriculture, fisheries, investigations I. agreements 1 free-trade agreements Trade Barriers Regulation sanitary and Monitoring of with Mediterranean phytosanitary third country countries, and South and measures, measures South-East Asia. TREATI. biotechnology C.A: S. GOSPAGE C.A.: C.A: C.A: N. ZAIMIS C.A: O. JONES Steel, coal, shipbuilding, automotive, chemical and other industries A.3 B.3 C.3 E.3 G.3 P. RUYS B. ADINOLFI - Market access. Trade R. SCHLEGELMILCH relations with USA, Canada, EFTA, Australia and New Zealand. Sustainable Information technology Trade defence Economic partnership development instruments: agreements 2 (including trade and investigations II environment); dialogue with civil society. Trade relations with China . C.A: G.WELGE C.A: M. DIHM C.A.: P. GARZOTTI C.A: R. RATCHFORD B.4 E.4 D. AVOT F. PERREAU DE PINNINCK Export-related trade Page 116 policy (export credits, controls; third countries practices). EU Staffing of AD Cases Department “B” of DG Trade deals with antidumping and antisubsidy investigations. Section B.1. processes the complaints and decides whether a case should be initiated. After that the other sections take over the investigation. Different units handle dumping and injury Other units deal with reviews, monitoring of undertakings, etc. For an investigation, the personnel assigned usually are: The head of the units (responsible for a number of cases) Two or three officials to handle the investigation regarding injury and Community interest Two officials to handle the dumping investigation (drafting questionnaires, reviewing questionnaire replies, conducting verification, drafting notices…) Page 117 2004 EU AD Statistics On 30 September 2004: 129 anti-dumping measures in force Initiations: In January-September 2004, 25 new investigations were initiated, as well as a number of reviews (e.g., 24 “interim” reviews). Measures: 5 provisional and 8 definitive measures were imposed. Terminations: 2 new investigations were terminated without the imposition of measures. Page 118 US AD Statistics Roughly 90 percent of DOC dumping determinations are affirmative, while only about 65 percent of ITC injury determinations are affirmative. Combined Antidumping Data 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 INITIATIONS 51 14 21 15 36 46 45 77 35 36 PRELIMS 46 23 16 16 28 34 22 61 44 19 FINALS 31 38 12 15 17 37 35 34 58 20 DUTY ORDERS 16 23 9 11 9 19 21 32 26 16 REVOCATIONS 28 12 6 4 25 48 57 8 9 2 AD REVIEWS COMPLETED 49 96 126 104 111 92 86 74 81 65 SUNSET REVIEW REVOCATIONS 4 1 148 10 9 SUNSET REVIEW CONTINUATIONS 36 125 27 2 5 Page 119 Central European country example: Bulgaria Bulgarian AD/AS Legislation: Decree of the Council of Ministers No. 287/04.12.1996 “On protection against dumped or subsidized import of goods in the Republic of Bulgaria”, amended on June 6, 1997. Compatible with WTO ADA. Organization and procedure: An AD investigation is initiated not later that 45 days after the filing of a petition. The Council of Ministers publishes a decree in the “State Gazette” announcing the initiation of the investigation. The investigation is conducted by a commission, whose members are appointed by the Minister of Economy. After the completion of an investigation the commission proposes AD measures (or termination of the procedure). The decision is taken by the Minister of Economy. Only one case: Bulgaria has conducted only one AD investigation, against imports of active baker’s yeast from Turkey. The Commission that conducted the investigation included officials from the Ministries of Economy, Finance, Agriculture and Foreign Affairs. The investigation was initiated in January 2002 and terminated without imposition of measures in September 2003. Page 120 Summary of Central European Anti-Dumping Actions as reported in Semi-Annual Reports of Members (1 July 2002-30 June 2003) – Central and Eastern European Countries Initiations Provisional Measures (negative preliminary Definitive Duties (negative Price Undertakings Revocatio Measures in force determinations and affirmative preliminary determinations not included) ns notified on 30 June 2002 determinations where no measures (definitive duties imposed are not included) and price undertakings) Total Countries involved Total Countries involved Total Countries involved Total Countries 0 BULGARIA 0 0 0 involved nr nr 0 CZECH REPUBLIC 0 0 0 0 1 0 LATVIA 2 Estonia Lithuania 1 Estonia 1 Belgium 0 1 0 LITHUANIA 0 0 0 0 7 0 POLAND 2 Czech Russia 2 Czech Russia 0 nr 8 Republic Republic "nr" indicates that the Member in question did not submit a separate table reporting revocations and/or a separate table reporting measures in force. Page 121 . Summary of Anti-Dumping Actions as reported in Semi-Annual Reports of Members (1 July 2002-30 June 2003) – Central and Eastern European Countries Lithuania Definitive duties in force Undertakings in force Country/customs Product Date imposed Country/customs Product Date territory territory imposed Belarus Burnt lime 1/28/2001 Latvia Safety matches 3/23/2001 Grey Portland 10/12/2001 Belarus Grey Portland 2/21/2003 Russia cement Burnt lime 1/28/2001 cement Grey Portland 10/1/2002 Ukraine Grey Portland 10/12/2001 cement Latvia FINAL MEASURES Dumped % of imports trade Provisional Trade Country/ Product Initiation Definitive Price as % of volume measures/ volume domestic investiga consump ted (of 1 2 3 4 5 6 11 12 13 Date Date, dumping Date, dumping Date, margin margin dumping margin Estonia Portland cement 3/12/2002 12.12.2002: 02.04.2003. - Year Year Year 2001: 2001: 2001: margin: 7,41 margin: 7,41 18260 6,44% 97% LVL/t LVL/t; proposed tons duty: 5,5 LVL/t Page 122 . Summary of Anti-Dumping Actions as reported in Semi-Annual Reports of Members (1 July 2002-30 June 2003) – Central and Eastern European Countries Czech Republic Definitive duties in force Country/customs Product Date of territory imposition Germany Salt for human consumption 11.10.2000 (4 products) Bulgaria No Final Measures Country/ Customs Product Date of Initiation Provisional Measures Territory No dumping No injury Case Other withdrawn 04.07.03 Turkey Active baker's yeast 16.1.2002 Termina- tion Page 123 . Summary of Anti-Dumping Actions as reported in Semi-Annual Reports of Members (1 July 2002-30 June 2003) – Central and Eastern European Countries Slovenia NO FINAL MEASURES Country/ Product Initiation Provisional Basis measures/ No dumping No injury Case Other Trade of determinations volume withdrawn deter Customs 1998 minati on territory 1 2 3 4 7 8 9 10 11 14 Date Date, Date Date Date Date dumping margin Fresh or frozen turkey Hungary breast, skinless, 11.3.1999 02.2.2000 1,185 MT HM boneless, half breast Page 124 . Implications of the WTO Agreements for the Private Sector Page 125 Situation for Industries in non-WTO Countries ADVANTAGE: The government of a non-WTO member has little or no limitation on the imposition of import measures from other countries, absent commitments in other agreements (such as FTAs). DISADVANTAGE: Other countries have little or no limitation on the imposition of import measures against imports from the non-WTO member, absent commitments in other agreements. Page 126 Situation for Industries in WTO Countries ADVANTAGE: Other WTO members can apply import measures against imports from the WTO Member country only pursuant to the GATT and relevant WTO agreements. If other WTO Members breach their obligations, the Member can seek binding dispute resolution. DISADVANTAGE: The government of the WTO Member country can apply import measures only pursuant to the GATT and relevant WTO agreements (and, if it breaches its obligations, can be subject to binding dispute resolution). Page 127 Producers’ Responsibilities as Complainants Page 128 Supporting evidence for initiation (Article 5.2) A complainant must file an application. The application must include evidence of dumping, injury and a causal link Simple assertion unsubstantiated by relevant evidence cannot be considered sufficient to meet these requirements The information contained in the application should be such as is reasonably available to the applicant Page 129 In particular, the application should contain the following information: the identity of the applicant a description of the volume and value of the domestic production of the like product Identify all known domestic producers in the industry, along with their volume and value of production of the like product a complete description of the allegedly dumped product the names of the country or countries of origin or export in question the identity of each known exporter or foreign producer a list of known importers Page 130 information on the normal value (domestic prices in the exporting country or, where appropriate, the prices for export to a third country or the constructed value) information on export prices or, where the export price is constructed, data on the prices of first resale to an independent buyer in the importing country information on the evolution of the allegedly dumped imports information on the effect of those imports on domestic prices of the like product information on the consequent impact of the imports on the domestic industry, as demonstrated by relevant factors and indices having a bearing on the state of the domestic industry Page 131 Examination of the evidence ( Article 5.3) The authorities must examine the accuracy and adequacy of the evidence provided in the application to determine whether there is sufficient evidence to justify the initiation of an investigation Rejection of an application (Article 5.8) The authorities must reject an application as soon as they are satisfied that there is not sufficient evidence of dumping or injury Page 132 Other activities of complainants answering domestic producer questionnaires commenting on the questionnaire responses of exporters and importers submitting legal arguments; opportunity for a hearing Page 133 Domestic producers’ questionnaire SECTION A – INTRODUCTION SECTION B – GENERAL INFORMATION: Details of the company; Shareholders; Legal Representative; Operational Links with Other Entities; Range of Products; Accounting Practices; trading with the Country Concerned SECTION C – PRODUCT CONCERNED: Scope of Investigation; Product; Company Control Number; Technical description; Product Comparability; SECTION D – PRODUCTION, PURCHASES AND STOCKS: Production and Capacity; Purchases of the Product Concerned; Stocks; SECTION E – SALES: Total sales of the product concerned produced by your company to unrelated customers; Total sales of the product concerned produced by your company to related customers; resales to related and unrelated customers; Captive use; SECTION F – DISTRIBUTION SYSTEM AND SELLING PRICES: Distribution system and channels of sale; Price Setting; Imports of raw materials and finished products into the EC; Page 134 Domestic producers’ questionnaire SECTION G – TRANSACTION BY TRANSACTION LISTING: Sales transactions in the Community during the IP; Explanation of the apportionment of costs to transactions shown in the tables to be completed under point G.1 above; Credit Notes SECTION H – COST OF PRODUCTION: Accounting System; Production Process; Cost of Production; Suppliers of Direct Materials; Related Suppliers; SECTION I – PROFITABILITY: Profitability of the Product Concerned; profit in the Absence of Injurious Dumping; Cash flow for activities concerning the product concerned; Investments; Ability to raise capital; ROI SECTION J – EMPLOYMENT: Personnel employed; Wages SECTION K – CAUSALITY SECTION L – COMMUNITY INTEREST Page 135 Producers’ Responsibilities as Respondents AD investigations impose substantial burdens on exporters and importers: They must answer questionnaires and undergo verification. If a company's exports are found to be dumped, then dumping duties probably will apply for at least 5 years. It is possible to seek review of the dumping duties, but review proceedings also are burdensome. Companies can undertake "audits" to determine their risk of dumping. Serbia and Montenegro, however, have not often been subject to AD investigations. Page 136 Exporters’ questionnaire SECTION A: GENERAL INFORMATION: Identity and Communication; Legal Representative; Corporate Information SECTION B: PRODUCT DESCRIPTION: Scope of the Investigation; Domestic and Export Product Specifications; Formats for product description (PCN); Comments on the product concerned SECTION C: OPERATING STATISTICS: Company's net turnover; Total Quantity and Value of Sales; Production and Capacity Statistics; Stocks; Employment; Investments SECTION D: EXPORT SALES TO THE EUROPEAN COMMUNITY: General information; Sales to independent customers; Sales to related parties SECTION E: DOMESTIC SALES: General information; Sales to independent customers; Sales of related parties to independent customers SECTION F: COST OF PRODUCTION: Accounting system and policies; Production process and cost of production of the product concerned SECTION G: PROFITABILITY: Profit and Loss SECTION H: ALLOWANCES - FAIR COMPARISON: Allowances on Export Sales; Allowances on Domestic Sales Page 137 Importers’ questionnaire SECTION B: Details of the company, Contractual links with other entities, Corporate Information, Legal Representative; Range of Products; Accounting Information; Turnover; SECTION C: Scope of the investigation; Product; SECTION D: Transaction-by-transaction list; Summaries; Documented purchase transactions; SECTION E: Global figures (all sales) SECTION F: Distribution network; Prices of subject merchandise sold in the EU; Additional costs; SECTION G: Employment figures SECTION H: Profitability of the product concerned SECTION I: Other injury factors SECTION J: Other Questions: Market Share; Customers; Suppliers; Description of the Market; Page 138 So far, Serbia and Montenegro have not often been subject to AD investigations. Page 139 Serbia & Montenegro – TDIs Included in the FTAs Subsidies – the FTAs very concise provisions, included in the “State Aid” chapter, stipulating that if a Party considers that a particular practice is incompatible with the objectives of the FTA and causes or threatens to cause injury to its domestic industry or agriculture, it may take appropriate measures under the conditions laid down, inter alia, by the Agreement on Subsidies and Countervailing Measures (only the FTA with Romania specifically mentions the SCM Agreement). However, the language is not specific and also relates to the provisions on safeguard agreements in the FTAs. Dumping – the FTAs contain very general language stating that if a country finds that dumping is taking place in bilateral trade relations, it may take appropriate measures against that practice in accordance with the Article VI of the GATT 1994. General safeguards – the FTAs state that the country may act if any product is imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers of like products or serious disturbances in any related sector of the economy. Page 140 Serbia & Montenegro – International Trade Agreements Free trade zone establishment in Southeast Europe is based on the Memorandum of Understanding on Liberalization and Facilitation of Trade Requirements (MoU) signed within the framework of the Stability Pact in Brussels on June 27, 2001 by Albania, Bosnia and Herzegovina, Bulgaria, Macedonia, Moldavia, Romania, FR Yugoslavia and Croatia. Serbia and Montenegro have concluded bilateral FTAs with the other participants in the process. FR Yugoslavia has concluded free trade agreements with the Republic of Macedonia in 1996 (prior to the initiative for Stability Pact), Hungary (in force since January 1st 2002) and Bosnia and Herzegovina (in force since July 2002). Stability Pact partners are countries of Southeast Europe, EU Member States, EC Commission, 22 OECD Member States, four G-8 Member States, UN, OECD, OSCE as well as financial institutions. Page 141 EU Antidumping Investigations Against imports from Serbia & Montenegro Sunset review Def. Termi- Product Status Initiation Initiation Outcome measures nation Hot-rolled coils Terminated C4, L31, L294, (flat rolled 07.01.99, 05.02.2000 17.09.2004 products of iron p.3 , p.15 , p. 1 or non alloy steel) Malleable tube Terminated C151, L208, or pipe fittings 29.05.99, 18.08.2000 p.21 , p.53 Polyester Expired L348, C230, Continuation staple fibres 17.12.88, 15.09.90, of measures p. 49 p. 3 Page 142 U.S. Antidumping Investigations Against imports from Serbia & Montenegro DATE OF DATE OF DATE OF DATE OF FINAL DATE OF PRODUCT PRELIMINARY ANTIDUMPING COMMENTS INITIATION DETERMINATION REVOCATION DETERMINATION DUTY ORDER ITC NEG STEEL WIRE NAILS 07/02/1981 PRELIM ANIMAL GLUE AND 01/26/1977 08/03/1977 10/28/1977 12/22/1977 01/11/1991 INEDIBLE GELATIN STEEL WIRE NAILS PW 02/03/1986 WELDED CARBON TERM STEEL PIPE AND 08/09/1985 12/31/1985 03/14/1986 04/22/1986 TUBE TAPERED ROLLER 09/19/1986 02/06/1987 06/29/1987 08/14/1987 11/24/1995 BEARINGS INDUSTRIAL 10/17/1989 04/24/1990 08/27/1990 10/16/1990 NITROCELLULOSE ITC NEG BALL BEARINGS 03/11/1991 04/10/1991 PRELIM TART CHERRY JUICE AND ITC NEG 04/16/1991 CHERRY JUICE PRELIM CONCENTRATE WELDED CARBON STEEL PIPE AND 08/09/1985 10/16/1985 12/31/1985 12/31/1985 08/08/1986 TUBE Page 143 CASE STUDY ON ANTIDUMPING MEASURES Page 144 EU AD Investigation Timeline: Seamless Pipes and Tubes from Slovakia) Timeline: Seamless Pipes and Tubes from Slovakia 31-Aug-96 Publication of Notice of Initiation Deadline by which exporters, importers and other interested parties should contact the Commission to 15-Sep-96 check whether they are listed in the complaint and request a questionnaire (if such questionnaire had not yet been sent). In the case of sampling, deadline by which exporters who wish to be included in the sample, or to be considered co-operating parties even though they are not included in the sample, must make 21-Sep-96 themselves known. Shortly thereafter the Commission will select which exporters to include in the sample. Such exporters can then obtain a questionnaire, which must be returned within 37 days. Deadline for submission of questionnaire responses by exporters, importers, and Community industry. In cases of sampling, deadline for submission of questionnaire responses by exporters seeking 10-Oct-96 individual treatment.Deadline for submissions on injury and Community interest by interested parties (e.g. exporters, importers, Community producers, consumer groups, etc.)General deadline for all interested parties to request a hearing, should they wish to have one. Deadline for submission of questionnaire responses by exporters selected for inclusion in the 28-Oct-96 sample. 28-May-97 Latest date for imposition of provisional measures (actually imposed on May 29) 24-Nov-97 Latest date for imposition of definitive measures (actually imposed on November 17) Page 145 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Like Product All seamless pipes and tubes subject to investigation were found to be alike in their essential physical and technical characteristics and in their end uses. Some exporters argued their products should not be considered as like products with those of the Community producers or other exporting producers due to: quality and technical differences differences in the distribution channels use and perception by the market. The Commission considered imported products and products made in the Community as like products because: products concerned are distributed through similar channels application and overall use are similar and there is a high degree of interchangeability and competition between all products – imported and manufactured by the Community producers the basic technical and physical characteristics of all imported products were identical to, or closely resembled, those of the products manufactured by Community producers. Page 146 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Dumping Investigation – Normal Value The Slovak producer contested the methodology the Commission used to determine normal value for some product groups. It claimed that: the Commission should not have calculated normal value on the basis of profitable sales only, but on the basis of all sales in the product groups, since the groups were profitable overall. The Commission rejected this claim as Article 2 (4) of the basic Regulation stipulates that sales made at a loss should only be excluded from the establishment of normal value where such sales constitute more than 20 % of all domestic sales. Page 147 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Dumping Investigation – Export Price The Slovak producer objected to the Commission's decision to deduct a 4 % profit margin from the prices charged by its Italian subsidiary, finding the margin excessively high. The Commission concluded that an adjusted figure of 3,8 % should be applied. Page 148 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Dumping Investigation – “Fair Comparison” The Slovak company asserted that a “distribution channel allowance” was justified in order to reflect the fact that the company sold directly to stockists on its domestic market whereas it sold through its related Italian and Swiss companies on the Community market. The Commission, however, had already adjusted the normal value downwards to reflect the fact that sales in the Community were mainly to large customers; hence, there was no justification for granting a further allowance. Page 149 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Injury Investigation Imports of all seamless pipes and tubes originating in the Slovak Republic were, between 1993 and 1995, subject to a tariff quota system, i.e. duty free within the limits of a quantitative ceiling; as soon as the ceiling was reached, a duty of 30 % was levied. This system lapsed at the end of 1995. Community consumption in tonnes per month amounted to 89 900 tonnes in 1992, 69 700 in 1993, 84 070 in 1994, 92 730 in 1995 and 92 130 during the investigation period (September 1, 1995 – August 31, 1996). Page 150 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Injury Investigation – Cumulation The Commission concluded that the dumped imports from Russia, the Czech Republic, Romania and the Slovak Republic should be assessed cumulatively for the purpose of injury analysis. The Commission asserted that the criteria set out in Article 3 (4) of the basic Regulation were found to be met in order to cumulate the imports from all four countries concerned, namely: the margin of dumping established and relating to each country was more than de minimis (i.e. between 5,1 % and 38,2 %) the volume of imports from each country was not negligible none of the exporting countries held a de minimis market share, namely below 1 %, since their market shares ranged from 3 % to 8,3 % the imported products were found to be interchangeable, to be following similar price trends, to have similar channels of distribution and similar low-price policy resulting in a high level of price undercutting (i.e. between 17,5 % and 43,2 %), to be simultaneously present in the same geographical areas and to compete therefore with each other and with those manufactured by the Community industry. Page 151 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Community Interest – Impact on Community Industry Likely effect of imposition of measures – price of imports is expected to rise, market supply and sales volumes to drop, Community industry would be able to increase output and sales, which would lead to increase in capacity utilization and drop of unit cost. Likely effect of non-imposition of measures – Community industry situation is expected to deteriorate (depressed production levels and capacity utilization rates, loss of market share, financial losses and reduction in employment). Page 152 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Community Interest – Impact on Importers and downstream users Importers – only a small percentage of their turnover consists of the subject product. Hence, the measures would have a minimal effect on their performance. Downstream users – machinery industry; transport of oil, gas, water, etc.; chemical and petro- chemical industries; power stations; the automobile and construction industries. The Commission believes the impact on the costs of downstream user industries of any price increases resulting from adoption of anti-dumping measures would be insignificant, if any. On the basis of the above elements, it is concluded that there is no compelling reason not to remedy the trade-distorting effects of injurious dumping and that the implementation of protective measures are in the interest of the Community. Page 153 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Measures imposed The Czech Republic: 5.1 – 28.6 % (Undertaking – no duty imposed) Hungary: 36.50 % (Undertaking – no duty imposed) Poland: 7.1 – 30.1 % (Undertaking – no duty imposed) Romania: 9.8 – 38.2 % (Undertaking – no duty imposed) Russia: 26.80 % (Undertaking – no duty imposed) Slovakia: 7.50 % (Undertaking – no duty imposed) Croatia: no duty (in 2000 in another AD investigation AD duty of 23% was imposed but not collected as an undertaking was accepted) Ukraine: in 2000 in another AD investigation AD duty of 38.5 % was imposed but not collected as an undertaking was accepted Page 154 EU AD Investigation Against Imports of Seamless Pipes and Tubes from Slovakia Review Proceedings Expiry and interim review was initiated in November 2002, concerning imports from Poland, Russia, the Czech Republic, Romania and the Slovak Republic. The duties were not amended. The measures for Slovakia, Poland and the Czech Republic lapsed on May 1, 2004 following their accession to the European Union. With regard to measures against imports from Russia and Romania, on July 16, 2004, the Commission decided to no longer apply the measures, as it found that a part of the Community industry was engaged in anti-competitive practices during the antidumping investigation. However, there is an ongoing interim and expiry review against imports from Romania and Russia. As for Croatia and Ukraine, the measures are about to expire on February 18, 2005, unless an expiry review is initiated. Page 155 Case Study on Safeguard Measures Page 156 Timeline of a typical U.S. Safeguards Investigation Timeline: U.S. Steel Safeguards Pursuant to USTR request, ITC initiated safeguard 22-Jun-01 investigation against imports of steel; notice published in the Federal Register 13-Jul-01 Interested parties to file an entry of appearance Interested parties to file request for participation in injury 22-Aug-01 hearings 10-Sep-01 Date for filing pre-hearing briefs on injury 17-Sep-01 ITC started conducting hearings on injury ITC found that imports of 16 out of 33 steel products 22-Oct-01 investigated were seriously injuring the U.S. industry Interested parties to file request for participation in remedy 23-Oct-01 hearings 29-Oct-01 Date for filing pre-hearing briefs on remedy 5-Nov-01 ITC started conducting hearings on remedy ITC transmitted to the President a report on its safeguard 19-Dec-01 investigation Proclamation of U.S. President Bush published, imposing 5-Mar-02 safeguard measures on steel imports 20-Mar-02 Effective date of Safeguard Measures against Steel Imports Page 157 Procedures in a typical U.S. safeguards investigation 1. USTR asks ITC to conduct a safeguard investigation 2. ITC institutes a safeguard investigation 3. Interested parties file entry of appearance 4. ITC conducts hearing on injury 5. ITC conducts hearing on remedy 6. ITC submits a findings report to the President of the United States 7. The President publishes a proclamation imposing the safeguard measures Page 158 U.S. Safeguard Case Study Page 159 Serious Injury Factors considered by the ITC include: Significant idling of productive facilities in the domestic industry, Inability of a significant number of firms in the industry to carry out domestic production of profit, and Significant unemployment or underemployment within the domestic industry. Page 160 Threat of Serious Injury Factors considered by the ITC include: A decline in the sales or market share, a higher and growing inventory, a downward trend in production, profits, wages, productivity, or employment in the domestic industry; The extent to which firms in the domestic industry are unable to generate adequate financial capital to finance the modernization of their domestic plants and equipment, or are unable to maintain existing levels of expenditures for research and development; and The extent to which the domestic market is the focal point for the diversion of exports of the relevant product by reason of restraints on exports of such product to, or on imports of such product into, third country markets. Page 161 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) OVERVIEW The Case Was Brought Based on a Request Filed by the U.S. Trade Representative USTR Requested an investigation covering certain steel products broadly defined as flat-rolled, long products, tubular products, and stainless steel products Period of investigation The ITC examined years 1996 through 2000, and the period January to June 2000 to January to June 2001 Page 162 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) OVERVIEW Like or Directly Competitive Product The ITC collected data on 33 product categories The ITC ultimately found that there were 27 domestic industries producing like or directly competitive products o The ITC found that carbon and alloy slabs, plate, hot and cold-rolled steel and coated steel were one like product. o The ITC found that carbon and alloy and stainless steel strand, rope, cable, and cordage were one like product. Page 163 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) OVERVIEW Serious Injury or Threat The ITC found injury in 8 categories and was evenly divided on injury in 4 categories The ITC’s injury findings covered approximately 80 percent of the steel products that were subject to the investigation Page 164 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) NAFTA Exclusion The ITC is required to exclude products from Mexico or Canada from a safeguard action if: 1) the country is not one of the top five suppliers of the product in the most recent three year period, or 2) the products did not contribute importantly to the serious injury or threat NAFTA Findings The ITC excluded 6 products from Canada, including flat rolled products, and reached one tie vote. The ITC excluded 9 products from Mexico. The President ultimately excluded all products from Canada and Mexico Page 165 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) ITC’s Recommended Remedy The ITC recommended tariffs on most products o A 20% tariff was recommended for flat-rolled products, except for slabs, for which a tariff-rate quota was recommended on imports in excess of 7 million tons in the first year Page 166 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) The President’s Action The President treated all of the ITC’s evenly divided votes as affirmative determinations The President imposed a tariff on most products o The President placed a 30% tariff on flat-rolled products, except for slab o The President imposed a tariff-rate quota on slab, with a 30% tariff on over quota entries The President excluded a number of developing countries from the safeguard action Page 167 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Post Presidential Action Product Exclusions o Approximately 25% of the steel products subject to the President’s action were excluded To be eligible for exclusion, the party requested an exclusion had to show either that the product was not produced by a U.S. producer, or that the product was not produced in sufficient quantities to meet demand o The next round of product exclusion requests is expected to begin in November, 2002 and to conclude in March, 2003 Page 168 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Carbon and Alloy Flat-Rolled Products ITC Phase Like or Directly Competitive Product The ITC found that slabs, plate, hot and cold-rolled products and coated products were one like or directly competitive product o The ITC found that imported and domestic flat products shared similar physical characteristics, uses, production processes, and channels of distribution o The ITC also found that a price correlation existed between the different types of flat-rolled steel Page 169 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Serious Injury The ITC found that the domestic flat-rolled producers were seriously injured o The ITC found that there was a significant idling of the domestic industry’s productive facilities and that a significant number of firms were unable to carry out production operations at a reasonable level of profit o The ITC also found declines in capacity utilization, prices, operating income, capital expenditures, and the number of production workers Page 170 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Substantial Cause o The ITC found that imports were a substantial cause of the domestic industry’s injury o The ITC found that imports increased in absolute terms and relative to domestic production Imports increased from 18.4 million tons in 1996 to 20.9 million tons in 2000 Imports increased from 10% of domestic production in 1996 to 10.5% in 2000 o The ITC focused on the import peak in 1998 discounting subsequent declines Imports increased from 19.3 million tons in 1997 to 25.3 million tons in 1998 Imports declined in 1999 and 2000, but remained above 1996 levels The domestic industry’s performance continued to worsen after the peak Page 171 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) o The ITC found that prices declined Import prices declined Flat-rolled average unit values declined from $370 per ton in 1996 to $331 per ton in 2000, reaching a period low of $298 per ton in 1999 Domestic prices declined Flat-rolled average unit values declined from $470 per ton in 1996 to $418 per ton in 2000, reaching a period low of $415 per ton in 1999. Page 172 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) The ITC discounted alternate causes of injury Declining domestic demand o The ITC found that the decline in demand occurred late in 2000 and that the domestic industry showed signs of injury prior to that time Domestic capacity outstripped demand o The ITC did find that domestic capacity exceeded demand Flat-rolled demand increased by 7.8 percent from 1996 to 2000 Domestic capacity increased by 15.9 percent from 1996 to 2000 o The ITC found that domestic overcapacity did not play as important a role as imports in causing the injury because the domestic industry did not lead prices down Page 173 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Poor Management o The ITC noted that the domestic industry weakened after the 1998 import peak o The ITC found that poor equity performance was caused by the low prices caused by imports Legacy Costs o The ITC found that legacy costs were present in 1996 when the domestic industry was earning reasonable profits Intra-Industry Competition o The ITC found that the cost advantages enjoyed by minimills existed throughout the period of investigation Page 174 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Buyer Consolidation o The ITC found that there was buyer consolidation, especially among automobile manufacturers, the consolidation was an ongoing process that did not suddenly occur in 1998 Page 175 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) NAFTA Findings Canada o The ITC found Canada was a top five supplier in the most recent three year period, but did not contribute importantly to the serious injury Imports declined absolutely and relative to domestic production from 1996- 2000 The domestic industry agreed that imports from Canada did not contribute importantly to the injury Mexico o The ITC found that Mexico was a top five supplier in the most recent three year period and contributed importantly to the serious injury Imports from Mexico increased absolutely and relative to domestic production The domestic industry did not argue that Mexico should be excluded Page 176 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Remedy – 4 Years Slabs o The ITC recommended a first year tariff-rate quota of 7 million tons, with a 20% tariff imposed on imports in excess of the quota Plate, Hot and Cold Rolled and Coated Steel o The ITC recommended a first year tariff of 20% Page 177 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Presidential Action The President did not alter the ITC’s finding that certain flat-rolled products consisted of one like or directly competitive product The President imposed a remedy to last for 3 years plus one day The President imposed a tariff-rate quota on slab imports 1st year - Approximately 5 million tons duty free, and 30% thereafter 2nd year – Approximately 5.5 million tons duty free, and 24% thereafter 3rd year – Approximately 6 million tons duty free, and 18% thereafter Page 178 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) The President imposed a tariff on certain flat-rolled products 1st year – 30% 2nd year – 24% 3rd year - 18% The President excluded Canada and Mexico Can be subjected to remedy if there are surges The President excluded all developing country WTO members Can be subjected to remedy if there are surges Page 179 Steel Inv. No. TA-201-73, U.S. ITC Pub. 3479 (Dec. 2001) Post Presidential Action The President delegated authority to the USTR to exclude products The first round of the exclusion process concluded in late August, 2002 Thousands of requests were made 727 exclusion requests were granted, accounting for approximately 25% of steel subject to the action The process for requesting exclusions is expected to resume in November, 2002 Page 180 Mandate and Jurisprudence of the WTO Dispute Settlement Body Page 181 Dispute Settlement Understanding The dispute settlement mechanism was implemented in 1995, along with the WTO formation. It aims to provide Members with a legal framework for solving disputes arising in the course of implementing the WTO agreements. It enforces the obligations already agreed. WTO Members can ask for panels and (possibly) appeal procedures. If a Member does not comply with WTO recommendations on bringing its practice in line with WTO rules, then trade compensation or sanctions, for example in the form of duty increases or suspension of WTO obligations may follow. WTO Members are consistently making use of the mechanism. The mechanism can protect weaker Members against unilateral action by the strongest. On the other hand, Member sometimes are reluctant to invoke dispute settlement for political reasons. Page 182 Consultation and Dispute Settlement The dispute settlement understanding applies to consultations and dispute settlement under the WTO trade remedy agreements. For example, Article 17.1 of the Anti-Dumping Agremement provides: The dispute settlement understanding is applicable to consultations and the settlement of disputes under the Agreement (Article 17.1) If any Member considers that any benefit accruing to it, directly or indirectly, under the Agreement is being nullified or impaired or that the achievement of any objective is being impeded by another Member, it may request in writing consultations with the Member in question, with a view to reaching a mutually satisfactory resolution (Article 17.3) Each Member must afford sympathetic consideration to any request from another Member for consultation (Article 17.3) A Member that has requested consultations may refer the matter to the Dispute Settlement Body ("DSB") (Article 17.4) if it considers that the consultations have failed to achieve a mutually agreed solution, and if final action has been taken by the authorities of the importing Member Page 183 The Member affected may also refer the matter to the DSB (Article 17.4) o when a provisional measure has a significant impact and o when the importing member has adopted that measure in contravention of the provisions of Article 7.1 of the Agreement At the request of the complaining party, the DSB will establish a panel to settle the dispute (Article 17.5) The rules governing the working of the panels are the same as those laid down in the Understanding The assessment criteria are that o the facts have been established properly, and that o their evaluation has been unbiased and objective (Article 17.6) Page 184 Panel decisions may be appealed to the WTO Appellate Body. The Dispute Settlement Body adopts the panel reports within 60 days of their circulation to WTO Members, unless a party decides to appeal. Parties to a dispute may appeal a panel report at any time before the panel report is adopted by the DSB. Appeals are limited to issues of law covered in the panel report and legal interpretations developed by the panel. Page 185 Timeline of a DSB procedure Day Action 1 Filing request for consultations 11 Response to request for consultations 31 Beginning of mandatory consultation period 61 End of mandatory consultation period 241 Normal end of panel procedures and circulation of Panel reports to Members Panel procedures can be extended by not more than three months 301 Latest date for filing of a notice to appeal 241 - 301 Appeal period 361 - 391 Circulation of Appellate Body report 391 - 421 Adoption of AB report by the DSB Page 186 Recent WTO Disputes Regarding Safeguards: There has been a significant number of cases. So far, the DSB has not approved a single safeguard determination. Page 187 U.S. - Steel Safeguards The WTO Appellate Body affirmed a panel ruling that the U.S. steel safeguard measures were WTO-inconsistent. The measures breached a number of obligations of the United States under the Agreement on Safeguards, including: The requirement to provide a "reasoned and adequate explanation" for its determinations regarding factors such as "unforeseen developments" and "increased imports." The Appellate Body also found that the safeguard measure breached the principle of "parallelism", because the U.S. included all imports for the purpose of its injury analysis, but then exempted the free trade partners of the United States from the application of the measure. Page 188 United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (March 2002), WT/DS202/R (Oct. 2001) Safeguard measures are “extraordinary remedies to be taken only in emergency situations.” Two “basic inquires” 1. “Is there a right to apply a safeguard measure?” 2. “If so, has that right been exercised, through the application of such measure, within the limits of set out in the treaty?” There needs to be a meaningful exchange of information on the actual safeguard measure prior to the effective date of the safeguard measure. The WTO Member imposing the safeguard measure must allow sufficient time to the other Members to analyze the measure, consider its likely consequences, conduct appropriate consultations domestically, and prepare for consultations with the WTO Member imposing the safeguard measure. Page 189 United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (March 2002), WT/DS202/R (Oct. 2001) The United States violated Articles 2 and 4 by including Canada and Mexico in the analysis of whether increased imports caused or threatened to cause serious injury but excluding Canada and Mexico from the application of the safeguard measure. Page 190 United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (March 2002), WT/DS202/R (Oct. 2001) WTO Members must take all “reasonable steps” to ensure that it has excluded developing countries from the safeguard measure if the developing countries fall below the three percent de minimis threshold. Page 191 United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (March 2002), WT/DS202/R (Oct. 2001) In violation of Article 4.2(b), the United States “did not adequately explain how it ensured that injury caused to the domestic industry by factors other than increased imports was not attributed to increased imports.” Page 192 United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (March 2002), WT/DS202/R (Oct. 2001) Safeguard measures “may be applied only to the extent that they address serious injury attributed to increased imports.” Under GATT Article XIX:1(a), WTO Members imposing safeguard measures must demonstrate the “unforeseen developments” justifying the need for such measures. Page 193 Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products, WT/DS207/R (May 2002) Chile violated Article 4.2(a) (threat of serious injury) by failing to evaluate each of the factors listed therein. Chile violated Article 4.2(b) (causal link) because its causation analysis was “strictly limited to its statement that international prices, import prices and domestic prices are linked” and because its determination did not consider other potential causes of injury. A WTO Member imposing safeguard measures can ensure that it has applied “safeguard measures only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment” only by demonstrating that “there is, at a minimum, a rational connection between the measure and the objective of preventing or remedying serious injury and facilitating adjustment.” Page 194 United States - Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS 177-78/AB/R (May 2001), WT/DS177-78/R (Dec. 2000) Safeguard measures may be applied only if the surge in imports is “unforeseen.” The ordinary meaning of the phase “unforeseen developments” requires that the developments which led to a product being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers must have been “unexpected.” The national authority must make an explicit finding that the surge in imports was unforeseen. Page 195 United States - Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS 177-78/AB/R (May 2001), WT/DS177-78/R (Dec. 2000) The Safeguard Agreement’s “like product” consideration is virtually identical to that of the Antidumping Agreement and the Subsidies Agreement. Thus parties can look to prior antidumping and countervailing decisions for precedent regarding like product interpretation. Growers and feeders of live lamb may not be included as producers of the like product (lamb meat). Like products must directly compete with each other. Live lamb production does not directly compete with processed lamb meat. Page 196 United States - Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS 177-78/AB/R (May 2001), WT/DS177-78/R (Dec. 2000) Data considered by the national authority must be “representative” of the domestic industry as a whole. The ITC considered questionnaire responses from only six percent of the domestic producers. Other data considered were also uneven or incomplete. The WTO Panel found that the data used as the basis of the ITC’s determination was not sufficiently representative of “those producers whose collective output . . . constitutes a major proportion of the total domestic production” of the like product. Page 197 United States - Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS 177-78/AB/R (May 2001), WT/DS177-78/R (Dec. 2000) The Safeguards Agreement does not require that increased imports be “sufficient” to cause serious injury, nor does it require that the increased imports “alone” be capable of causing or threatening to cause serious injury. Injury from other factors must not be attributed to the increased imports. The Appellate Body found that the ITC failed to explain how it “ensured that the injurious effects of the other causal factors were not included in the assessment of injury ascribed to increased imports.” Page 198 United States - Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R (December 2000) Appellate Body reversed the Panel approach regarding causation. Increased imports “alone”, or “in and of themselves”, or “per se” need not be capable of causing injury that is serious. Thus, the national authority should determine whether the increase in imports, not alone, but in conjunction with other relevant factors, cause serious injury. Page 199 United States - Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities However, it is essential for the national authority to examine whether factors other than increased imports are simultaneously causing injury. If the national authority does not conduct this examination, it cannot ensure that injury caused by other factors is not “attributed” to increased imports. Page 200 Argentina - Safeguard Measures on Imports of Footwear, WT/DS121/AB/R (December 1999) The use of the phrase “is being imported” indicates that it is necessary to examine the most recent imports (present tense) and not just the trends in import levels over the preceeding five years. The national authority must evaluate each of the factors listed in Article 4.2(a). The factors listed in Article 4.2(a) are: the rate and amount of the increase in imports of the product concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment. Page 201 Korea - Definitive Safeguard Measure on Certain Dairy Products, WT/DS98/AB/R (December 1999) The Safeguards Agreement imposes an obligation on a Member applying a safeguard measure to ensure that the measure applied is not more restrictive than necessary to prevent or remedy serious injury and to facilitate adjustment. Page 202