WTO: Trade Remedies in the Doha Round

WTO: Trade Remedies in the Doha Round

Order Code RS21610
September 4, 2003
CRS Report for Congress
Received through the CRS Web
WTO: Trade Remedies in the Doha Round
Vivian C. Jones
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
At the November 2001 Ministerial meeting of the World Trade Organization
(WTO) in Doha, Qatar, trade ministers from the 146 WTO member countries launched
a new round of trade talks known as the Doha Round. One of the negotiating objectives
agreed to called for “clarifying and improving disciplines” under the WTO Antidumping
and Subsidies Agreements. This objective was criticized by a number of Members of
Congress who were concerned that future concessions by the United States could lead
to the weakening of U.S. trade remedy laws.
Negotiations on antidumping, countervailing duties, and other trade remedies are
ongoing as WTO Members stake out positions and provide suggestions for amendments
to the Agreements. If adopted, many of these proposals would require changes to U.S.
trade remedy laws. The positions of major actors in the negotiations are briefly
discussed. It is too early to tell at this time whether an international consensus will
develop over any one position. This report will be updated as events warrant.
Background
The United States and many of its trading partners use antidumping (AD) and
countervailing duty (CVD) laws to remedy the adverse impact of alleged unfair trade
practices on domestic producers. These statutes are permitted by the WTO as long they
conform to the WTO Agreement on Implementation of Article VI (Antidumping
Agreement, ADA) and Agreement on Subsidies and Countervailing Measures (ASCM)
as adopted in the Uruguay Round. A review of the Agreements was included in the Doha
Round under pressure from U.S. trading partners, despite concerns of some in Congress
and the business community that concessions may lead to a weakening of U.S. trade
remedy laws (i.e., make it harder for U.S. industries to gain relief from unfair trade
practices).
Doha Ministerial Conference
At the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001, trade
ministers reached agreement on an agenda for a new round of trade talks. A group of
major U.S. trading partners (including Japan, Korea, Brazil, Chile, Columbia, Costa Rica,
Congressional Research Service ˜ The Library of Congress

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Thailand, Singapore, Switzerland, and Turkey) had become concerned with a perceived
general increase in the use of trade remedy measures, and particularly with measures the
United States had taken to protect the steel industry. The group demanded that the United
States allow a review of the ADA and ASCM as a condition for launching the new round.
U.S. trade officials were not successful in keeping language on antidumping and
subsidies out of the Doha declaration. After much discussion, WTO trade ministers
agreed to negotiations seeking to clarify and improve the measures, “while preserving the
basic concepts, principles, and effectiveness of these agreements.”1
The upcoming fifth WTO Ministerial meeting to be held in Cancun, Mexico from
10-14 September, 2003, is considered an important “stock-taking” on the progress of
Doha Round negotiations which are scheduled to be completed by January 2005. Several
suggested changes to the ADA and ASCM have been presented during initial negotiations
in the WTO Negotiating Group On Rules leading up to the Cancun Ministerial. The
recently released draft Cancun Ministerial Text does not contain any specific objectives
regarding the ADA or ASCM, but it does instruct the Negotiating Group on Rules to
accelerate its work on antidumping and subsidies and countervailing measures “with a
view to shifting its emphasis from identifying issues to seeking solutions.”2
Congressional Interest
The Doha Round agenda has significant implications for the Congress because any
required amendment of U.S. law resulting from the Doha agreements would require
congressional approval before the agreements can be implemented by the United States.
Congressional interest in AD and CVD negotiations has been especially high.
Prior to the Doha Ministerial, the Bush Administration faced considerable pressure
from a number of Members of Congress to protect U.S. trade remedy laws from changes.
On November 6, 2001, the House overwhelmingly passed (410-4) a concurrent resolution
declaring that the negotiators should “preserve the ability of the United States to enforce
rigorously its trade laws and should ensure that United States exports are not subject to
the abusive use of trade laws by other countries”(107th Congress, H.Con.Res. 262). In
the Senate, then-Senate Finance Committee Chairman Max Baucus and 61 other Senators
sent President Bush a letter in May 2002 cautioning against allowing U.S. trade remedy
laws to be weakened in a new round of talks. Not all Members held this view, however.
In a November 9 letter, Senator Phil Gramm of Texas and six other Republican Senators
argued for flexibility on negotiating on AD and CVD.3 Bush Administration trade
officials defended the decision to negotiate on AD and CVD issues by highlighting the
U.S. need for an “offensive agenda” on trade remedies to address the increasing “misuse”
of trade remedy measures in other countries against U.S. exporters.
1 World Trade Organization (WTO). Doha Ministerial Declaration, WT/MIN(01)/DEC/1.
2 WTO. Draft Cancun Ministerial Text, JOB(03)/150/Rev.1, August 24, 2003.
3 CRS Report RL31206, The WTO Doha Ministerial: Results and Agenda for a New Round of
Negotiations, coordinated by William H. Cooper.

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Some Members remained unconvinced that trade negotiations on AD and CVD laws
would be beneficial to U.S. interests, and on May 14, 2002, during floor debate on trade
promotion authority (TPA, H.R. 3009, 107th Congress), the Senate passed by voice vote
the so-called Dayton-Craig amendment (S. Amend. 3408). Under the amendment, trade
agreement implementing legislation would have been subject to a point of order if the
legislation included any provisions that would modify or amend, or require a modification
or amendment of U.S. trade remedy laws. If a point of order were raised, the provision
would be stripped from the legislation unless a 51-vote majority waived it. Bush
Administration trade officials had warned that they would recommend that the President
veto the bill if it was amended to contain the provision.
The Dayton-Craig amendment was dropped in conference. However, the H.R.3009
conference report (H.Rept. 107-624) contained compromise language that: (1) added an
additional negotiating objective instructing trade officials to “preserve the ability of the
United States to enforce rigorously its trade laws” and “address and remedy market
distortions that lead to dumping and subsidization;” (2) added a reporting requirement that
required the U.S. Trade Representative (USTR) to report on ways that a proposed trade
agreement might affect trade remedy laws; and (3) allowed for a procedural disapproval
resolution in either House (using specified language) stating that the proposed changes
in trade remedy laws were inconsistent with the negotiating objectives specified in the
Act.
Major Issues in Trade Remedy Negotiations
Recent Developments
On June 20, 2003, the United States submitted a paper to the WTO Negotiating
Group on Rules suggesting measures to strengthen the ADA “standard of review”
provision. In the paper, U.S. trade officials asserted that the ADA contains a number of
general obligations, but leaves Members flexibility on the precise means of by which to
implement those obligations in practice. The officials state that Article 17.6 of the ADA
(provides guidelines for dispute settlement in AD cases), if correctly applied, will help the
WTO dispute system to “respect the balance of commitments inherent in the ADA and
not operate so as to impose on Members obligations to which they did not agree.”
The paper also addressed additional issues U.S. negotiators want to discuss in rules
negotiations, including preliminary determinations in AD and CVD investigations, the
definition of “affiliated parties” when analyzing relationships between foreign producers
and resellers, clarification of exchange rate calculations, disclosure of calculation methods
used when setting AD and CVD rates, the definition of “dumped” imports, and the
treatment of pre-privatization subsidies.4
In June 2003, the “Friends of Antidumping” group submitted a proposal advocating
an explicit ban on “zeroing.” This method of calculating antidumping margins is used
when multiple comparisons of the export price and home market price are made for
4 WTO Negotiating Group on Rules, Further Issues Identified under the Anti-Dumping and
Subsidies Agreements, United States. TN/RL/W/130.

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different types of the subject merchandise. Zeroing refers to the practice of treating
“negative”dumping margins as zero values when averaging the values to determine a
dumping margin for the product as a whole.5
U.S. Position
U.S. application of some trade remedy laws has been found in recent years to be in
violation of the WTO agreements in certain WTO dispute settlement proceedings. U.S.
trade officials and many Members of Congress have at times been dissatisfied with the
standard of review used by the WTO when evaluating dispute resolution complaints —
accusing WTO panels of going beyond the scope of the Uruguay Round Agreements
(URA) to decide cases. Some Members of Congress have notified the USTR that it is
essential that U.S. negotiators address these dispute settlement issues.6

U.S. negotiators have emphasized the importance of establishing a proactive agenda
on trade remedy issues. The following issues have been presented in negotiations:
! Maintaining the strength and effectiveness of the trade remedy laws and
the WTO agreements;
! Encouraging openness and transparency in the operation of trade remedy
laws within WTO Member countries;
! Eliminating “trade-distorting practices” that lead to the need for trade
remedy laws;
! Tightening of dispute panel and appellate body “standard of review”
provisions so that panels do not add to the obligations, nor diminish the
rights of WTO member nations; and
! Preserving the certainty and predictability of a rules-based trading
system.7
“Friends of Antidumping” Proposals
A coalition of developed and developing WTO Member countries (known as the
“Friends of Antidumping”) including Brazil, Chile, Colombia, Costa Rica, Hong Kong,
China, Israel, Japan, Korea, Mexico, Norway, Singapore, Switzerland, Thailand, and
Turkey, have been concerned about a “continuing increase in the use of contingency
measures worldwide.” During the Doha Ministerial, it was largely this group of nations
that insisted that the ADA and ASCM be opened up for negotiations.
The “Friends” group seeks to clarify and improve the disciplines under the WTO
agreements, largely by providing more precise definitions of certain language in the
5 WTO. Negotiating Group on Rules. Proposal on Prohibition of Zeroing. Brazil, et. al.
TN/RL/W/113, June 6, 2003. The practice has been struck down by WTO panels as violative of
article 2.4.2 of the ADA. An EC challenge to the U.S. use of “zeroing” is pending.
6 “Zoellick Raises Two Objections to WTO Draft Declaration,” Inside U.S. Trade, November 2,
2001; “Baucus Lays Out Demands for Changes in WTO Dispute Settlement,” Inside U.S. Trade,
April 19, 2002.
7 World Trade Organization. Negotiating Group on Rules. Basic Concepts and Principles of the
Trade Remedy Rules. United States. TN/RL/W/27. October 22, 2002.

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agreements, providing more specific guidelines for calculation of dumping margins, and
other procedural changes, including the following:
! Narrower definitions of terms such as “dumped” imports, “like product”8
and “domestic industry;”
! Changes in investigating authority calculations by providing specific
definitions and guidelines in the ADA and ASCM for calculating
dumping and subsidy margins;
! Amending the ADA to prevent antidumping duty orders from being
extended beyond five years through sunset reviews.9
European Union (EU) Issues
In a July 8, 2002 paper, the EU said that WTO Members, especially developing
countries, have increasingly relied on antidumping measures, and that there were major
differences between countries in the interpretation and application of trade remedy rules.
The EU emphasized that “antidumping is now a global instrument and every country is
now both a potential user and a potential target of antidumping action.” EU proposals to
strengthen the disciplines related to implementing trade remedies include the following:
! Provide greater disclosure and access to nonconfidential documents;
! Apply a mandatory “lesser duty” rule when imposing antidumping
margins if the lesser duty is adequate to remove the injury to the domestic
industry;
! Apply a “public interest test” by requiring or allowing investigating
authorities to examine the impact of an antidumping order on the
economy as a whole;
! Provide for accelerated WTO dispute settlement proceedings prior to the
initiation of investigations under certain conditions;
! Reduce the costs of investigations so that firms, especially in developing
countries, can more readily participate in proceedings;
! After trade rules are updated, provide a package of concessions to allow
for the special needs of developing countries; and
! With regard to subsidies, amend the definition of “subsidies” so that less
detectable types of actionable subsidies can also be disciplined.10
Developing Countries’ Position
The ADA and ASCM provide some “special and differential treatment” for
developing countries. Article 15 of the ADA recognizes that “special regard must be
given by developed country Members to the special situation of developing country
Members when considering the application of antidumping measures under this
8 “like product” refers to determining the product or products like, or most similar in
characteristics and uses with the article subject to an AD investigation.
9 World Trade Organization. Negotiating Group on Rules. Antidumping: Illustrative Major
Issues, Paper from Brazil, Chile, Colombia, Costa Rica, Hong Kong, China, Israel, Japan,
Mexico, Norway, Singapore, Switzerland, Thailand, and Turkey. TN/RL/W/6. April 26, 2002.
10 World Trade Organization. Negotiating Group on Rules. Submission from the European
Communities. TN/RL/W/13. July 8, 2002.

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Agreement.” Although developed countries are instructed to apply “constructive
measures,” Article 15 provides no specifics as to what measures should be implemented.
In the ASCM, Article 27 allowed governments of developing countries to provide certain
subsidies on a time-limited basis (generally, five years from the entry into force of the
Agreement for developing country members and eight years for least developed country
members); however, this provision has expired.
Subsidies Agreement. India has submitted several WTO discussion papers
representing the views of developing nations. According to India, in order to foster
economic development of smaller industries in these countries, the state must play a more
active role in assisting industries. India suggests the measures for discussion in order to
address the needs of developing countries:
! The de minimis level of subsidy should be raised above 3%. When a
countervailing duty is assessed, the duty should be applied only to that
amount by which the subsidy exceeds the de minimis level;
! The “negligible volume of imports” threshold should be raised from less
than 4% of total imports of the product to less than 7%;
! Export subsidies should be permitted if they account for less than 5% of
the f.o.b. value of the product; and
! Subsidies provided as incentives for using domestic over imported
intermediate goods when making products for export should be allowed
on an indefinite basis.
Antidumping Agreement. India points out that from January 1, 1995 to June 30,
2001, more than 60% of antidumping measures imposed were directed against developing
country imports. India suggests that “positive efforts” to implement Article 15 of the
ADA could include:
! Raise the current 2% de minimis dumping margin to 5% for developing
countries;
! Apply the 5% de minimis level retroactively in review and refund cases,
not only in newly initiated cases;
! Increase the negligible volume of dumped imports from 3% of total
imports to 5% and delete the provision allowing for antidumping action
below the threshold if countries collectively account for more than 7% of
total imports; and
! The “lesser duty rule” (applying only the amount of duty necessary to
offset injury to the domestic industry) should be made mandatory when
imposing antidumping duties against imports from developing country
Members by any developed country Member.11
Concluding Perspectives
The procedures in the Negotiating Group on Rules leading up to the Cancun Ministerial
have largely involved presenting suggested topics for trade remedy negotiations and
defining the positions of the major stakeholders in the debate. It is too early to tell if an
international consensus will develop on any one position.
11 World Trade Organization. Negotiating Group on Rules. Proposals on Implementation-Related
Issues and Concerns, India. TN/RL/W/4, April 25, 2002.