Trade Remedies-What Business Needs to Know

Article excerpt

While liberalization has opened up world trade to freer competition, there have recently been more national measures blocking market access on the grounds of unfair pricing by exporters. Products such as steel, iron and chemicals from developing countries and transition economies have been increasingly subject to such measures - known as "trade remedy actions". There is a system within WTO to stop governments from abusing these actions, but in any case the consequences are serious for an exporter or a country subjected to such measures. As this article points out, even being charged with dumping carries a heavy penalty in the effort required to set the record straight. So exporters should take care to avoid creating grounds for such actions.

Trade remedies are exceptions to the WTO principles of free trade. The procedures are also unique in the WTO system in giving an active role to the business community. Governments seek trade remedies almost exclusively on the instigation of local business or because of business concerns.

The WTO identifies three main types of import restraints as trade remedies:

* Antidumping measures. The most commonly used are antidumping measures to counteract unfairly low prices. The WTO Agreement on Antidumping deems that goods are "dumped" when companies export them at prices lower than those at which they sell in their home market. Dumping is not illegal in itself; it becomes illegal as soon as it results in injury to local businesses in the importing country. Therefore, in order to initiate an antidumping investigation, local businesses must demonstrate evidence of dumping, injury to themselves and a causal link between the dumped prices and the injury to them. Generally, this takes the form of a written application to the relevant national authority (e.g., the Ministry of Trade). This authority will provide a notice of receipt of a "properly documented application" to the government of the exporting country. The national authority may, in "special circumstances", initiate an investigation without receiving an application from businesses. In any case, all interested parties receive a copy of a notice of initiation (which includes a copy of the application). The national authority also issues a notice and/or a report to the public.

* Countervailing duties. Countervailing duties counteract subsidies by national authorities that unfairly enable their companies to export at a lower price.

* Safeguard measures. These measures do not counteract an unfair practice, but allow countries to suspend import surges temporarily in order to grant local industries time to adjust to increased foreign competition on national markets.

However, if a country is thought to be breaking the rules by imposing limits for unjustified reasons, other WTO members can - and do - challenge them through the WTO's dispute settlement system.

Business concerns

The business sector and legal experts in developing and transition economies report several difficulties in interpreting and applying trade remedy laws. To help national officials and business leaders in these countries to understand the workings of the trade remedies system, ITC's World Tr@de Net programme organized regional workshops in Asia and Eastern and Central Europe, focusing on national regulations and practices in the United States, the European Union (EU) and Canada, and their implications for business. Participants in these workshops cited these main business concerns:

* Heavy procedural requirements. During antidumping investigations, the EU gives exporters only 37 days to complete its questionnaire, which participants do not think is sufficient time to complete it in detail. Also, accounting and yardsticks can differ significantly from their home countries. Participants requested more cooperation from EU representatives during their investigations.

* Use of "sampling". When the EU investigates a group of companies, it may choose certain companies as a sample group for in-depth investigation. …