Briefing Paper: WTO Doha Rules Group Negotiations on Dumping and Subsidies

Update on Progress

17 April 2008

The Mandate

1. The 2001 DOHA Ministerial Declaration on WTO Rules saw an agreement to undertake a broad and balanced work programme across a raft of WTO Agreements. The paragraph on WTO Rules stated in part:

"In the light of experience and of the increasing application of these instruments by Members, we agree to negotiations aimed at clarifying and improving disciplines under the Agreements on Implementation of Article VI of the GATT 1994 and on Subsidies and Countervailing Measures, while preserving the basic concepts, principles and effectiveness of these Agreements and their instruments and objectives, and taking into the needs of developing and least-developed participants."

Chairman's Draft Text

2. The Chairman of the Rules Negotiating Group, Ambassador Guillermo Valles-Galmés, of Uruguay, having received over 150 proposals, heard considerable debate and having studied proposed new text from Members, decided that the best way to advance the work of the Group was to produce a Chairman's draft text seeking to find a balance across the Rules area. This text was released on 30 November 2007 and can be found on the WTO website www.wto.org. The relevant document number is TN/RL/W/213. It covers revisions to the existing WTO Anti-Dumping and Subsidies Agreements (the SCM Agreement includes the new Annex VIII on fisheries subsidies). This paper will only comment on the Dumping and Subsidy texts.

Reaction to the Text

3. Many exporting Members, led by Japan see the text as unbalanced and biased towards the United States' methodologies and practices. They have, however, stopped short of rejecting the text as a basis for negotiation but are urging the Chairman to release a revised version with a better balance as soon as possible. The Chair has resisted these calls and has told Members that it is up to them to make clear where a balance might lie and until this is agreed he will not issue a revised text. Others, New Zealand included, see the text as having included some controversial issues that will need to be addressed, but overall find the text to be a good basis to negotiate the new Agreements.

Current Position

4. Since January of this year the Chairman has undertaken a "first reading" of his text via a series of intensive negotiating sessions with an invited Group of participants. New Zealand has taken part in these sessions. These meetings are scheduled to continue until June of this year with a view to trying to find consensus on key issues. At the conclusion of the March meetings:

• On anti-dumping, Members continue to hold their political positions on the most contentious issues;
• Some progress has been made on enhancing transparency of the investigation process;
• On subsidies, the Chair has resisted the inclusion of the US proposal to widen the scope of prohibited subsidies. There is progress on non-contentious additions to the text, but political positions are still being adhered to on major issues.

Summary of the Key Anti-dumping Issues in the Chair's Text

5. Article 2.4.2 – 2.4.4 - Zeroing : This is the most contentious issue in the Chair's text. Many countries want the practice of zeroing banned in all circumstances while the US wants to ensure that what they understand to have been negotiated during the Uruguay Round (i.e. that zeroing is permitted) is retained. New Zealand's current practice of using a comparison of normal value and export prices on a transaction-to-transaction basis and disregarding non-dumped transactions appears to be permitted under the Chair's text.

6. Article 11.3 - Sunset Reviews: The text calls for a termination of a measure once it has been in place 10 years. It does allow for an "expeditious action" to be taken in the two years following termination if a domestic industry lodges another properly documented application against the same product. New Zealand has voiced its concern at this proposal. The text also attempts to tighten initiation standards for domestic industry seeking a continuation of a measure.

7. Article 9.1 - Public Interest Test: The text requires Members to establish procedures in its laws and regulations to enable its authorities to take due account of representations made by domestic interested parties whose interests might be affected by the imposition of anti-dumping duties. "Interested parties" includes industrial users of the imported product under consideration and of the domestic like product, suppliers of inputs to the domestic industry and, where the product is commonly sold at the retail level, representative consumer organizations.

8. Article 9.1 - Lesser Duty Rule: Many members are unclear on whether or not this provision has been removed from the text or whether it has been substituted by the public interest test. The Chair has agreed in open session with New Zealand's interpretation of the text that the lesser duty rule remains and if necessary you can lower an anti-dumping duty further by the use of a public interest test. While the Minister currently is obliged to consider if a lesser duty is appropriate an additional public interest test would be a new consideration.

9. New Article 9bis - Anti-Circumvention: This addition to the text will allow investigating authorities to deal with situations where exporters or importers are deliberately avoiding the payment of anti-dumping duties by circumventing an anti-dumping determination without having to have a domestic industry apply for another investigation. Currently there are no rules in the AD Agreement covering circumvention.

10. Article 3.5 - Causation: The Chairman has attempted to bring WTO Appellate Body jurisprudence into his text by clarifying the requirements of the causation assessment when considering the injurious effects attributable to dumped imports and to other factors. The text now calls for authorities to "separate and distinguish the injurious effects of such factors from the injurious effects of the dumped imports".

11. Article 4.1; Footnote 17 – Definition of Domestic Industry: A new provision has been introduced which will allow investigating authorities to exclude a producer from the domestic industry in cases where that producer is itself an importer of the product under consideration. The footnote gives guidelines as to when this would be appropriate.

12. Article 14 – Third Country Dumping: The new text operationalises this provision by vesting the decision whether or not to proceed with a case solely with the importing country. In effect this could allow the importing country to levy anti-dumping duties on dumped imports that injure the domestic industry of a third country. New Zealand has voiced its concern at this change.

13. Various Articles - Transparency Provisions: The text has a number of amendments aimed at enhancing transparency and due process during an anti-dumping investigation. Some examples include having to keep an indexed public file of an investigation and allowing prompt access to it, requirements to notify the exporting government of receipt of an application no later than 15 days before the initiation of an investigation, providing written reports of verification visits and providing increased information in public notices. These provisions will not have any major impact on New Zealand's current practices.

Summary of the Key Subsidy Issues in the Chair's Text

14. There are relatively few changes to the Subsidies and Countervailing Measures Agreement apart from the addition of Annex VIII which contains the Fisheries provisions. This reflects Members' decisions to concentrate on the Anti-dumping and Fish negotiations rather than subsidy issues. One issue which will arise once the Anti-dumping Agreement is negotiated is that investigation principles and practices will be harmonised in both Agreements.

15. Some of the changes to the SCM Agreement include: Article 14 – Subsidy Calculation: The revamp of this article attempts to give clearer guidelines to investigating authorities when they are dealing with the subsidisation of inputs, regulated prices and below-cost financing and attributing subsidy benefits to particular time periods.

Key New Zealand Negotiating Objectives

16. New Zealand's objectives in the Rules Negotiations are to ensure that any changes reflect a balance in the Anti-Dumping negotiation and:

1. allow New Zealand domestic industries to gain remedies against dumped, injurious imports;
2. avoid the abuse of anti-dumping provisions where New Zealand exporters are facing anti-dumping action in other countries; and
3. enhance the transparency of the investigation process.

17. In the Subsidies negotiation New Zealand's objective is to:

1. support disciplines on trade-distorting subsidies (as we do in agriculture and fisheries); while
2. remaining conscious of the need to retain adequate policy flexibility for our own domestic support programmes.

18. In its present form, the Chairs draft text does not adversely impact on New Zealand's trade remedies regime. However, this is the first text issued by the Chair and changes can be expected in future versions as negotiations progress.

Trade Rules, Remedies and Tariff Group

Competition, Trade and Investment Branch

Ministry of Economic Development

17 May 2008

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