Authors: Philip Bentley QC

            Partner, McDermott Will & Emery Stanbrook, Brussels,

            Belgium

            Aubrey Silberston CBE

            Emeritus Professor of Economics, Imperial College, London,

            UK

Introduction

The purpose of this study is to provide an overview of the World Trade Organisation (WTO) rules on countervailing action and dumping. These are based on the implementation of Article VI of the General Agreement on Tariffs and Trade (GATT), and are the rules which determine the circumstances in which the USA, the European Union (EU) and other WTO member countries may adopt countervailing or anti-dumping measures against imports of products from a third country. These measures are imposed on the grounds that the products are either subsidized in the country of origin, or are being dumped,and that their import is causing injury to domestic producers of the like product.

In this study, after some brief introductory remarks about the historical background, and the WTO framework for countervailing action and dumping, these matters are considered in some detail, together with an examination of a number of economic and legal problems that arise in their operation. Many countries now take action under these rules, including a growing number of developing countries, but long experience of such actions by the USA and the EU has given rise to many cases initiated by them, as well as numerous GATT and WTO Panel findings, and judgments of the national courts. This is therefore reflected in many of the cases cited in this study. We will begin this introduction with some basic terminology. The expression "anti-dumping action" is used to refer to state measures, usually in the formof additional customs duties, designed specifically to protect that state’s ownproducers of a given product against unfair dumping practices carried on by exporters of the like product in another state. Countervailing action’ is similar except that the purpose of the additional customs duties is to protect one state’s domestic producers of a given product against the unfair trade effects of subsidization of the like product by another state. This study is about the internationally accepted rules on anti-dumping and countervailing action. These are contained in two international agreements on the implementation of Article VI of the GATT. Pursuant to these rules, anti-dumpingor countervailing action measures may be imposed against imported products that are either subsidized in the country of origin or are being dumped, and where it is also demonstrated that their import is causing injury to domestic producers of the like product. This simple introductory statement raises manyquestions. Since every state is sovereign in its own territory, one would expect states to have completely unfettered freedom to impose customs duties or quantitative restrictions (quotas) for any purpose what so ever. And, indeed,they have such freedom. For centuries, kings and emperors have imposed customs duties both as a means of raising revenue and as a means of protecting domestic industry, arts and crafts. It is only in comparatively modern history that wecome across serious questioning of whether ‘protectionism’ is good policy,whether there might not be some practical economic limits to sovereign power to levy import duties and to protect domestic industry. This is one aspect of the present study – the economic limits to anti-dumping and countervailing action in modern trade policy. When, by the end of the Second World War, it had become widely accepted among trading nations that "free trade" was good for the world trading order, and ‘protectionism’ was bad, a multilateral trade agreement was negotiated, the General Agreement on Tariffs and Trade. The text of this agreement was concluded in 1947 and is generally referred to as the GATT 1947. TheGATT 1947 set up a mechanism for the "regulation" of international trade, in avery loose sense of the word "regulate". However, this was the opportunity for lawyer to enter on the scene, as rules were developed in more or less binding form, culminating in the setting up of the World Trade Organisation at the endof the Uruguay Round of multilateral trade negotiations in 1995. Thus, in addition to the pragmatic economic limitations on anti-dumping and countervailing action, there came to be ‘legal’ limits, using the word ‘legal’ in the broad sense accepted by public international lawyers. It is from this dual point of view, economics and law, that this study will analyse the limits to anti-dumping and countervailing action.