Author: Reid M. Bolton

Introduction

In the first week of February, 2010, the world’s three largest trading entities all became directly involved in anti-dumping disputes before the World Trade Organization (W.T.O.). China alleged that the European Union had improperly imposed anti-dumping duties on China’s footwear exports, while Vietnam alleged that the United States had imposed the same type of protectionist tariffs on its imported shrimp. This was not an extraordinary event as member-countries are constantly invoking Article VI, the W.T.O.’s anti-dumping provision, as both complainant and respondent. Whether W.T.O.members are initiating anti-dumping investigations on behalf of their domestic producers—there are over 200 investigations a year—or challenging another members’ imposition of anti-dumping duties in front of the W.T.O.’s Dispute SettlementBody (D.S.B.), challenges based on Article VI are practically an everyday occurrence. These everyday occurrences, however, can often raise eyebrows and create tit for tat responses. For example, when the United States recently announced that it was placing tariffs on Chinese automobile tires under the W.T.O.’s safeguard provision, China announced only two days later that it wouldbe initiating an anti-dumping investigation into whether exporters in the United States were dumping automobile and chicken products into China. The timing of the announcement was no accident. The anti-dumping investigation was clearly intended to counter the tariffs placed on Chinese products. Its initiation indicated the type of retaliatory intent and protectionist sentiment that is precisely what the W.T.O. was formed to prevent.

These types of events highlight the challenges to world trade embodied in Article VI. First, the incidence of dumping investigations and duties is extremely high because the elements of dumping are both easily alleged and quickly proven by domestic agencies. Second, anti-dumping investigations and duties (more than any other aspect of the W.T.O.) can become weapons vis-à-vis other members because there are few checks on their use.Third, anti-dumping duties harm consumers (of footwear, shrimp, chickenproducts, etc.)—a politically powerless group in the context of anti-dumping decisions—by maintaining higher prices for these goods on behalf of domestic producers. Given the fact that anti-dumping investigations are initiated and duties are assessed so often, the D.S.B. has been called upon to adjudicate numerous anti- dumping disputes. Yet what is telling is that in these disputes,the dispute settlement mechanism has invariably found the duties inconsistent with W.T.O. obligations. Thus, there is tension between the frequent use of anti-dumping measures by most members of the W.T.O. and the fact that the D.S.B. has rarely found the measures as-applied to be acceptable. Instead, anti-dumping investigations (and the imposition of tariffs) continue despite disfavor by the W.T.O. because many duties are never challenged in front of the D.S.B. While Article VI remains the most challenged provision of the W.T.O.,litigation such as the cases initiated by Europe and Vietnam represents only the tip of the iceberg of anti-dumping duties that should be challenged. Although there are some theoretical justifications for recognizing anti-dumpingduties, these rationales are rarely present in situations where dumping is alleged. Recent scholarship has identified a troubling characteristic of anti-dumping disputes: legal capacity, rather than more relevant criteria such as the merits of the case itself, predicts both the targets of anti-dumping duties and the likelihood of anti-dumping measures being challenged. These studies show that anti- dumping investigations are often directed against countries that do not have the legal capacity to defend themselves, and that countries with low capabilities tend to forego challenges to anti-dumping duties due to the complexity of these disputes. There is also evidence that anti-dumping provisions can lead to “vigilante justice,” since it is easier and faster to initiate one’s own anti- dumping investigation against another W.T.O. member than to challenge that member’s anti-dumping assessment in front of the D.S.B. These studies suggest that anti-dumping duties have little correlation with the actual merits of prohibiting dumping and more to do with raising protectionist barriers against fellow W.T.O. members who are unable to participate in the highly legalistic

D.S.B. institution.

With all of the problems embodied by Article VI, the obvious question is how to reduce the burden on world trade imposed by this protectionist mechanism. Although the ideal remedy would likely be a wholesale reform of the Article or outright appeal, those avenues are foreclosed by the complete deadlock of every round of trade negotiations over the last decade and resistance from member governments. The anti-dumping regime was an important factor in establishing the original General Agreement on Tariffs and Trade (G.A.T.T.) framework and most (if not all) governments would reject a proposal that completely excised the anti-dumping “safety-valve” from the W.T.O. Since complete repeal is impractical and likely impossible, this article instead proposes a significant change that is both in the best interest of every single member of the W.T.O. and also possible to implement. This article argues that the W.T.O. should adopt a theory of “heightened scrutiny” for all anti-dumping cases. This “heightened scrutiny” standard would be similar to the “strictscrutiny” standard used by United States judiciary when dealing with powerless minorities, presumed breakdowns in the political process, and certain fundamental rights. This article argues that such a procedural proposal is not outside the realm of possibility for the D.S.B. and W.T.O. to adopt. It would have an immediate positive impact on world trade through a decrease in the number of anti-dumping investigations initiated as well as a larger number of duties found inconsistent by the D.S.B. This reform would work by decreasing the importance of legal capacity in bringing suits and thereby increase the number of petitions raised in front of the W.T.O. Since most petitions against anti-dumping duties that make it to the D.S.B. already end favorably, this reform could also ultimately decrease the overall number of anti-dumping duties assessed.

This article is divided into four sections. Part I outlines the traditional justifications for allowing anti-dumping duties and the body of economic analysis that has rejected those justifications. It also provides a brief background on the specific structure of anti-dumping requirements and procedures. Part II then introduces the concept of legal capacity, which recent studies have suggested is the single most important factor in understanding anti-dumping investigations and disputes. In particular, it highlights the differences in usage and outcomes for high-capacity (e.g. sophisticated) W.T.O.members compared to low-capacity (e.g. most developing countries) across a number of facets of the dispute settlement process. Part III then outlines previous proposals for reforming the W.T.O.’s anti-dumping provisions. Finally, in Part IV, this article argues that the ideal way of overcoming the legal capacity dilemma is through a concept of “heightened scrutiny” for anti-dumping duties. After making arguments for this reform by the Appellate Body, it then addresses some of the likely counter-arguments.