Author: Tania Voon

Introduction

On 23 January 2007, the Dispute Settlement Body (‘DSB’) of the World Trade Organization (‘WTO’) adopted the Panel and Appellate Body Reports in what may be the last in a long series of disputes concerning so-called ‘zeroing’ methodologies in anti-dumping proceedings conducted by WTO Members: US – Zeroing (Japan). This was one of four zeroing disputes adopted by the DSB within the last year. Although zeroing is perhaps among the most complicated aspects of the highly technical field of anti-dumping law (which may explain the relative dearth of academic commentary on it), US – Zeroing (Japan) and its predecessors repay careful examination given their significant impact on Members’ anti-dumping practices and their implications for the meaning of the disciplines contained in the WTO’s Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (‘Anti-Dumping Agreement’) and for the ongoing negotiations to reform those disciplines. More-over, these cases provide a fascinating snapshot of the WTO dispute settlement system in action, illustrating how the Appellate Body refines its reasoning over time without directly overruling itself, the quiet struggle for control between Members and the Appellate Body, and the often noisier conflict between Panels and the Appellate Body.

‘Dumping’ occurs where a product of one country is ‘introduced into the commerce of another country at less than its normal value’. Essentially, this is where the export price of the product is lower than its domestic price (when sold in the country of export). Subject to compliance with certain stringent conditions as elaborated in the Anti-Dumping Agreement, Article VI:2 of the General Agreement on Tariffs and Trade 1994 (‘GATT 1994’) allows WTO Members to impose anti-dumping duties (generally in the form of increased tariffs on imports) to counteract injury caused by dumping of particular products exported by certain other Members, even though this would normally violate the core obligations of most-favoured nation treatment and (potentially) tariff bindings. Although the economic rationale for imposing anti-dumping measures is dubious (since they generally harm consumers and industrial users of the allegedly dumped product in the country imposing them), they are an accepted part of the WTO pursuant to the bargain reached among Members at the end of the Uruguay Round.

In determining whether a product is being dumped and, if so, the extent or ‘margin’ of dumping, investigating authorities in the importing country compare the normal value with the export price. Zeroing may arise in various ways in the course of this dumping determination. As Merit Janow (now an Appellate Body Member) and Robert Staiger have pointed out, ‘it is difficult to evaluate formally the economic merits of zeroing, because there is not an accepted understanding of why dumping is to be ‘condemned’ in the first place’.

In this article, I first explain the area in which the zeroing case law has had the greatest effect, namely in relation to ‘model zeroing’ in original anti-dumping investigations conducted under Article 5 of the Anti-Dumping Agreement. The line of cases on model zeroing demonstrates the inherent difficulties in interpreting carefully negotiated text and the potential for Panels and the Appellate Body to step in to determine issues on which the negotiators themselves were unable to agree. I then turn to certain less well-settled aspects of zeroing as used in both original investigations and subsequent ‘periodic’ reviews to establish the amount of anti-dumping duties payable on given imports and ‘new shipper’ reviews to establish dumping margins for exporters or producers who did not export to the importing Member during the period that the original investigation examined. The varied interpretations in disputes to date of the WTO-consistency of zeroing in these circumstances highlight the ambiguity of the relevant provisions and the dynamic relationship between Panels and the Appellate Body. Next, I consider the consequences of prohibitions on zeroing for reviews of anti-dumping duties where circumstances have allegedly changed and for ‘sunset’ or expiry reviews after duties have been in force for five years. The Appellate Body’s reasoning in relation to these reviews is much less elaborate but equally problematic. Finally, I consider two remaining areas in which zeroing may survive this latest Appellate Body Report: to address targeted dumping, and in relation to the determination of injury.