Brian D. Kelly
Seattle University

Abstract

This paper analyzes the simultaneous application of two major tools of trade policy, countervailing duties and antidumping duties.  Previously a rare occurrence, simultaneous countervailing and antidumping duty proceedings have rapidly become one of the most prominent expressions of trade protection permitted under WTO rules.  The chief analytic focus is whether, or to what extent, the duties should be cumulative when they are simultaneously applied.   The normative standard is that enunciated in the WTO agreements, that the duties imposed should be measured with respect to the behaviors that give rise to them.  The analysis first considers the assumption that underlies modern countervailing duty laws, that subsidies are passed on fully in prices.  The analysis is then broadened to consider cases in which pass-through of the subsidy to prices is not perfect.

The paper establishes the theoretical conditions to identify any undercount or double-count of a countervailing response to subsidization and a simultaneous application of antidumping duties in response to export pricing below a benchmark (“normal”) value. Evaluation of current practices reveals that an important area of doubled responses to subsidization has emerged in recent years, in apparent violation of the rationale underlying the laws and WTO requirements that the remedies not exceed the transgressions.