A method known as "zeroing" used by the US in anti-dumping investigations and reviews was slapped down on 30/04/2008 by the top court of the World Trade Organisation.

In a case brought by Mexico against punitive US duties on imports of Mexican steel, the WTO's appellate body ruled that zeroing was illegal in all types of anti-dumping action. It was the latest in a series of similar rulings against Washington.

The issue has set the US against the rest of the 151-strong WTO membership in the Doha global trade talks, where Washington is pushing for zeroing to be legitimised in changes to anti-dumping rules.

It has also sparked a debate over the role of the appellate body, which the US claims is making rather than interpreting WTO rules. Thus the dispute panel that first considered Mexico's complaint argued that current rules did permit zeroing in some circumstances, flouting an earlier appeals ruling. The panel's decision has now been struck down.

Washington on Tuesday responded angrily, accusing the appellate body of over-reach "by inventing new obligations" and of undermining the proper functioning of the dispute settlement system.

Gretchen Hamel, spokeswoman for the US trade representative, said: "The appellate body has, unfortunately, once again gone beyond the agreement that WTO members negotiated. As the United States has explained, during the Uruguay Round negotiations, WTO members considered and declined to adopt a prohibition on zeroing. We are therefore extremely disappointed by the appellate body report in this appeal."

Under WTO rules, countries can impose compensating duties on "dumped" imports that are sold more cheaply for export than at home, if they are hurting domestic industry.

Opponents of zeroing say the practice unfairly inflates dumping margins because only price differences that show dumping are taken into account. Price comparisons that do not show dumping are ignored (set at zero).

The US has said it cannot agree to changes in WTO anti-dumping rules in the Doha negotiations unless zeroing is permitted. In a first draft of possible changes last November, the chairman of the rules negotiations proposed allowing zeroing in reviews of anti-dumping actions, though not in initial investigations.

However, this led to protests from many other WTO members, including the European Union, Japan, China, South Korea and Mexico, which want the proposal scrapped.

The EU and Japan are challenging US compliance with earlier rulings against its zeroing methodology, proceedings that could lead to sanctions against US exports.

By Frances Williams in Geneva , Financial Times, 30 Apr 2008

Source: money.ninemsn.com.au