Anti-dumping and Subsidy Issues in Agricultural Trade Presentation by G. Tereposky Thomas & Partners CATPRN Workshop 6 March 2005
Overview of Presentation Introduction 1. What is “dumping”? 2. What is “anti-dumping”? 3. What is a “subsidy”? 4. What is the difference between between 5. subsidy disciplines and “countervailing measures”? Are anti-dumping and subsidy issues best 6. addressed at the regional trade agreement level or the multilateral level?
Overview of Presentation Example of anti-dumping issues that are 6. relevant to the agricultural sector Example of subsidy issues that are relevant 7. to the agricultural sector Negotiating dynamics - What makes 8. economic sense is not always negotiable
Introduction � Anti-dumping and subsidy issues are important to countries such as Canada which have a small domestic market and are export- oriented � The issues are complex � Established regimes are in place to address these issues - future developments will primarily involve “fine-tuning” these regimes:
Introduction � Anti-dumping Agreement (WTO) � Agreement on Subsidies and Countervailing Measures (WTO) � Agreement on Agriculture (WTO) � GATT 1994 (WTO)
Introduction � There is a lot that could be “fine tuned” – see WTO doc TN/RL/W/143, 22 Aug 03 (160 pages of dumping and subsidy issues being discussed in the WTO) � My objective today is to give you an overview of the regimes and a few examples of issues that arise in the agriculture sector
What is “Dumping”? � At its simplest level, “dumping” is price discrimination between domestic and export markets � If prices of goods sold in export markets (“export price”) are lower than comparable prices in the domestic market of the exporter (“normal value”), dumping exists � Detailed rules on how to determine dumping are set out in Article 2 of the Anti-dumping Agreement
What is “anti-dumping”? � “Anti-dumping” refers to measures taken by an importing country to counteract dumping– generally duties to offset the margin of dumping � Under existing international rules, anti- dumping measures can be applied only in specific circumstances which include the existence of “material injury” to a domestic industry that is caused by dumped imports
What is “anti-dumping”? � Anti-dumping issues and potential subject matter for negotiation arise throughout the anti-dumping process
What is “anti-dumping”? � Stage #1 – Initiation � Stage #2 – Preliminary Determinations of Dumping and Injury � Stage #3 – Final Determination of Dumping � Stage #4 – Final Determination of Injury � Stage #5 – Duty administration
What is “anti-dumping”? � From an economic research perspective, likely focal points are the meaning and determination of: � “dumping” � “causation” � “injury” � I will provide some examples later in my presentation
What is a “subsidy”? � A measure that is a “subsidy” in economic terms is not necessarily a “subsidy” in legal terms � Defined in the Agreement on Subsidies and Countervailing Measures and in the Agreement on Agriculture � In the case of agricultural subsidies, the starting point is always the Agreement on Agriculture
What is a “subsidy”? � “Domestic support” = support provided for an agricultural product in favour of the producers of the basic agricultural product or non-product-specific support provided in favour of agricultural producers in general, other than support provided under programmes that qualify as exempt from reduction under Annex 2
What is a “subsidy”? � Annex 2 “green box” subsidies - no, or at most minimal, trade-distorting effects or effects on production � “Export subsidies” - subsidies contingent upon export performance, including the export subsidies listed in Article 9 of the Agreement
What is a “subsidy”? Article 9 - Export Subsidies subject to � reduction commitments a) the provision by governments or their agencies of direct subsidies, including payments-in-kind b) the sale or disposal for export by governments or their agencies of non- commercial stocks of agricultural products at a price lower than the comparable price charged for the like product to buyers in the domestic market
What is a “subsidy”? payments on the export of an agricultural c) product that are financed by virtue of governmental action, whether or not a charge on the public account is involved, including payments that are financed from the proceeds of a levy imposed on the agricultural product concerned or on an agricultural product from which the exported product is derived
What is a “subsidy”? the provision of subsidies to reduce the d) costs of marketing exports of agricultural products (other than widely available export promotion and advisory services) including handling, upgrading and other processing costs, and the costs of international transport and freight
What is a “subsidy”? internal transport and freight charges on e) export shipments, provided or mandated by governments, on terms more favourable than for domestic shipments subsidies on agricultural products f) contingent on their incorporation in exported products
What is a “subsidy”? � Agreement on Subsidies and Countervailing Measures – Article 1 (definition of a subsidy)
What is a “subsidy”? For the purpose of this Agreement, a subsidy shall be deemed to exist if: (a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where: (i) a government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees); (ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits);
What is a “subsidy”? (iii) a government provides goods or services other than general infrastructure, or purchases goods; (iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments; or (a)(2) there is any form of income or price support in the sense of Article XVI of GATT 1994;
What is a “subsidy”? and (b) a benefit is thereby conferred
What is the difference between between subsidy disciplines and “countervailing measures”? � Subsidy “disciplines” are obligations under international trade agreements that prohibit or limit subsidies � Agreement on Agriculture – Domestic support and export subsidy reduction commitments � SCM Agreement – Prohibited subsidy and serious prejudice provisions
What is the difference between between subsidy disciplines and “countervailing measures”? � Countervailing measures are taken by importing countries and usually involve a duty (i.e., countervailing duty) that is applied against subsidized imports to offset subsidization � Countervailing measures can be imposed only in certain circumstances include the existence of “material injury” to a domestic industry that is caused by dumped imports
What is the difference between between subsidy disciplines and “countervailing measures”? Like anti-dumping measures, countervailing measures involve a staged procedure: � Stage #1 – Initiation � Stage #2 – Preliminary Determinations of Subsidy and Injury � Stage #3 – Final Determination of Subsidy � Stage #4 – Final Determination of Injury � Stage #5 – Duty administration
What is the difference between between subsidy disciplines and “countervailing measures”? � From an economic research perspective, likely focal points are: � meaning of “subsidy” � new or refined subsidy disciplines � “causation” � “injury” � I will provide some examples later in my presentation
Are anti-dumping and subsidy issues best addressed at the regional trade agreement level or the multilateral level? � Certain anti-dumping and subsidy issues have been addressed in a limited manner at the regional level � NAFTA – Chapter 19 binational panel review
Are anti-dumping and subsidy issues best addressed at the regional trade agreement level or the multilateral level? Canada – Chile FTA: Reciprocal Exemption from the Application of Anti- dumping Subject to Article M-03, as of the date of entry into force of this Agreement each Party agrees not to apply its domestic anti- dumping law to goods of the other Party. Specifically: neither Party shall initiate any anti-dumping investigations or a) reviews with respect to goods of the other Party;
Are anti-dumping and subsidy issues best addressed at the regional trade agreement level or the multilateral level? each Party shall terminate any ongoing anti-dumping b) investigations or inquiries in respect of such goods; neither Party shall impose new anti-dumping duties or other c) measures in respect of such goods; and each Party shall revoke all existing orders levying anti- d) dumping duties in respect of such goods.
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