7 years ago

Trump Administration aims anti-dumping arrow at China: Its implications

Commerce Secretary Wilbur Ross arrives at a state dinner at the Great Hall of the People in Beijing, China, November 9, 2017. - Reuters photo
Commerce Secretary Wilbur Ross arrives at a state dinner at the Great Hall of the People in Beijing, China, November 9, 2017. - Reuters photo

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On November 27, 2017, the US Department of Commerce announced its self-initiation of anti-dumping duty and countervailing duty investigations of imports of common alloy aluminium sheet from China.

Anti-dumping and countervailing investigations are routine matters these days but self-initiation by a government happens once in a blue moon. The self-initiated investigation means there is no formal request or complain from the concerned local industry that dumping is taking place. The last self-initiated anti-dumping duty investigation occurred in 1985 on the import of semiconductors from Japan and a countervailing duty investigation in 1991 on softwood lumber from Canada - both were done by the USA. The latter case led to a very protracted legal battle between the two North American neighbours.

The action by the US Department of Commence is clearly legal both under the US law and international law administered by the World Trade Organisation (WTO), but it raises some concerns too.

By textbook definition, anti-dumping and countervailing duties are responses to unfair practices by foreign businesses and governments. The problem is, these duties can be a veiled means of protecting struggling competing domestic businesses of the investigating country facing strong competition from exports. The deflation of the export price to swat foreign competitors away and gain market share is a very complex task. When, globally, import duties are consistently decreasing - which signals openness towards import, anti-dumping and countervailing duties are on the rise which shows a hostile attitude towards import. Indeed, arguably, this may be taken as an indication that at least in some cases, anti-dumping and countervailing duties are tariff protection measures to the domestic industry.

The assessment of the margin of dumping and subsidies, i.e., to what extent foreign products are being sold below their real cost, is a very complex and lengthy task. The initiation of an investigation, of course, does not also mean that upon its conclusion, any anti-dumping or countervailing duty would be imposed. This being said, some signals are unmistakable, so are some potential adverse effects of the move.

This move by the US Department of Commerce clearly signifies a protective mode of the Trump administration and would give little credence to its claim that the process of investigation into dumping and subsidies are quasi-judicial. It is quite awkward that the US Department of Commerce is seeking to protect the US domestic industry which has not petitioned for such protection. This is awkward because anti-dumping and countervailing duties harm the producers of the importing country and benefit (at least, in the short term) the consumers because the latter get cheaper products.

This self-initiation takes the dynamics of determination of dumping and subsidy to a different level. In a typical anti-dumping or countervailing investigation, the victim (the domestic industry) would be the complainant and the Department of Commerce would be the judge, though not in a strict judicial sense of the term but in a quasi-judicial sense. One may argue that even in the case of a criminal trial, it is the state whose officials prosecute and judges try the matter. However, dumping and subsidies are, at the most, unfair trading practices of exporters or their government harming the business of competing industry in the importing country. And even in the case of a prosecution, in most advanced democracies (for sure the US, too) prosecutors enjoy a very high latitude of discretion and are separate from the judges. Thus, even an otherwise fair ruling in this case by the Department of Commerce can be legitimately frowned upon by the critics.

The international trading community would closely monitor this move by the US Department of Commerce as it may trigger similar moves against other trading partners. After all, the domestic business lobbies, facing tough competition from the exporters, rarely miss an opportunity to seek protection from the government.

Strategically speaking, the launching of the investigation would, for sure, wane the case of the US administration as a champion of globalisation (which, of course, is not -- a position unambiguously asserted by the Trump administration). The detractors of the Trump administration may brand this as a desperate move to keep the administration's image when its promise to deliver on some other trade fronts are failing to deliver (renegotiating NAFTA or officially branding China as a currency manipulator would be examples), which may not give any leverage to the administration that it may be seeking.

Dr Md. Rizwanul Islam is Associate Professor at Department of Law, North South University.

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