Bridges Weekly Trade News Digest • Volume 12 • Number 33 • 9th October 2008
WTO Panel Rules against US on EU ‘Zeroing’ Complaint
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A WTO dispute settlement panel has found largely in favour of the EU in a dispute over how the US calculates anti-dumping duties that affect a wide range of European goods. The WTO panel ruled against the US’ use of ‘zeroing’ in administrative reviews, upholding earlier rulings of the WTO’s Appellate Body.
The dispute settlement panel ruling, made public on 1 October, found that Washington “acted inconsistently with its [WTO] obligations” by using the controversial method of ‘zeroing’ to determine whether its trade partners are selling goods more cheaply abroad than in their home markets, a practice known as dumping. Under WTO rules, a Member may apply ‘anti-dumping’ measures on goods that are dumped in its home market and that subsequently cause or threaten injury to its domestic producers.
Critics of zeroing argue that the practice distorts dumping calculations and is inconsistent with the WTO Anti-Dumping Agreement (ADA) because it ignores (’zeroes out’) instances in which prices are lower at home than in the export market, and takes into account only cases where the ‘dumping margins’ are positive. Brussels maintained that the US’ use of zeroing had inflated ‘dumping margins’, thus allowing Washington to impose inappropriately high anti-dumping duties on competing imports.
In a series of decisions against the US, the WTO’s Appellate Body and WTO panels have consistently ruled that zeroing violates the ADA, which requires the “fair comparison” of export prices and home market prices in dumping calculations. In particular, it is generally accepted that zeroing during original investigations contravenes the agreement. Indeed, in this case the US did not contest the EU claims on this matter.
But notably, this was the first WTO panel to rule that zeroing in administrative reviews is not acceptable. Three prior panels had found zeroing during reviews acceptable under the ADA, but each time this finding was overturned on appeal by the Appellate Body. While the panel said in its decision that it was “inclined to agree” with the US claim that zeroing in administrative reviews is a “permissible” interpretation of the ADA, it did not rule in this way. The panel reasoned that the Appellate Body has continually overturned panel rulings on this matter and that consistency was necessary to develop a predictable body of case law.
The office of the US Trade Representative has given no indication as to whether it will appeal the ruling.
ICTSD reporting; “WTO slaps US on EU ‘zeroing’ complaint,” THE CALTRADE REPORT, 7 October 2008; “WTO supports EU in fight against US ‘zeroing’ practices,” LAW AND TAX NEWS, 6 October 2008; “Zeroing panel rules against US in explicit deference to Appellate Body,” INSIDE US TRADE, 3 October 2008; “WTO condemns US charges on European products,” ASSOCIATED PRESS, 1 October 2008.
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