Anti-dumping measures provoke intense debate

Date: 11/01/1996

By Ian S. Forrester QC

FOR many years, the GATT allowed signatory states to take measures against dumping - the sale of goods that are unreasonably cheap on export markets.

During the 1950s and 1960s, the US became the world leader in devising anti-dumping techniques. A wide variety of goods which exporters believed were being sold fairly and profitably on the US market were deemed, after some arithmetical mysteries condoned (or at least not clearly prohibited) by the GATT, to have been dumped. If their sale caused injury to US producers, anti-dumping duties could be imposed to drive up the price of future imports into the US to a supposedly fair level. If prices did not increase, extra duties could be imposed.

During the 1960s and 1970s, the Commission was a sceptical observer of US anti-dumping practices. European exporters and politicians complained about excessive use of such measures, but with little impact.

In the US, local producers convinced themselves and their congressmen that dumping was a pernicious and immoral practice. They assumed, understandably, that those who were accused of dumping had been engaging in conduct that was reprehensible and unfair, and that a finding of 'dumping' was as exact and as technically uncontroversial as a chemical analysis.

However, any exporter or official or lawyer who has been involved in a dumping case will confirm that the calculation of whether a given shipment has been dumped is highly artificial and bears very little resemblance to how an exporter would analyse his own business.

Nevertheless, the American approach to anti-dumping measures became, in a sense, the world standard. Despite having criticised US rules, in 1979 the GATT effectively codified many of their features as acceptable. And during the next ten years, the European Commission became an enthusiastic exponent, fine-tuning Europe's anti-dumping artillery so that it could strike virtually any export by a Japan-based corporate group, as well as hitting exporters from the US, Canada, Brazil and many other countries. Indeed, some features of European practice were even criticised by the US.

Anti-dumping proceedings are protective mechanisms whose purpose is to assist domestic producers by forcing exporters to charge higher prices. Whether anti-dumping measures are desirable is something that journalists and economists argue about. The majority opinion holds that they have generally failed to restore profitable vitality to ailing domestic industries, although they play a useful function by permitting intermittent exceptions to the broadly desirable principle of free trade. Although anti-dumping measures used to be justified as a neutrally-calculated response to unfair or predatory trade, they are now seen as a regrettable necessity.

Whether they are legal, as opposed to undesirable or inopportune, has been a source of intense debate. During the 1980s, the European Court of Justice consistently upheld the Commission's exercise of its prerogatives as legal. The Court refused to substitute its judgement for that of the Commission in the assessment of complex economic circumstances. In earlier cases, the Commission and the exporter, looking at the same figures, might arrive at wildly different results. In one case, the Commission found a dumping margin of over 60&percent;, whereas the exporter claimed it was not dumping and indeed had a 7&percent; positive margin of safety. The Court overwhelmingly rejected the exporter's contention as to how the calculation should have been made.

The Commission was so successful in dumping matters before the European Court that it was most reluctant to expose itself to the closer scrutiny of the Court of First Instance when it was set up in 1988. Among the less edifying excuses offered was the fear that disappointed exporters would clog the court system with time-consuming appeals and that Asian exporters, having economic advantages, did not need judicial ones.

More plausibly, it was argued that since anti-dumping law was relatively new, its transfer to the new court should be delayed to allow the higher Court to develop a broader case law. However, with effect from 1994, the Court of First Instance was granted responsibility for anti-dumping appeals and has already rendered a number of judgements. A few have involved embarrassing defeats for the Commission, usually on procedural grounds. However, there has been no interference with the broad manner in which the Commission performs anti-dumping calculations.

One problem which deserves further study is how far judicial review should go in trade cases. It is plainly not the job of the judge to decide whether or not European industry should be protected against imports of Ukrainian cement. His job is to decide on the legality of Commission action granting or denying such protection. It is also understandable that judges are cautious about taking steps which might weaken the Commission's ability to protect European jobs. However, it is arguably true that to be defeated in a dumping case, the Commission must be more plainly wrong than in a competition case.

This article reflects the personal views of the author.