Business Law environment essay
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Ch11Ppt1.pptxCHAPTER 11 Regulating Import Competition and Unfair Trade
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GATT Escape Clause:
Article XlX- allows escape from previous promises.
Many countries have provisions in national law that parallel GATT’s Escape clause.
Safeguards Against Injury
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GATT Escape Clause:
See the Argentina Safeguard Measures on Imports of Footwear (WTO 1999) case: Argentina failed to show that increased imports were the cause of serious harm to domestic footwear.
Safeguards Against Injury
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WTO Agreement on Safeguards.
Provides details lacking in the escape clause and sets out procedural steps for countries to use it.
Administrative investigation and hearing.
Must find increased imports are the actual cause of the industry’s decline.
Safeguards Against Injury
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WTO Agreement on Safeguards (cont’d).
Global Safeguards.
Limits on Use of Safeguards.
May not exceed 4 years.
Voluntary restraint agreements no longer permitted.
Trade Compensation.
Safeguards Against Injury
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WTO Agreement on Safeguards (cont’d).
The WTO Committee on Safeguards: countries must notify the WTO Committee on Safeguards when taking action.
Safeguards Against Injury
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Safeguards Against Injury Under U.S. Law.
U.S. Escape Clause: Section 201 of The Trade Act of 1974.
Does not follow the GATT guidelines.
U.S. law refers to safeguards as “positive adjustments.”
Safeguards Against Injury
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Safeguards Against Injury Under U.S. Law (cont’d).
U.S. Escape Clause: Section 201 of The Trade Act of 1974.
WHAT? “article being imported in such increased quantities as to be a SUBSTANTIAL cause of SERIOUS INJURY or threat thereof to domestic industry producing an article LIKE or DIRECTLY COMPETITIVE with the imported article”
Safeguards Against Injury
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Safeguards Against Injury Under U.S. Law (cont’d).
U.S. Standard for Import Relief.
ITC Safeguard Investigations: public notice in the Federal Register.
Must have “substantial cause of serious injury” and apply the Argentina standard.
Safeguards Against Injury
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Safeguards Against Injury Under U.S. Law (cont’d).
See the Heavyweight Motorcycles & Engines & Power-Train Subassemblies (ITC, 1983) case: incremental duties must be imposed.
Safeguards Against Injury
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Available Remedies Under U.S. Law.
President’s options:
Temporary: 4-8 yrs.
50% tariff increase.
Tariff rate quotas.
Absolute quotas.
Auctioned import license quotas.
Trade Adjustment Assistance.
Safeguards Against Injury
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Available Remedies Under U.S. Law (cont’d).
Market Disruption from Chinese Imports.
Imports from China are subject to special rules not applicable to other WTO countries.
U.S. and China agreed that safeguards would apply until 2013.
Relief if ITC finds “market disruption.”
Safeguards Against Injury
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Trade Adjustment Assistance.
Petitions are filed with Department of Labor by workers, state workforce, or union.
Direct cash payments to workers.
Job retraining for workers and relocation.
Help for companies as well.
Trade Assistance to Firms.
Safeguards Against Injury
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Unfair Import Laws: Dumping and Antidumping Duties
Dumping:
The unfair trade practice of selling products in a foreign country for less than the price charged for the same or comparable goods in the producer’s home market.
The Economics of Dumping.
Price discrimination.
Purpose to drive out competition.
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Unfair Import Laws: Dumping and Antidumping Duties
WTO Antidumping Agreement.
Calculating the Dumping Margin.
Dumping is at less than normal value, or less than “fair value.”
Calculating the Export Price.
Price at which a product is sold to an unaffiliated buyer in the importing country.
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Unfair Import Laws: Dumping and Antidumping Duties
WTO Antidumping Agreement (cont’d).
Adjustments to Normal Value and Export Price.
Market Viability and Constructed Value.
Sales Below Cost.
Level-of-Trade Problem.
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Unfair Import Laws: Dumping and Antidumping Duties
The Material Injury Requirement.
Antidumping duties are only applied after a finding of ‘material injury.’ Factors:
(1) Volume of the dumped imports.
(2) Effect of the imports on prices in the domestic market for like products and
(3) Impact on domestic industry.
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Unfair Import Laws: Dumping and Antidumping Duties
WTO Dispute Settlement in Dumping Cases.
Disputes taken to the WTO Dispute Settlement Panel.
Panel must accept the “facts” as found by the ITA/ITC in their investigation.
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Unfair Import Laws: Dumping and Antidumping Duties
Dumping and Non-Market Economy Countries in Transition.
Market-Oriented Exporters.
See the Bulk Aspirin from the People’s Republic of China (ITA, 2000) case: The ITC found injury to US producers of aspirin but the ITA cut the antidumping duties to zero. Rhodia testified that without the duties its business disappeared. Rhodia closed its U.S. plant and moved to China.
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Unfair Import Laws: Subsidies and Countervailing Duties
WTO Agreement on Subsidies and Countervailing Measures (1994).
Definition of a Subsidy: government confers a benefit on a domestic firm and provides income, price support or financial contribution (not collecting a tax, providing grant or loan at favorable rate) in order to achieve a social or economic objective.
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Unfair Import Laws: Subsidies and Countervailing Duties
WTO Agreement on Subsidies and Countervailing Measures (1994).
WTO Rules Apply to Specific Subsidies.
Prohibited Subsidies: export subsidies or import substitution subsidy.
U.S.-Brazil Dispute over Cotton Subsidies.
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Unfair Import Laws: Subsidies and Countervailing Duties
Actionable (Adverse Effect) Subsidies.
Domestic subsidies which give unfair competitive advantage to domestic firms.
Actionable at WTO if:
Cause injury to domestic industry, OR
Cause nullification and impairment of rights, OR cause “serious prejudice.” (Presumed if subsidy exceeds 5% of value.)
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Unfair Import Laws: Subsidies and Countervailing Duties
Actionable (Adverse Effect) Subsidies.
Upstream Subsidies: granted for raw materials.
WTO Subsidy Dispute Settlement.
Countervailing Duty Actions.
Countervailing Duty Actions in the United States.
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Unfair Import Laws: Subsidies and Countervailing Duties
Subsidies and State-Owned Enterprises.
Presents several problems when enterprises are owned by countries without a market economy.
In 2007, the Department of Commerce began applying the countervailing duty to nonmarket countries like China.
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Unfair Import Laws: Subsidies and Countervailing Duties
Subsidies and State-Owned Enterprises (cont’d).
Exports from Newly Privatized Enterprises.
See the U.S. Countervailing Measures Concerning Certain products from the EC (“European Steel”) (2002) case. Panel found U.S. violated WTO Agreement on Subsidies and Countervailing Measures.
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Countervailing Duties and Antidumping duties may be reviewed by the CIT (both final determinations and negative injury).
Limited review in Escape Clause.
Judicial Review in International Trade Cases
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Conclusion
Complex interrelated international and national regulations.
Businesses will face these issue at home and abroad.
What role WTO will play in the future?
Role of politics- reflections?
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