Transcript Trade Remedy Actions Within NAFTA: Increasing? Alternatives?

Trade Remedy Actions in
NAFTA for Agriculture &
Agri-food Industries:
Increasing? Alternatives?
Linda Young, John Wainio and Karl Meilke
Our objectives:
Examine the economic rationale for
administered protection
Does it hold in NAFTA?
Evaluate data on the use of AD/CVD
Propose changes to current procedures
Broaden the options-new ideas
Economic Rationale:
 AD actions make little economic sense,
particularly within an FTA
 Protectionist actions rewarding rent-seeking
behavior
 Punish firms for behavior in foreign markets that
is considered normal for domestic firms
 Expensive to initiate and defend, but…
 CVD actions are different
 Economic efficiency losses associated with
both
AD/CVD Cases Initiated by NAFTA Countries
1/1/1984 - 6/30/2001
180
160
140
120
100
80
60
40
20
0
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Avg
United States
Canada
Mexico
AD/CVD Case Outcomes
1/1/1984 - 6/30/2001
80%
70%
60%
50%
40%
30%
20%
10%
0%
United States
Canada
AD
Mexico
CVD
NAFTA
Total
Rest of World
Active AD/CVD Measures
As of 6/30/2001
Countervail Measures
Antidumping Measures
7%
11%
7%
19%
35%
23%
51%
6%
8%
1%
11%
21%
United States
Canada
United States
Canada
Mexico
India
European Communities
ROW
Mexico
Australia
European Communities
ROW
.
As traditional trade
barriers are lowered,
the use of trade
remedy law rises.
Trade Liberalization Has Not Resulted in More
AD/CVD Investigations
Pre-CUSFTA
Post-CUSFTA
Pre-NAFTA
Post-NAFTA
30
25
20
15
10
5
0
1984-88
1989-93
US-CN
CN-US
1989-93
US-MX
1994-98
MX-US
NAFTA Partners Target Each Other’s Imports Less
Than Those of Other Countries
1989 - 1999
69%
75%
75%
50%
27%
22%
21%
25%
8%
0%
United States
Canada
Percent of all cases against NAFTA partners
Mexico
Percent of imports from NAFTA partners
NAFTA Countries Are Far More Likely to be the
Target in Cases Investigating Agricultural Trade
1989 - 1999
60%
53%
57%
40%
21%
22%
21%
20%
8%
0%
United States
Canada
Percent of all cases against NAFTA partners
Mexico
Percent of ag cases against NAFTA partners
Is Agricultural Trade Overrepresented in
AD/CVD Cases?
(1989 - 1999)
11%
12%
8%
9%
6%
7%
5%
5%
4%
3%
0%
United States
Canada
Agriculture's proportion of all cases
Mexico
Agriculture's proportion of all imports
Even in Agriculture, the Three Countries
Target Partner’s Trade Less Than Others
1989 - 1999
75%
66%
77%
57%
53%
50%
30%
21%
25%
0%
United States
Canada
Percent of ag cases against NAFTA partners
Mexico
Percent of ag imports from NAFTA partners
Active AD/CVD Measures Within NAFTA
As of 6/30/2001
20
United States
16
United States
12
Mexico
Canada
15
8
11
8
9
4
Mexico
Canada
0
United States
1
Canada
0
Mexico
Malt beverages (220300)
Initiation - 1991 Duty - 1991 Revoked - 1994
40,000
30,000
20,000
10,000
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Value of US Exports to Canada ($1,000)
2000
2001
Tomato paste (200290)
Initiation - 1992 No injury finding - 1993
40,000
30,000
20,000
10,000
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Value of US Exports to Canada ($1,000)
2000
2001
Cauliflower (070410)
Initiation - 1992 No injury finding - 1993
35,000
30,000
25,000
20,000
15,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Value of US Exports to Canada ($1,000)
Lettuce (070511)
Initiation - 1992 AD duty in effect
80,000
70,000
60,000
50,000
40,000
30,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Value of US Exports to Canada ($1,000)
Refined Sugar (1701 & 1702)
Initiation - 1995 AD duty in effect
60000
50000
40000
30000
20000
10000
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
Value of US Exports to Canada ($1,000)
1999
2000
Apples (080810)
Initiation - 1994
Duty - 1995
Revoked - 2000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Value of US Exports to Canada ($1,000)
2000
2001
What do we want to achieve?
Reduce incidence, retaliation, costs
Maintain transparency
Maintain ability to protect producers
Cognizant of the goals of FTA;
And…
One more criterion
The extent to which changes assist
producers in considering their domestic
market to be tri-national
Why?
Rules have changed quickly
Paradigms and institutions have not
kept pace
Trinational Market (almost)
However, producers still largely identify
with the national market
Slow to develop bi or tri-national
commodity groups
Such institutions may increase gains to
producers through cooperation in
market development, research, joint
work on SPS, lowering costs of crossing
the border, other joint efforts
Options for Change: Tweaks
Increase the difficulty of requirements
to impose duties or change criteria for
the level of the duty
Increase the de minimis level
Increase the level of negligible imports
Restrict the duty to address injury only
Change the calculation of duties to account
for practices in the domestic industry.
Options for Change: Tweaks
(con’t)
Provision requiring evaluation of the
impact of duties on the general interest
of the FTA
Consultations
Not required for AD/CVD
Important component of dispute
resolution systems of NAFTA and WTO
Involve:
Clarification of legal basis of dispute
Discussion on why policy undertaken
Options for resolution explored
How Successful are
Consultations?
WTO considered 51 cases (July 2001)
with completed panel reports
37 cases resolved in consultations, 7
more before completed panel reports
Thought required to adopt within
NAFTA AD/CVD
Scope of parties included
Eliminate AD Suits Entirely
Australia and New Zealand have
Canada and Chile have
Also working on eliminating CVD
Why? Trans-Tasman market:
Hamper efficient allocation of resources
Rationale no longer exists
Detrimental to commercial relationships
Introduce Alternative Dispute
Resolution
ADR: processes usually involve a third
party neutral
Why change a system? Does the
current system produce:
Acceptable and durable outcomes?
Are the costs acceptable?
Impact on relationships-does it matter?
Disputant involved in the resolution?
Factors Leading to AD/CVD
Suits-More than rents
• Import surge
• Change in industry
structure
• Low prices
• Misinformation
• Different policies and
marketing institutions
• Leadership bid
AD/CVD process
Duty or not
Tensions underlying are not
alleviated!
Treat one symptom,
low prices (maybe)
Causes of
dispute largely
unalleviated
Causes of
dispute
Reoccurrence!
Characteristics of Dispute
Resolution Systems
Assessment of resolution options
Identification of issues and
development of agenda of issues
Fact finding
Collaborative problem solving
Settlement
AD and CVD processes:
Are not dispute resolution systems!
‘Administrative review’
No choice of resolution options to
participants
Does not considered broad interests
Access to other NAFTA markets
Avoidance of a counter-suit
General de-escalation of use of traderemedies
AD/CVD are not dispute
resolution systems (con’t)
Regulatory and policy harmonization
Trade liberalization generally
Unified domestic industry
Fact finding rigid, not participatory
No problem solving – duties or not
Settlement- trade tension still exists
Good Offices
When a third party works to correct
misunderstandings and fear, and
increase communication
Used by the WTO and the UN
Good Offices might be useful within
NAFTA
Mandatory Facilitated Dialogue
Proposal: complainants engage in a
dialogue, facilitated by a neutral, before
the suit can be investigated by national
protection agencies
Purpose:
In general a type of mediation to
explore interests, issues and options,
less geared toward settlement
Mandatory Facilitated Dialogue
Specifically, to engage the
complainant in a wide-ranging
discussion on the consequences,
costs and benefits widely defined,
of pursuing the suit
Costs and Benefits
Will the defending industry retaliate?
Is the domestic industry unified? Costs
of proceeding?
Gains from cooperation – how affected?
Correct misinformation through joint
data collection
It could happen…
If one NAFTA industry is selling below
the costs of production then likely all
are
… might be discussed during the
facilitated dialogue
Need to think further a field
Tensions from economic integration
inappropriately channeled into AD/CDV
NAFTA needs processes for industry
groups for managing those tensions
An array could include good offices,
faciliated dialogue, mediation offered by
the NAFTA secretariate
What is Possible
Economists have long been
disenchanted with AD/CVD processesPolitical opposition to eliminating them
is fierce
Leaving them in place may make it
possible to put more effective measures
of dispute resolution up front