A draft text proposing amendments to WTO subsidy and anti-dumping rules released on 30 November has provoked strong reactions from a large number of trade officials.
Members directed their strongest criticism against the draft proposal’s explicit acceptance of certain forms ‘zeroing’ in the calculation of anti-dumping margins. Simply put, zeroing refers to investigating authorities taking into account only instances where a good is sold to an export market for less than the price charged in the domestic market. However, cases where the domestic price is lower than the export price are assigned the value of zero, rather than a negative margin, which can result in an artificially high anti-dumping duty.
Different aspects of zeroing have been condemned in numerous WTO dispute settlement rulings, and the majority of Members had sought an outright prohibition of the practice in the rules negotiations. However, chair Guillermo Valles Galmés proposed that in certain cases where anti-dumping investigators aggregate the results of multiple comparisons of normal and export values “they may disregard the amount by which the export price exceeds the normal value”.
This was a clear victory for the United States, which continues to use the method, and has repeatedly accused dispute settlement panels and the Appellate Body of ‘judicial activism’ in interpreting WTO provisions as prohibiting virtually all forms zeroing.
At the rules group’s December meeting, Brazil, China, Colombia, Costa Rica, Hong Kong, India, Indonesia, Japan, Mexico, Norway, Pakistan, Singapore, South Africa, South Korea, Switzerland, Taiwan and Thailand circulated a joint statement condemning the draft’s zeroing provisions on the grounds that they would “nullify the results of trade liberalisation efforts.” Argentina, Canada, Ecuador and the EU also endorsed the statement.
China, Brazil and the EU warned that the proposed zeroing language could undermine the credibility of the dispute settlement system. Brazil’s Ambassador Clodoaldo Hugueney went even further, suggesting that reinstatement of the practice would ‘negatively affect the level of ambition’ in the agriculture and NAMA talks “since any market access achieved in these areas could be more than offset by the proliferation of unfair barriers to trade.” The EU, India and Japan also strongly condemned the ‘reappearance’ of zeroing.
The US acknowledged that it would be difficult to keep the provision intact in up-coming negotiations. Nevertheless, Ambassador Peter Allgeier underlined the importance of the issue to his country, and reiterated the US view that “the Appellate Body went beyond what was agreed, and when that happens it is legitimate for the membership to correct that.”
Fisheries Subsidies
Reactions have been more muted to the annex on fisheries subsidies proposed in the draft text, which sought to bridge the principal split in the negotiations between advocates of a ‘topdown’ blanket ban on fisheries subsidy payments (with negotiated exceptions), and countries that want a ‘bottom-up’ ban only on specific kinds of subsidies, most vocally Japan, Taiwan, and Korea. Subsidies covering the construction, operating and fuel costs of vessels, for instance, are among those slated to be banned. Other support for the fishing industry – such as that for port infrastructure ‘exclusively or predominantly for activities related to marine wild capture’ fishing, including storage and processing facilities – is also prohibited (see also page 2).
Some subsidies would be permissible for all countries, provided that they maintain an international- standard fisheries management system. These include payments aimed at boosting fishing vessel safety without increasing fishing capacity, reducing the environmental impact of fishing, or re-training fisheries sector workers into unrelated occupations. Governments would also retain the ability to grant limited fishing access to certain individuals and groups, so long as this does not affect migratory fish stocks or other countries’ ‘identifiable fishing interests’.
Under special and differential treatment provisions for developing countries, least-developed countries (LDCs) would be exempt from any disciplines prohibiting subsidies. Non-LDC developing countries would be allowed to provide otherwise-banned subsidies, including those that boost capacity, to small-scale fisheries in territorial waters characterised by nonmechanised fishing, family- or association-based fishing operations, catches consumed largely by fishing families, and the absence of a ‘major employer-employee relationship’. So long as functional management systems to conserve fish stocks are in place, developing countries would be able to subsidise port infrastructure, and provide income and price supports.
With regard to ‘access fees’ (the payments that a government offers another coastal nation in exchange for right to fish in that nation’s waters), the text explicitly states that government-to government fees are not deemed to be subsidies. However, ‘subsidies arising from the further transfer’ of already-purchased access rights to a third party in the host nation, such as private industry, are normally prohibited – except when the host is a developing country, and the fishery is within that country’s exclusive economic zone and operated in accordance with internationally-recognised best practices for fisheries management.
Marine conservation group Oceana welcomed the text’s “strong prohibition on subsidies that increase overcapacity and over-fishing.” The US called the proposed disciplines a ‘good first step’, while New Zealand’s trade minister Phil Goff said harmful subsidies should be eliminated. India expressed reservations on restrictions to support for small-scale fishing in developing countries, and the EU warned that the new rules might stretch too far in a way that could hurt port infrastructure and the aquaculture sector.
The rules negotiations are set to continue during the weeks of 21January and 11 February, with a first revision of the text due in the second half of February.