Bridges Weekly Trade News Digest • Volume 12 • Number 42 • 10th December 2008

US ‘Zeroing’ Practice Challenged at WTO, Again, This Time by Brazil, Thailand

Discuss this articleShare your views with other visitors, and read what they have to say

Brazil and Thailand both initiated WTO consultations at the end of November over a contentious method that the US uses to calculate the extent of trade violations.

Central to both cases is the use by the US of ‘zeroing’, a controversial method of determining whether and by how much trading partners are ‘dumping’ (exporting at artificially low prices) their goods in the US market. Under this calculation, US trade authorities ignore, or ‘zero out’, instances in which goods command higher prices in US markets than abroad.

WTO rules permit countries that receive dumped goods to retaliate with anti-dumping measures, which usually come in the form of higher tariffs, against the offending country. But critics argue the zeroing method overstates the amount by which goods are being dumped and allows injured US companies to secure inappropriately high levels of anti-dumping duties on competing imports.

While Brazil is concerned with US antidumping calculations on its orange juice, Thailand has requested consultations regarding polyethylene retail carrier bags. According to the Brazilian Ministry of External Relations, the US calculated “dumping margins of up to 4.81 percent” in the US market for the period between August 2005 and February 2007. But Brasília said that the US’ use of zeroing had “artificially inflated” those margins.

The consultation request “reflects the perception that the ‘zeroing’ practice, in addition to being inconsistent with multilateral trade rules, is cause for great uncertainty and serious damage to the affected export companies,” the Brazilian statement said.

Likewise, in the Thai WTO communication, Bangkok said the effect of the zeroing practice “was to create artificially margins of dumping where none would otherwise have been found, or at a minimum, to inflate margins of dumping.”

Past WTO dispute panels as well as the Appellate Body have repeatedly ruled against the practice. But the US has not yet changed its internal procedures and continues to apply the zeroing calculation of dumping margins saying that WTO courts have exceeded their authority.

ICTSD reporting; “Brazil, Thailand challenge U.S. import measures,” REUTERS, 2 December 2008.

One response to “US ‘Zeroing’ Practice Challenged at WTO, Again, This Time by Brazil, Thailand”

Joseph Michael Finger 11th December 2008 at 13:53
William Nye has a paper at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1263423

that quantifies the impact of zeroing. He estimates that zeroing adds 3-4 percent to the average US antidumping margin.