Bridges Weekly Trade News Digest • Volume 13 • Number 18 • 20th May 2009

Appellate Body Urges US to Comply with ‘Zeroing’ Ruling

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

The WTO’s Appellate Body, the organisation’s highest court, has called on the US to comply with an earlier ruling that found that the Washington violates world trade rules in its treatment of unfairly priced imports.

The complaint, which was brought by the EU, centres on Washington’s use 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 treat as zero, instances in which goods command higher prices in the US market 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 exaggerates the amount by which goods are dumped and allows Washington to secure inappropriately high duties on competing imports. With the sole exception of the United States, all of the WTO’s 153 Members oppose the use of zeroing. Brazil, China, Egypt, India, Japan, Korea, Mexico, Norway, Taiwan, and Thailand were all third parties to the EU’s complaint against the US.

The WTO’s Appellate Body has consistently ruled against zeroing, but Washington has continued to employ the approach.

In its compliance report, which was made public last week, the Appellate Body (AB) urged the US to comply with a December 2008 ruling of a WTO compliance panel, which concluded that Washington’s use of zeroing contravenes the WTO’s Anti-Dumping Agreement (ADA).

“To the extent that the US has failed to comply with recommendations and rulings of the [Dispute Settlement Body] in the original proceedings, they remain operative,” the AB report said.

“The Appellate Body recommends that the DSB request the US to implement fully the recommendations and rulings of the DSB.”

But the AB report also upheld sections of the December decision that rejected some of the EU’s claims that Washington had failed to comply with previous rulings on zeroing.

A study conducted by William Nye of the US government’s Department of Justice concluded that using the zeroing methodology will almost always result in an increase in the anti-dumping duty “and will sometimes create a duty where none would have been imposed” if the calculation had not been used. Nye estimated that zeroing adds 3 percent to 4 percent to the typical anti-dumping duty imposed by the US.

Additional information

To access William Nye’s report, please visit http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1313172.

ICTSD reporting.