Bridges Weekly Trade News Digest • Volume 13 • Number 30 • 9th September 2009

Brazil Contests US Surcharges on Orange Juice

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Brazil has launched a complaint against the US’ method of determining the extent of trade violations, the country’s Ministry of Foreign Affairs announced last month.

Brasilia’s complaint centres on how Washington calculates the level of anti-dumping tariffs that it imposes on imports of Brazilian orange juice. The South American country insists that the retaliatory tariffs are unfairly high.

At a meeting of the Dispute Settlement Body on 31 August, Brazil requested the establishment of panel to hear its complaint. The country requested consultations with the US on the matter in November of last year, but subsequent bilateral talks failed to produce a resolution.

Central to the case is 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 ‘zero out’, instances in which goods command higher prices in US markets than abroad.

The WTO allows countries that receive dumped goods to strike back with anti-dumping tariffs against the exporting country. But critics argue that zeroing inflates the apparent margin by which goods are dumped and results in inappropriately high levels of retaliatory duties on competing imports.

“The ‘zeroing’ practice, in addition to being inconsistent with multilateral trade rules, causes great uncertainty and serious damage to the affected exporting companies,” Brasilia said in a statement.

The WTO’s Dispute Settlement Body has consistently ruled that zeroing violates the global trade forum’s Anti-Dumping Agreement, which requires the “fair comparison” of export prices and domestic prices in dumping calculations. Canada, Ecuador, the EU, Japan and Thailand have all challenged Washington’s continued use of zeroing. Under pressure following a dispute with the EU, the US shifted its methods in 2007, eliminating zeroing in all new anti-dumping investigations from then on. However, it continued to use zeroing in investigations that were ongoing at the time.

“This is a situation in which the US is knowingly not fulfilling obligations,” said Roberto Azevedo, Brazilian ambassador to the WTO.

A recent ruling in an anti-dumping case brought by Japan seems to strengthen Brazil’s claim. In a decision released on 18 August, the trade body’s highest court rejected an appeal from Washington that defended the use of zeroing, effectively giving Tokyo a green light to impose trade sanctions on the US. The Appellate Body found against the US on every count.

ICTSD reporting; translated and adapted from Pontes Quinzenal, Vol. 4, No. 14