Bridges Weekly Trade News DigestVolume 14Number 4 • 3rd February 2010

Vietnam Initiates First-Ever WTO Dispute, Targeting the US

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Vietnam has requested WTO consultations with the United States over Washington’s anti-dumping duties on Vietnamese shrimp. The move marks the first time that Vietnam has ever filed a complaint with the global trade body’s dispute settlement system.

The complaint centres on anti-dumping duties of as much as 25 percent that the US has slapped on imports of Vietnamese shrimp since 2005.

The Vietnamese private sector is confident that country’s challenge will be successful, largely due to the fact that Washington used a practice known as ‘zeroing’ in calculating the margin by which Vietnamese shrimp were being ‘dumped’ - or sold at below-normal value - in the US market. The WTO has repeatedly ruled against zeroing on the grounds that it artificially inflates dumping margins.

“The WTO has concluded that the US was wrong in applying the zeroing method in precedent cases. I can see high possibility of Vietnam winning the case,” the Vietnam Association of Seafood Exporters and Producers’ Nguyen Huu Dung said last year, Reuters reported.

In a case that was decided in July 2008, Thailand brought a similar challenge against the US, claiming that Washington’s anti-dumping duties on its warm water shrimp were unfairly high because the US had used the ‘zeroing’ methodology in calculating the dumping margin. The Dispute Settlement Body ruled in Thailand’s favour.

But the case brought by Vietnam may be different.

When Vietnam acceded to the WTO in 2007, it agreed to be temporarily recognised as a non-market economy, a status that US law defines as not operating “on market principles of cost or pricing structures, so that the sales of merchandise…do not reflect the fair value of the merchandise.”

Article VI of the General Agreement on Tariffs and Trade (GATT) appears to support special practices for non-market economies as it allows different treatment of states that have “a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the state.”

With reference to this provision, the US had considered Chinese (which equally agreed to the status of a non-market economy, or NME) and Vietnamese shrimp exports separately from other shrimp exporters when it conducted its dumping investigation in 2004.

To calculate the dumping margin, Washington used Hanoi’s NME status to ‘construct’ a normal value of shrimp  based on a ‘surrogate’ market  economy, rather than using Vietnam’s market prices, according to the US-Vietnam WTO Coalition.

Although there has been much protest against the US method, Washington has yet to revoke Hanoi’s NME status. Moreover, the US has abandoned the particular zeroing practice that Thailand challenged in its case - known as weighted-to-weighted averaging.

This dispute marks the first time that Vietnam has been a complainant in WTO proceedings.  Hanoi had previously been a third party in three disputes.

Should consultations between the parties fail to resolve the issue after 60 days, Vietnam may request the WTO to establish a panel to hear the case.

ICTSD Reporting; “UPDATE 3-Vietnam tackles US at WTO over shrimp imports,” Reuters, 3 February 2010.

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