1 RULES NEGOTIATIONS: WAY FORWARD ICRIER 6 April 2006 Abhijit Das, Senior Trade Officer, UNCTAD India Programme

2 Rules Negotiations: What is cooking Procedural improvements in anti-dumping investigation More precision in dumping margin determination Improvements in injury analysis and causality Tightening of disciplines on reviews Expeditious dispute resolution Expand prohibited subsidies Acceptance of specific methodologies for determination of benefit Harmonise anti-dumping and cvd investigation procedures Improvements in cvd investigation procedure Improvements in definition of de facto export subsidy Disciplines on fisheries subsidies Will the final dish be delicious for all or even for any one country?

3 Overall balance in Rules negotiations Australia, Canada, EU, Egypt, FANs, India, New Zealand and US are active in Rules negotiations. But, US and Japan likely to be the key players in determining the ambition level and overall balance in the Rules Negotiations: their position would be crucial in deciding the way forward

4 US interests in ADA negotiations Overwhelmingly defensive interest A few issues in which it has a positive interest include:  Rules on anti-circumvention  Improvements in the provision on New Shipper Review  Improvement in the standard of review provision

5 Japan (FANs) interest in ADA negotiations Offensive interest in almost all provisions of the ADA Detailed proposals made on increasing precision and predictability in  initiation  dumping margin determination  defining material injury  injury evaluation  causality  mandatory application of lesser duty rule  public interest  reviews, particularly sunset reviews  due process and investigation procedure Defensive interest mainly in anti-circumvention and NSR

6 ADA negotiations: can interests be balanced Given the extensive interest of Japan (FANs) in amendments to the ADA, US may have to give up more than what it is likely to gain in ADA negotiations In ADA negotiations difficult to achieve balance between interest of Japan (FANs) and US

7 ADA- US interests: Anti- circumvention US seeks to address two situations of circumvention which undermine effectiveness of trade remedy rules through :  minor alteration in the product  replacement of trade in the product by trade in its sub-components which are assembled in the importing country or in a third country US proposal – impose anti-dumping duty / cvd on a product not subject to original investigation if any of the above two situations of anti- circumvention arises

8 Anti- circumvention: How do others view it FANs - Anti-Circumvention is a complex issue and the Informal Group was not able to reach a conclusion even on the basic question of what constitutes circumvention  Legitimate right of business to change their source of supply.  Difficult to differentiate between the real circumvention and legitimate business behavior.  With increasing globalization, fast development of products using new technology, new products can be developed very fast.  Need to exercise caution, otherwise anti-circumvention provision could lead to further abuse of anti-dumping measures Canada and EU have a nuanced position and look forward to the issue being addressed by NGR. India has faced problems relating to circumvention, but has opposed rules

9 Anti- circumvention: Way forward US and EU already apply anti-circumvention provision – not challenged so far under DSU To ensure predictability and more fair rules, may be better to include anti-circumvention provision in the ADA  Need to clearly define the rights and obligations under anti-circumvention proceedings  Need to be more precise on when anti- circumvention provision can be invoked  Limited duration for anti-circumvention duty remaining in place

10 ADA- US interests : NSR US envisages a two-step approach for NSR New concept of threshold determination requiring the parties to establish that:  they are not related to any of the parties currently subject to duties.  they are engaged in bona fide sales to the importing country. If positive threshold determination, then no duty would be levied during the review NSR would not be on an accelerated basis

11 NSR: How do others view it Most of the countries opposed to US proposal ‘bona fide commercial sales’ will be subject to higher and strict standards deletion of the need for accelerated review against the interest of genuine NSRs

12 NSR: Way forward In certain cases India has also faced problems similar to that faced by US Need to retain the requirement of accelerated review The requirement of ‘bona fide commercial sales’ could be made more precise for preventing abuse and protecting the rights of exporters

13 ADA – Japan (FANs) interests: Sunset reviews Initial proposal of FANs sought termination of anti-dumping duties at the end of the 5- year period.

14 Sunset reviews: How do others view it Other countries have underscored the need for strengthening disciplines on SSR Illustrative list of parameters suggested for the ‘likelihood’ test Major users opposed to automatic termination of anti-dumping duties at the end of the 5-year period

15 Sunset Reviews: Way forward ‘Likelihood’ test is extremely subjective, if not outright speculative Suggested list of parameters for the ‘likelihood’ test has limited scope for improving the situation. Recent proposal from Japan provides the middle ground-  Automatic termination of anti-dumping duties after x no. of years  Initiate SSR before the end of 5 th year on receipt of a well documented petition by or on behalf of the domestic industry  Clearer standards for ‘likelihood’ test

16 ADA- Japan (FANs) interests: LDR India has joined the FANs on this issue Mandatory application of LDR proposed NIP to be calculated using one of the following:  Current price of the like product produced by domestic producers  The price of the domestic like product during a period prior to being affected by dumping  Price of non-dumped imports of the product under investigation  Constructed price method

17 LDR: How do others view it Following strong objections by US and Egypt :  Article 9:1 allows Members discretion to impose duty up to dumping margin  How to quantify injury margin on the basis of one injury factor (price)  Imposition of LDR may lead to duty absorption  Implementing LDR will be resource intensive  Implementing LDR will be complex Other countries implementing LDR appear keen only to preserve their existing practise

18 LDR: Way Forward Limit mandatory application of LDR to original investigation Provide flexibility to the country to notify a preferred methodology to be followed, with reasoned explanations in cases of deviation If need be, expand the category of permitted methodology to include other practices not covered

19 Subsidies Issues – US interest: Expanding Prohibited Subsidies US has proposed expanding the list of prohibited subsidies to include ‘intrusive govt. interference in the marketplace’  Art. 6.1 subsidies  Subsidies which have forestalled industry restructuring  Creation and maintenance subsidies – steel sector specified.

20 Expanding Prohibited Subsidies: How do others view it Nuanced support from certain developed countries Generally opposed by developing countries as it would severely restrict policy space

21 Expanding Prohibited Subsidies: Way Forward As the US proposal is not well developed, is it a mere straw man to be demolished after concessions have been extracted? Would introduce disciplines on capacity – new element in the ASCM context Clear definition of creation and maintenance subsidies needed. Prohibition should not apply to developing countries

22 Fisheries Subsidies: Important element for overall balance in Rules Negotiations Disciplines on fisheries subsidies appear essential for achieving overall balance in Rules Negotiations- US on the offensive and some of the FANs (Japan, Chinese Taipei and Korea) on the defensive.

23 Fisheries Subsidies: Who has what interest US, New Zealand, Australia etc are seeking general prohibition on fisheries subsidies – top down approach Japan, Korea etc. resisted negotiations. Appear willing to live with bottoms up approach Brazil has sought to link disciplines with fisheries patently at risk

24 Rules negotiations: India’s interest Need to tread a finely balanced path in ADA negotiations with tilt towards export interest In subsidies need to seek improvements in provisions on:  export competitiveness  reasonable and effective verification system for duty concessions In fisheries subsidies protect:  Interests of small fishermen  Support for deep sea fishing  Inland fishing

25 Rules Negotiations No overall winner Most countries would have to give up some issues of their crucial interest Domestic industry and DGAD need to be prepared to implement improved procedural and transparency requirements There could be some surprises towards the end. Need to visualise end game and be adequately prepared for it

26 THANK YOU