metadata: authors: 0: author: Finger, J. Michael
1: author: Murray, Tracy
count: United States
docna: 0: docna: Policing unfair imports : the U.S. example
docty: Policy Research Working Paper
subtopic: Disease Control & Prevention,International Trade and Trade Rules,Trade and Services,Energy and Mining,Crime and Society
teratopic: International Economics and Trade
abstracts: cdata!: This paper researched the numbers on
            U.S. import cases to find out how the Unites States uses
            antidumping and countervailing duty actions to regulate
            imports. It describes the procedures followed by the
            Commerce Department and the International Trade Commission,
            surveys cases and outcomes in the 1980's and analyzes
            what drives the unfair trade laws. The pattern of petitions
            and results, it concludes, suggests strongly that injury to
            U.S. producers beset by import competition is what the
            antidumping and countervailing duty laws are about. That is
            why the pattern of antidumping cases is not particularly
            different from the pattern of antisubsidy cases - and why
            the frequency of cases against politically powerful
            countries is the same as the frequency of cases against
            politically weaker ones. The political strength of the
            exporting country does influence the form of import
            restriction the U.S. government will use. A powerful country
            will receive the courtesy of a negotiated settlement. A less
            powerful country will in due course receive determinations
            through normal administrative procedures. In short, unfair
            trade cases are where the action is because they are broad
            enough to handle all the action.
geo_reg_key: 119228,517191
repnme: repnme: Policing unfair imports : the U.S. example
display_title: Policing unfair imports : the U.S. example
listing_relative_url: /research/1990/03/700319/policing-unfair-imports-example
topicv3: Trade m1326924 698,Trade in Services m1326928 780,Criminal Justice m1326993 1014,Injury m1327524 1428,Iron m1503514 2931
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: International Economics and Trade
origu: Policy, Research & Ect Affairs
no_of_pages: 30
model_extractions: **Policy, Research, and Extemal Affairs**

# **Trade Policy**

This papera product ol'the Trade olicy Division, Country Economics Department - is part of'a lir;>r effort in PRE to understand the economics of the emergencc of "fairncss" as a standard for regulating international trade and its implications for the continued openness of the international trading :ystem and its continued functioning as an important vehicle for development. Copies are available free from the World Bank, 1819 H Street NW, Washington DC 2(433. Please contact Nellie Artis, room N1U-613, extension 3801() (25 pages ,ith tables).

Finger and Murray dug out the numbers on **U.S.** - unfair imports cases how many, against which countries, with what result - to find out how the United States uses antidumping and countervailing duty actions to regulate imports.

They describe the procedures followed by thc Commerce Department anrd the Intemrational T'rade Commission, survey cascs and ouLcomes in the 1980s, and analyze what drives the unfair tradc laws.

The pattern of petitions and results, **thev** conclude, SUggeStS strongly that injury o U.S. producers beset by import cormpelitiorn is what thc antidumping and countervailing duty laws are about.

That is why the pattem ol antidumping cases is not particularly different from the pattem of - antisubsidy cases and why the frequency of cases against politically powerful countries is the same as the frequency of cascs against politically wcakci ones.

The political strcingth ol the exporting country does iniluelnce thc _form_ of import rcstriclion IhC U.S. govcnmcnt will use.

A powerful country will reccive tIhc courncsy of a negotiated settleiieiit. A less powerful country will in due course receive determinations through normal administrat've _proce(lues._ In short, unfair trade cases are whcre thc action is because they arc broad enough to handlc all the action.

The PRE Working Paper Series dissemiiiates the findings of work under way in thc Bank's Policy, Rcscarch, and External Affairs Complex. An objective of the series is to geo these findings out quickly, even if prcsentations arc less than fully polished. The findings, interpretations, and conclisions in these papers do not necessarily reprcsent official Batik policy.

Produced at the PRE Dissemination Ccnter
# Policing Unfair Imports: The U.S. Example

by J. M. Finger and Tracy Murray

# Table of Contents

|1.|Sequence<br>and Time Limrits of U.S. Procedures|2|
|---|---|---|
|I.|Cases and Outcomes in the 1980s|7|
|Ill.|What Drives the Unfair Trade Law--?|15|
|IV.|Concluision|20|
|Refer|ences|21|
|Anne|x|22|
# POLICING UNFAIR IMPORTS: THE UNITED STATES EXAMPLE J.M. Finger and Tracy Murray

Our tas3k in writing this paper was to dig out the numbers on United States unfair imports cases -- how many, against which countries, to what result -- and to provide an overall picture of how antidumping and countervailing duty actions are used by the United States to regulate imports. Do they tell us anything about where United States import policy is going?

The information we will present indicates that the unfair trade laws provide the standard against which imports are evaluated in the 1980s and the rationale by which most import restrictions are justified. But antidumping or countervailing duty actions are not always the way import restrictions are implemented. Half of the cases undertaken in the 1980s have led to negotiated export restraints rather than to antidumping or countervailing duties. We have also found that in almost every unfair trade case that gets to a formal determination the US government finds that the foreigners are unfair -- that the foreign merchandise has been dumped or subsidized. When the US government turns down a petition for an import restriction it is almost always because the injury test is negative -- the government finds that the imports in question are not causing serious harm to domestic producers. These findings suggest that the definition of dumping and subsidy are broad enough that the economics of the unfair trade remedies is effectively the same as the economics of the escape clause.
- 2 -

An alternative explanation is that petitions are self-screened: petitions that could not prove subsidy or injury are not submitted. But this alternative, we will explain, is not consistent with the facta.

# I. SEQUENCE AND TIMF LIMITS OF U.S. PROCEDURES

Industries will complain from time to time about impcrt competition, nence a goverrment must have a way to decide if and when it will impose import restrictions. Current United States law provides several tracks along which a domestic firm or industry may petition the government for protection from import competition, the antidumping and countervailing duty mechanisms being two of these. I/ Though the US Constitution clearly gives Congress (rather than the Executive and Judicial branches of the US governme: c) the right to regulate imports, the restrictions that result from administrative procedures like an antidumping or countervailing duty case do not require a specific Congressional vote to make them legal. Congress, in passing the US trade law, has delegated that legal authority. The Commerce Department may impose such restrictions when it and the International Trade Commission determine that the conditions Congress has specified have been met.

An antidumping or countervailing duty investigation begins when the government receives a petition from a domestic industry alleging that

- 1/ The others, identified by the sections of US trade law that establish them are "201" or safeguards cases; "301" cases, mainly about unfair foreign barriers to US exports; "337" cases, mostly about patent infringement, and "406" cases that involve disruption by imports from communist countries. Detailed descriptions are provided in Kaye, Plaia and He 'tzberg (1987).
- 3 -

imports **are** being dumped or are benefitting from a<sup>subsidy. The petition</sup> is filed simultaneously with the Commerce Department and the International Trade Commission. By law, it must **include** information "reasonably available to the petitioner" to support the<sup>allegation. The government</sup> must determine within 20 days whether the petition<sup>meets the standards of</sup> the law. If not the petition is dismissed, but in<sup>all likelihood a more</sup> complete petition would be resubmitted within a few weeks.

When a petition is accepted the Commerce<sup>Department begins an</sup> investigation to determine if the imported goods in question are<sup>dumped or</sup> receive a subsidy. All antidumping<sup>and most countervailing duty cases</sup> include a simultaneous but separate investigation<sup>by the International</sup> Trade Commission to determine if the competing<sup>domestic industry _'</sup> experiencing or is threatened by material injury from these imports.<sup>2/</sup> The International Trade Commission has 45 calendar<sup>days from</sup> receipt of a petition to determine if "the jest<sup>available information"</sup> provides a "reasonable indication" that the _omestic<sup>industry has been or</sup> is threatened with material injury by reason<sup>of unfair imports. A negative</sup> determination terminates the case.

Trade law charges the Commerce Department to determine<sup>at the</sup> preliminary level if there is a "reasonable<sup>basis to believe or suspect"</sup> that imports benefit from an unfair trade practice.<sup>A negative preliminary</sup> determination on subsidization or dumping does not<sup>end the case. Either</sup>

> 2/ Injury tests are included in countervailing duty cases involving dutyfree goods, plus all cases against signatories to<sup>the GATT Subsidies</sup> Code, Taiwan, and economies to whom the United<sup>States has extended by</sup> treaty unconditional most favored nation status.
way, **the** case proceeds to a final determination. However, an affirmative preliminary determination triggers immediate "suspension of liquidation,n a negati-e prelimirn y determination doe3 not. Under suspension of liquidation the importer must poet a bond to guarantee payment of antidumping or countervailing duties if the final determination is also positive. The **size** of the bond is **based** on the preliminary **estimate** of the effect of the subsidy on2 the exporter's price, or of the margin of dumping. Suspension of liquidation imposes, in effect, an import deposit requirement.

Positive determirations are necessary at the final stage on injury **and** on subsidization or dumping before an antidumping duty or countervailing duty order is issued. Before a final determination is reached there are several possible avenues to a negotiated settlement. The major of these are a quantitative export restraint agreement or an agreement to cease dumping or to eliminate the export subsidy. The foreign action must be monitorable and the case can be reopened quickly if the US government ccncludes that the terms of the agreement have not been met.

The sequence of the parts of a countervailing duty or an antidumping case is easier to communicate in tabular form, and is therefore laid out in Table 1. The order in which the various steps are completed is as listed, 1 then 2 then 3 then 4. Countervailing duty cases that do not include an injuey test proceed through the sequence as if they received a positive injury determination at the preliminary and at the final stage.

The relevant tine limits are listed in Table 2. Line C2 in Table 2 is the point of decision on suspension of liquidation, for example a normal countervailing duty case will reach this decision in no more than 85 days. The duration of suspension of liquidation is, in normal cases, 120
- 5 -

# Table ls SEQUENCE OF THE PARTS OF A COUNTERVAILING DUTY OR ANTIDUMPING CASE IN THE UNITED STATES

|Even<br>Prgli|t<br>minary<br>determinations|RE-'.LT|
|---|---|---|
|1.|Injury<br>Negative|Case ands|
||Positive|Case<br>continues|
|2.|Subsidy or dumping||
||Negative|Case continues|
||Positive|Came continues and suspension of<br>liquidation|
|Fin|al determinations||
|3.|Subsidy or dumping||
||Negative|Case ends and suspension of<br>liquidation is lifted|
||Positive|Case continues, suspension of<br>liquidation continued or initiated|
|4.|Injury||
||Negative|Case ends and suspension of<br>liquidation is lifted|
||Positive|Case ends, CVD or AD order is<br>issued|
- 6 -

Table 2: TIME LIMITS FOR THE PARTS OF A COUNTE1VAILING DUIT OR ANTIDUNFPIN CASE IN THE UNITED STATES

|||Ti<br>Countervaili<br>Normal|me limit<br>(in ca<br>ng<br>duty**case**<br>Complicated|lendar<br>days)<br> <br>b/<br>Normal|and event at vhic<br>Antidu<br>Compl<sup>4</sup>cated*|h the veriod of time bedns<br>siing<br>**Cases**<br> Etdd<br> <br> <br>|
|---|---|---|---|---|---|---|
||||||a<br>not Extended|xene<br>el<br>Complicated<br>_*1_<br>not Complicated<br>a/<br>and Extended S/|
|Event<br>A.|Petition<br>submitted|as|||||
|B.|Petition<br>accepted<br>or rejected|<br>2|na<br>|ns<br>|na|_na_|
|C.|<br> <br> <br>Preliminary<br>determinations|0,A|20,A|20,A|20,A|20,A<br>20,A|
||<br><br>1.<br>Injury||||||
|D.|<br> <br>2.Subsidy or dumping_aI_<br>Final<br>determinations|45,A<br>85,A|45,A<br>150,A|45, A<br>160, A|45, A<br>210, A|45, A<br>45, A<br>160, A<br>210, A|
||1.Subsidy or dumin||||||
||pg<br>2.<br>Injury<br>if C2isaffirmative|75,C2<br>120|75,C2<br>|_75,_C2<br>|75,C2|135,CA<br>135, C2|
|Total|<br>ifC2**is**negative<br>days|, C2<br>75,DI|120, C2<br>75,DI|120, C2<br>75,DI|120, C2<br>75,DI|180, C2<br>180, C2<br>75,D<br>75, DI|
|<br>|<br>If C2**is**affirmative||||||
||<br>If C2isnegative|205, A<br>235, A|270, A<br>300 A|280, A<br>310 A|330, A<br>360 A|340, A<br>390, A<br> <br>|
|Suspen|sion<br>ofliquidation|120 C2|,<br>|,<br>|,<br>|370, A<br>420, A|
|<br>(no.|<br> <br>ofdays)|,|120, C2|120, C2|120, C2|180, C2<br>180, C2|

- na not applicable

- S/ !/ b/ ordinarily The Comerce affirmative dumped. The preliminary Some time limits investigated, (b) the Cammerce Department (ii) complicated and the extension Department may postpone if the preliminary (11) the novelty subsidy on dumping or subsidization because of (i) or dumping determination concludes **is** of the issues, requested dumping determination a final that the number and complexity by exporters all parties dumping determiration investigatioas or may (iii) not be msde before was negative are ccoperating the number of of a significant my be sxtended of subsidy ti) and the extension firms **and** if the preliminary the preliminary share of the merchandise vhose determines practices if (a) the activities or duping **is** tkat frjury requested titioner dusping determination the case **are** determination. transactions to be investigated.alleged requests by the petitioner. **is** extra-to beit, to besntJ **vas**
- 7 -

days, but if exporters raquest an extension of the case, liquidation might be suspended for as long **as** 180 days. (When liquidation is *uspended the petitioner cannot request that the final decision be delayed.) From submission of tle petition to final determination, a countervailing duty case can take no more than 300 days, **an** antidumping case no more than 420. These "length of proceedings" numbers roughly measure the period over which importers **and** exporters will be influenced by the uncer einty a case generates. However, before a firm files a petition it often makes inquiries with law films fam~.liar with such cases and holds informal discussions with the Coam erce Department. These inquiries and discussions are not kept secret, and they can begin to generate uncertainties for importers and exporters.

# II. CASES AND OUTCOMES IN THE 1980.

There have been a lot of cases in the 1980s, 774 through 1988 and they have touched a lot of countries, 59 in all. The country coverage of cases is summarized in Table 3 and listed by country in Annex Tables 1 and 2.

# Country incidence

Which countries have been hit by a larger share of unfair trade cases than their share of US imports would predict? The second and third columns in Table 3 answer this question. First, -..ports from Eastern Europe generated, per dollar, an unusually high number of unfair trade cases, the observation holding for each individual country as well as for the group as a whole. Developed countries as a group were more lightly hit, but among them some important trading partners of the United States were hit often and others not so often. US imports from European Community member states were
- a -

Table 3& COUNTRIEZ THAT ARU THE OBJECT OF US ANTIDUMPING AND COUNTERVAILING CASES COSPARED WITH THE SHARE T8EY PROVIDE OY US MERCHANDISE IMPR'iS

# (antidumping and countervailing duty cases completed, 1980-1988)

|Country or Group of Countries|Total number<br>of**cases**|Total cases**against**<br>this country or<br>group**as a**1of<br>totalsagainst<br>all<br>countries|Percentage<br>of 1987<br>US merchandise<br>imports that<br>_originate_<br>in this<br>country or group|Percentages<br>with<br>restrictive<br>outcouea<br>(including<br>VERs)|
|---|---|---|---|---|
|All Countries|774|100|100|70|
|Developed Countries|450|58|63|65|
|Developing Countries|286|37|36|75|
|**Eastern**Europoan Countries|38|5|0.5|87|
|Europnan Community|304|40|20|64|
|Brazil|56|7|2|79|
|South Africa|20|2.6|0.3|100|
|Korea|36|4.7|4.2|86|
|Mexico|35|4.5|4.9|91|
|Taivan, China|29|3.7|6.1|62|
|HongKong|1|0.1|2.4|100|
|Singapore|6|0.8|1.5|67|
|Canada|35|5|18|54|
|Japan|49|6|21|69|
**-9-**

particularly contentious. The Community supplies 20 percent of US imports, bears 40 percent of the unfair trade cases. 3/ Japan, on the other hand, supplies about the **same** part of US imports, but **wva** the object of only 1i6 as many cases; 49 ot imports from Japan versus 304 on imports from the European Community. Likewise, per dollar of imports from Canada there were relatively tow unfair trade cases.

Low figureo on this scale do not of course, mean that the cases a country experienced were not troublesome. Canada considered US unfair trade **cases** sufficiently troublesome that their control was **a** principal Canadian objective when the Canada-US Free Trade Agreement was negotiated.

# Developing versus develoged

Developing countries _as_ a group are not unusually burdened. They supplied 36 percent of US imports in i987 _4;_ and were Lhe oujiets ofL a comperable 37 percent of the cases. Among major developinjr country exporters, Brazil is the only one whose share of US unfair trade cases is far above its shara of the US import market; 7 percent versus 2 percent. Korca has blen hit in propottion to its share of US imports but imports from Hon= Kong, Singapore and Taiwan, China, have been relativ -ly free of unfair trade complaints.

- 31 Country by country, only West Germany would have a smaller figure in the second column of Table 3 than in the third.

- 4/ Thirty-eight percent in 1984.
- 10 -

# Antidumping versus countervailing duty

T'ne numbers of antidumping and countervailing duty cases were very nearly the same; 385 antidumping cases and 389 countervailing duty cases. Table 4 shows that when we subdivide by developed versus developing countries the even split between antidumping and countervailing duty cases is maintair.ci. Looking at this "coin" from the other side, there is no tendency for protectionist interests in the US to use one kind of unfair trade complaint against developed, another kind against developing countries. They use both instruments agAinst both groups.

Cases against developing countries led to restrictive outcomes slightly mor( often than cases against developed -- roughly 3/4 of the cases against developing versus 2/3 of the cases against developed ccuntries. (Table 4) Cases against developing countries were superseded less often by negotiated, voluntary export restraints -- only 15 percent of cases as compared with 36 percent of cases against developed countries. A larger share of cases against developing countries come to restrictive outcomes, but more often these outcomes were reached within the routine of the antidumping and countervailing duty law, not by recourse to a negotiated restraint.

# Many cases were superseded by negotiated export restraints

Nearly half (348 of 774) of the cases were superseded by negotiated export restraints. During 1980 to 1985 the US steel industry filed complaints against almost every exporter of steel. These complaints were the 1980's installment of a steel industry campaign for import protection that had been under way since the 1960s. As incorpcrated into the International Trade Commission work program, they came to over 300 cases.
- 11 -

# Table 4: COUNTERVAILING DUTY AND ANTIDUMPING OUTCOMES COMPARED

|Country<br>or group|Antidumping<br>as<br>apercentage<br>of total num'ier|Restrictive<br>**a**perce<br> <br>numb<br>Anti-<br>dumping|<br>outcom<br>ntageoft<br>er<br>of cases<br>Counter-<br>vailing|es<br>**as**<br>otal<br> <br>Both|VERsas<br>of restr<br>outcome<br>Anti-<br>dumping|a percentage<br>ictive<br>s<br>Counter-<br>vailing|Both|
|---|---|---|---|---|---|---|---|
|All<br>countries|50|72|67|70|63|66|64|
|Developed countries|49|69|61|65|65|82|74|
|Developing countries|46|73|77|75|55|46|49|
|Eastern European countries|87|91|60|87|77|100|78|
- 12 -

The strategy of the industry in the 1980s was to pressure the US government to negotiate market shares with all significant suppliers and to pressure foreign suppliers to accept such restraints. The industry achieved its goals. The President, in 1984, announced a "Steel Industry Stabilization Program," which included the negotiation of export limits with all suppliers. Congress, as part of the Trade and Tariff Act of 1984, provided the President the authority to enforce negotiated limits at the US border. The law specified an aggregate import share of 17.0 percent to 20.2 percent, but specified this global quota as a "sense of Congress" rather than a legally established limit. In the next paragraph of the law, however, the Congress promised further actions if this did not get the job done. It did get the job done.

Later, the US electronics industry used unfair trade charges to force the US government to negotiate and Japan to accept export limits on semiconductors. In a few instances antidumping or countervailing duty charges were used to force negotiation of an export limit on an apparel item from a country that was not subject to a limit under the multifibre arrangement.

Do th, salvos of unfair trade complaints that forced negotiations of export restraints overlay concentrations of particularly bad or particularly injurious foreign practices? Not so, according to the determinations reached in the resulting cases. Of cases superseded by VERs, 42 percent of those that were completed were affirmative; i.e., found that the imports were dumped or subsidized and that they had injured US producers. Of cases not supersede by VERs, 48 percent reached that determination.
- _ 13

Injury is what it is really about Dumping or subsidization is found almost always. Table 5 reports the outcomes of cases that reached a formal determination -- affirmative or negativ;e on the questions of subsidy, dumping and injury. Of cases that did not receive a formal affirmative or negative final determination the largest part, 169 cases, were superseded by a negotiated export restraint agreement or a suspension agreement within the unfair trade laws. Another 48 cases were withdrawn or terminated without an announced capitulation or adjustment by the exporter. Of these, 25 were withdrawn or terminated by the Commerce Department, who are responsible for the dumping or subsidy investigation, the others terminated by the International Trade Commission. If we assume that the 169 (the cases that came to a restrictive informal outcome) would have received an affirmative subsidy or dumping finding and the 25 a negative finding, then add these to the data in Table 5, the percentage negative changes from 11.0 percent tc 11.5 percent. Thus, as the table reports, nine times out of ten subsidization or dumping is detected.

The figures in Table 5 refer to what we might call the "calibration" of the individual tests -- the percentages of Affirmatives and Negatives produced by each individual test. The overall evaluation of a petition involves not only this calibration, but also the sequencing of the tests as well. For example, a case that receives a rnegative final dumping determination ends there. It does not go on to a final injury determination. (Table 1 above tabulates the sequence of the tests.) When we take both sequencing and calibration into account, we see the injury test, not the dumping or subsidy test, determines which petitions are unworthy, i.e., the injury test bears the burden of rejec.ing
- 14 -

# Table 5: NEGATIVE AND AFFIRMATIVE DETERMINATIONS a/ IN SUBSIDY, DUMPING AND INJURY TESTS: NUMBERS AND PROPORTIONS

||Affirmative<br>number|Ne<br>number|gative<br>percentage|
|---|---|---|---|
|Subsidy and dumping tests||||
|Preliminary|403|50|11|
|Final|484|60|11|
|Injury tests||||
|Preliminary|444|129|23|
|Final|190|113|37|

- a/ Only cases that reached an affirmative or a negative determination are included, i.e., suspended, terminated, etc., cases are not included. Some cases that were superseded by VERs had previously reached final determinations.
- 15 _

petitions for protection. Consider,<sup>for purposes of exposition,atypical</sup> basket of 100 petitions that end<sup>with a formal detormination,</sup> i.e., are not withdrawn when a VER is negotiated<sup>or suspended by a "cease and desist"</sup> agreement. Of the 100, 23<sup>would be rejected by a preliminary determination</sup> of no injury. Of the 77 that<sup>remained, 8 (that is, 11 percent) would be</sup> dismissed by a determination of no subsidy or dumping, and<sup>of the other 69,</sup> 25 (that is, 37 percent) would<sup>be dismissed by a final determination</sup> of no injury. Thus 56 of the initial<sup>100 petitions would not lead to a final</sup> antidumping or countervailing duty order. Of the 56, 48 would<sup>be dismissed</sup> by a negative injury determination.<sup>That is 6 times as many as the 8</sup> dismissed by a negative subsidy<sup>or dumping determination.</sup>

# III. WHAT DRIVES THE UNFAIR<sup>TRADE LAWS?</sup>

The obvious explanation behind these<sup>facts is that injury is what</sup> the unfair trade laws are really<sup>about. Might there be however another</sup> explanation? In particular,<sup>might the injury test appear to be the</sup> critical one because petitioners<sup>do not file cases that would fail the</sup> dumping or subsidy test?

# Motives for Detitions

Once the mechanisms are in place,<sup>filing a complaint could reduce</sup> import competition oeveral ways.<sup>A bit of thought provides the following</sup> list:

- (1) The outcome of resulting<sup>investigation is a restrictive</sup> antidumping or countervailing<sup>duty order, or a</sup> restrictive agreement under<sup>the antidumping or</sup> countervailing duty law.
- 16 -

- (2) The costs to the exporter of responding to the petition, or the uncertainty it generates about the profitability of developing market further lead the exporter to cut back his efforts to export. Likewise, importers will be less certain of the price they will pay in the future and may shift to other sources of supply.

- (3) Filing the petition helps to build political support for the import-competing industry -- jupport that increases the likelihood that Congress will take direct action to protect the industry, or that the Executive will pressure the exporting country to limit its exports.

- (4) Such possibilities will soften up the exporter, make him receptive to negotiation of the sort of export reduction the world now labels "voluntary" -- a VER.

In short, the petitioner's interests are served by any outcome or influence that will disadvantage his competitors. A formal antidumping duty order is only one of the ways.

# Self-screening would be for injury, not for dumping or subsidy

Jagdish Bhagwati, in his recent book Protectionism, has emphasized the "harassment effect" that pending cases impose on exporters. But to the degree that petitioners use unfair trade cases to harass import competition it will be less important for them to self-screen for dumping or subsidy than for injury. The preliminary injury test comes 45 days after a petition is filed. If it is affirmative the case continues. (See Table 2) Importers and exporters will be burdened for at least 205 days, maybe for 420 days, by the uncertainties of a pending case -- and it does not matter
-17 -

if the preliminary subsidy or dumping determination is negative or positive. The case continues either way. Self-screening thus would pay more attention to the injury test, and if the dumping and subsidy tests were equally tight as the injury test the subsidy or dumping test would be the one more often negative. The facts as we saw above are the opposite.

Breaking down the data between cases superseded by VER and those not superseded provides more evidence that the legal definitions of dumping or of subsidy are very broad. The strategy of the steel industry, which filed 95 percent of the cases that have been superseded by VERs, was to overload the system; to file so many cases that the US government would not have the capacity to process them, and would be forced to negotiate VERs with exporters. One might expect that this strategy would push on the limits of situations in which the subject exports were in fact dumped or subsidized. Yet, as Table 6 shows, the same 89 percent of cases received affirmative determinations. Imports of almost every steel product from almost every source -- complained about by an industry that clearly was injured by import competition -- could not find the limits of the legal definitions of dumping and subsidy.

# Direct evidence

Direct evidence that injury is what the unfair trade screening process is really about can be taken from a study by Finger, Hall and Nelson. They analyzed 1975 through 1979 antidumping and countervailing duty cases to see what factors explained the outcomes of subsidy and dumping determinations.

Comparative costs, not pricing practices turned out to be the explanation. If a case involved a product in which US producers have
- 18 -

# Table 6: PE..CENTAGE OF AFFIRHATIVE DETERMINATIONS IN FINAL SUBSIDY AND DUMPING DETERMINATIONS: CASES SUPERSEDED VERSUS NOT NOT SUPERSEDED BY VERS

||Superseded<br>by ''ER|<br>Not Superseded<br>by VERs|
|---|---|---|
|Subsidy|||
|Negative number|12|17|
|Affirmative number|75|134|
|Affirmative percentage|86|89|
|Dumping|||
|Negative number|5|16|
|Affirmative number|59|135|
|Affirmative percentage|92|89|
|Subsidy and dumping|||
|Negative number|17|33|
|Affirmative number|134|269|
|Affirmative percentage|89|89|
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_ comparative advantage, the case came usually to a negative subsidy or dumping determination. (The research was an analysis of th& subsidy and dumping test, not of the injury test.) But cases involving products in which the United States does not have comparative advantage, (hence US producers are likely to be injured by import competition) usually come to an affirmative dumping or subsidy determination. The researchers concluded: A major difference between our view and others has to do with what the (antidumping, countervailing duty and escape clause] mechanisms actually do. In law, the escape clause deals with injury to US producers from import competition and the [antidumping and countervailing duty] mechanisms with the fairness of business practices used in the US market by foreigners. But in economics we find that they both deal with the same thing -- injury from imports and the associated gains from trade. The functional difference between the cases which belong on one track or the other is the size and perhaps the degree of public awareness of the interests at stake, not the nature of those interesta. Antidumping and countervailing duties are, fur.-.tionally, the poor (or small) man's escape clause. (pp. 46ff.)

# There are few escape clause cases

Finally, the escape clause involves no test of the fairness of import competition, only an injury test. If the distinction between fair and unfair competition mattered, complaints that could pass the unfair trade laws' injury test but would not pass the dumping or subsirly teet
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would be escape clause cases. But there are almost no escape clause cases, four per year in the 1980s compared with eighty-six unfair trade cises per year. For petitioners, unfair trade cases do have procedural advantages, they can be applied to imports from a particular country and the President does not have authority to set aside an affirmative decision. But these procedural advantages come into play only if the escape clause standards for dumping or injury are broad enough that the unfair trade mechanisas are effective alternatives.

# IV. CONCLUSION

The patterns of petitions and of results suggests strongly that injury to US producers beset by import competition is what the antidumping and countervailing duty laws are about. That is why the pattern of antidumping cases is not particularly different from the pattern of antisubsidy cases, and why the frequency of cases against po±itically powerful countries is the same as the frequen'-y against weaker ones. The political strength of the exporting country does influence the form of i-oort restriction the US government will use. A powerful country will receive the courtesy of a negotiated settlement, a less powerful one will receive in due course the determinations made through normal administrative procedures.

In sum, unfair trade cases a:e where the action is because they are broad enough to handle all the action.