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| Canada-US Softwood Lumber Dispute |
Professor
Raj Bhala contemplates that following troublesome issues exist from the point
of view of the exporters with the present Antidumping Agreement[1]:
1.
The terms and phrases in the agreement need to be clearly defined in order to
reduce opportunistic and protectionist abuse by the importing countries while
imposing antidumping duty.
2.
The present antidumping agreement tends to focus more on the mere act of price
discrimination. Instead, cross-border price discrimination[2]
needs to be taken into consideration so as to understand the underlying
micro-economic rationale in differentiation of price.
3.
The price classification must exist on the basis of the Cost Structure adopted
by the exporter. By doing this, the range of actionable dumping situations will
surely get narrowed[3].
In
order to address the abovementioned problems, he has suggested a Traffic Light
System similar to that which exists in the Agreement on Subsidies and
Countervailing Measures.
Red-Light
Dumping
Under
such dumping, the moot question to be determined is:
Whether
or not an exporter is engaged in predatory dumping if it sells its product in the
importing country below its shut-down point i.e. at a price below its minimum
average variable cost?
It
is quite evident that in such a situation, the exporter seeks to drive its
competitors out of business in the importing country, establishing a monopoly
position. Under the Traffic Light System, no final antidumping duty is imposed
and no estimated deposit is required until the Investigating Authority is
convinced that the red-light dumping is the substantial cause of material
injury.
Yellow-Light
Dumping
An
exporter is said to commit yellow-light dumping if it sells its product in the
importing country at a price somewhere in between its break-even and shut-down
points i.e. at a price below its minimum average total cost but above its
average variable cost.
In
such a situation, the Investigating Authority should issue a cautionary
statement to the exporter informing him that its pricing strategy for the
subject merchandise is nearing the point of red-light dumping which, in turn,
will trigger certain presumptions against the exporter and will ultimately lead
to imposition of the duty. However, no duty is to be imposed in case the
dumping continues to be yellow-light and does not turn red.
Green-Light
Dumping
Green-Light
Dumping takes place when an exporter sells in the importing country at or above
its break-even point i.e. at a price equal to or above its minimum average
total cost. According to the professor, such a situation
does not warrant imposition of any kind of anti-dumping duty. The exporter can
not only cover its total costs, but may also earn a profit.
Purpose
of the Traffic Light System
According
to Raj Bhala[4]:
“The
central purpose of the traffic-light system is to limit the risk of
protectionist abuse. By restricting the scope of actionable dumping behaviour,
the traffic-light system makes antidumping law a less attractive, more
difficult remedy to obtain. By classifying dumping behaviour and attaching
definite legal consequences to each category, the law is simpler and less
ambiguous than under the Agreement or the Act.”
International Trade Law Notes
[1] Raj Bhala, Rethinking
Antidumping Law, 29 Geo. Wash. J. Int'l L. & Econ. 1 (1996).
[2] See A Report of the C.D. Howe
Institute Competition Policy Council, Cross-Border Price Regulation:
Anti-Competition Policy?, visited at http://www.cdhowe.org/pdf/Verdict_CPC_May_2014.pdf
[3] To understand the types of Price
Discrimination and Price Classification, See, F Machlup, Characteristics and
Types of Price Discrimination, p.397-440, (Volume ISBN: 0-87014-196-1)
visited at www.nber.org/chapters/c0971.pdf
[4] Ibid.
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