The Antidumping Epidemic: Causes, Victims, Implications and Potential Solutions

I will be the moderator of today's forum entitled "The Antidumping Epidemic: Causes, Victims, Implications and Potential Solutions."  You will notice, however, that I take license with the definition of moderator.  So expect a small diatribe before we turn to our distinguished group of panelists.  Following the presentations we will have a question and answer session.

For those of you who are in attendance strictly to see or hear Zyg Jablonski, I apologize for his absence.  He was unable to attend due to a last minute conflict.

I started at Cato a little more than a year ago when I was brought on to focus my efforts on antidumping reform.  As you are all aware, however, antidumping remains very much unreformed.  It remains a protectionist tool of choice here in the
United States and it has become increasingly popular abroad as you will hear today.  I want to give a little bit of background on dumping, in general, before we get into the proliferation problem.  U.S. victims of
U.S. antidumping measures out-number beneficiaries of such measures disproportionately.  Consumers of the affected materials--which become more scarce and more expensive in the presence of antidumping orders--are put at a cost disadvantage vis-a-vie foreign competitors who have access to these materials without antidumping duties.  Not only are these costs passed on to you and me when we purchase final products, but they are reflected in diminishing profit margins, wage suppression and rising unemployment statistics in downstream industries.  Since most products subject to antidumping measures in the
U.S. are raw material commodities (such as steel and lumber) this dynamic is commonplace.  Antidumping duties cause a massive burden shift from import competing to import-using industries.  From an employment perspective there are about 25 workers in the major
U.S. lumber using sectors for every one in the logging and saw mill sectors.  There are between 40 and 60 jobs in the steel using sectors of our economy, which include auto production, appliance manufacturing, construction materials and others for every one in steel producing.  Nearly half of the approximately 225 existing antidumping orders are on raw steel products.  These past several weeks Congress has been negotiating a fiscal stimulus plan to "jump start" the economy.  The last time I checked, the leading indicators of most economic recoveries are new housing starts and big-ticket purchases (like autos and appliances).  So here they are debating the tax and spend approaches while the raw materials that are essential to the normal recovery process are being choked off by over-zealous administration of anti-consumer, anti-growth, antidumping measures.  On top of that we are now facing the specter of additional restrictions on steel in the current safe guards case.

Despite evidence of significant welfare costs and misguided economics of antidumping, the law continues to enjoy widespread support among policy members.  Even members of Congress who represent export intensive states have little or no import competing constituents.  Why is that?  I imagine it has something to do with the fact that efforts to dissuade this type of protectionism have been less rigorous than efforts to encourage it.  After all there is a staggering asymmetry to the process.  The benefits of protection accrue to a small group of concentrated producers while the costs are spread among a larger cross section of import users and consumers, so inherently there is a greater motivation to seek protection than to challenge it.

It is, therefore, incumbent upon adversely affected constituencies to recognize that their consolidated stakes are higher than those of the protection-seekers.  The interests of importers, import-using industries, and consumers have been given short-shrift by policy makers in the antidumping arena.  Now, by coalescing and expanding the ranks to include increasingly embattled
U.S. exporters, and really, any company with a stake in trade liberalization, the forces of antidumping have a chance to make an impact.  Defenders of the antidumping law like to argue that antidumping is a trade lubricant.  By maintaining an antidumping law, constituencies that face the greatest challenges from open trade are more apt to buy into trade liberalization, generally.  Please. 

The AD law benefits the steel industry primarily, and steel as opposed to trade liberalization, period.  You'll find no support within the steel industry for an FTAA, for a new WTO round, or for any bi-lateral agreements.  The industry exports around two percent of its production and has no interest whatsoever in opening markets abroad. 

The truth is that the
U.S. antidumping law poses one of the greatest threats to trade liberalization. The
U.S. administration has already run afoul of WTO rules in several cases, with more challenges coming down the pike.  For example, the Byrd Amendment, which is under challenge, and the issue of zeroing, which is now in the process of being challenged.  In reality, the
U.S. law could be significantly de-fanged if, pursuant to successful challenges at the WTO, it were brought into conformity with the Antidumping Agreement.  But there is question as to whether and when these revisions will be made by our legislators.  We hear rumblings within the petitioners' bar and from protectionist industries that the WTO rulings have been unfair and that well, who needs the WTO, anyway?

This is dangerous posturing.  Posturing that should summon the pro-trade and antidumping reform constituencies to arms.   The rationale for antidumping is based on a theory that a foreign producer, reaping super-normal profits in a protected home market could sell at a loss in the United States for a prolonged period, driving its competitors from the market and eventually raising price in the absence of any competition.  This rhetoric does not stand up to the reality of antidumping, which is wielded indiscriminately against low-price imports, without ever considering the home market conditions on which the law is premised. 

The law has nothing to do with fair trade, as AD defenders implore.  It contains no mechanism for distinguishing between fair low prices and unfair low prices.  In an antidumping proceeding, all imports sold at lower prices here than in a foreign producers home market are deemed unfair.  Even if the producer is more efficient, has lower costs, and can economically justify the lower prices.  Originally intended to prevent anti-competitive behavior, antidumping has become the tool of choice among those seeking to squelch competition.  What is so perverse about antidumping is that duties are imposed whenever there is a price differential favorable to consumers. 

The
United States is the world's biggest user of antidumping and has been for decades.  This is a major irritant to our trade partners.  Many are seeking reform to bring antidumping use into closer conformity with its original intent.  Many consider the topic a pre-condition for any further discussion of trade liberalization.  But concurrently, a new trend has emerged, one that is just beginning to capture official
Washington's attention: proliferation of antidumping laws around the world is on the rise.  This phenomenon is, in part, a response to antidumping reform opposition here at home, a position which is based on the faulty assumption that antidumping laws are the exclusive domain of U.S. businesses seeking reprieve from unfair foreign competition.

In May, 62 senators signed a letter to the President threatening to withhold support for trade promotion authority, or any new trade agreements that might weaken the antidumping law.  But now they may be finding it difficult to reconcile this position and its consequences.  Last year, U.S. chicken producers were hit with astronomical antidumping duties on exports of chicken meat to
South Africa.  Under its own antidumping law, modeled after the U.S. version, the South African government found
U.S. exporters to be selling chicken meat there at prices below the cost of production.  But the
U.S. industry has taken exception to the methodology under which this finding was rendered, and is seeking recourse before a WTO body.  In July, 20 senators wrote a letter to the USTR, Robert Zoellick, imploring him to pursue the chicken industry's cause.  While Zoellick feels their pain, his hands have been tied by many of these same senators seeking his assistance--13 of the 20 signatories of the chicken letter were also signatories of the letter warning the President against weakening the antidumping law back in May.  So challenging the South African government's methodology could expose the U.S. antidumping law to similar scrutiny in that body--scrutiny likely to compel revision in the
U.S. law. 

The problem confronting chicken exporters reflects a growing trend affecting
U.S. exporters of a range of products to dozens of countries.  Appliances to Canada; chemicals, chemical products to India, Korea, and Columbia; paper products to Mexico and
Australia, and on and on.  The emergence of antidumping around the world threatens to offset gains made through years of market access liberalization. 

Until the mid 1980's, only a few wealthy countries, including the United States, Canada, Europe, Australia, and
New Zealand maintained antidumping laws.  But now antidumping laws have been enacted by new countries around the world at a rapid pace.  By the second half of the 1990's, the United States became the world's third largest target of foreign antidumping--trailing only China and
Japan.  The availability of this WTO sanction-protectionist tool has been of great comfort to countries like India, Brazil, South Africa, and
Argentina, which, until recently, maintained extremely high tariffs and quotas.  The use of antidumping was unnecessary in the face of the relatively prohibitive barriers. But as these barriers have begun to fall in compliance with WTO obligations, antidumping has emerged to fill the vacuum. 

In the first half of the 1990's,
India initiated 15 antidumping investigations.  In the second half, 140.  Between these same periods,
South Africa's initiations increased from 16 to 129. 
Argentina's case initiations reached 96 in the second half of the decade, representing a greater than 50 percent increase over the first half.  And the groups of products targeted by antidumping around the world are vital U.S. exports, constituting almost 55 percent of total
US export value in 2000.

It's not only the volume of cases that is troubling, but it is the methodologies used by local antidumping authorities that are problematic.  The Antidumping Agreement affords considerable latitude, or at least there have been few methodological WTO challenges when calculating dumping margins.  Mr. Sumner will discuss one of the more egregious infractions in the South African chicken case, but there are many others.  In a Canadian case involving baby food, which incidentally involves a U.S. petitioner, Heinz, operating out of Canada, as well as a
US respondent,  the authorities were extremely selective, i.e. results oriented about the sales to use and the calculation of normal value.  Since all of Gerber sales to Canada were produced in a particular plant in Michigan, the authorities only considered the U.S. sales from this plant, even though there were other production facilities in the
United States.  Then it shows only those
U.S. sales from this plant where volumes were most similar to those sold to the Canadian importer.  To say the least, this approach really stretches the bounds of basing normal value on ordinary course home-market sales. 

In an Indian case concerning acrylic fiber, the antidumping authority simply ignored
U.S. sales that included an in-use rebate.  The American company, Cytech, had this program for its American customers in place, but not for its Indian customers.  The authorities claimed that the rebate program should have been available to Indian companies to be recognized in this proceeding.  Obviously, rebates cause net prices to decline and rejection of the adjustment adversely affected the
U.S. company.  There is nothing unusual about granting rebates to customers who meet certain criteria.  It is common practice to provide incentives to customers in one market and not another.  In another Indian case, normal value was based in a manner that is above scrutiny but the
U.S. export sales value was really gobbled. 

A major diversion from acceptable practice was undertaken with respect to the calculation of export prices. Union-Carbide, the respondent, produced subject merchandise in dozens of countries and exported to
India from several of those countries.  The Indian authorities subsequently decided to use sales from all of these countries to calculate an average export price.  This outcome really says nothing about
U.S. dumping, but the antidumping order did take effect.  These are merely a few examples. 

Antidumping proliferation has affected the developing world, where average tariffs have fallen by about 50 percent over the past decade.  To assume that this trend will somehow abate on its own is folly considering that most of these countries' industries are being exposed to meaningful foreign competition for the first time.  China, which has not been officially inducted into the WTO yet, has been the number-one target of antidumping by most countries for the past decade.  It has agreed to significant market-opening measures to win entry into the WTO.  During this courtship period, China has been relatively restrained in its resort to antidumping.  That could change after its succession to the WTO is complete and official, mitigating long-awaited market access improvements there.  And why?  Because the official position of the U.S. government is that antidumping laws are a sacred cow. 

It's past time for trade policy to reflect this new reality.  While the antidumping regime has always been costly to Americans, the price tag is rapidly inflating.  Antidumping is becoming the remedy of choice to foreign governments who are obliged to finesse reductions in traditional trade barriers.  American industries have had several decades head-start in the process of adjusting to foreign competition and have much less justification in resorting to antidumping.  But its availability to countries whose markets are finally becoming accessible undermines that accessibility.  Opposition to antidumping reform provides our trade partners with the means to justify their own protectionism. 

I'm now going to turn the podium over to our first panelist. His name is Jim Sumner. Jim has served as President of U.S.A Poultry and Egg Export Council, also known as USAPEEC, since February 1990.  USAPEEC is a non-profit membership organization, which represents approximately 230 of the leading poultry processing companies, trading companies, and affiliated organizations involved in exporting.  The Council, as a cooperator with the Foreign Agricultural Service, is responsible for the worldwide promotion of U.S. poultry and egg products, and maintains offices in 13 foreign countries.  The council also represents the industry in various trade policy and other export-related issues.  Jim has been appointed by the past four secretaries of agriculture and U.S. trade representatives to serve on the Agricultural Technical Advisory Committee (ATAC), and continues to serve on the Agricultural Policy Advisory Committee (APAC), appointed by U.S. Trade Representative Robert Zoellick, and U.S. Agricultural Secretary Ann Veneman.  These committees provide industry input for various international trade issues and will be actively involved in upcoming WTO negotiations.  Jim will share with us today some of the horrors he and his industry have experienced with foreign antidumping proliferation.  Please welcome Jim Sumner.

James Sumner:

Good afternoon.  Looking at the title of today's panel I guess it's fair to say I fall into the victim category, or at least, the industry I represent does.  Maybe not the kind of victim you are used to hearing about, though, because I represent an industry that has been on the receiving end of these procedures, the U.S. poultry industry.

I'm the first to admit that I'm not an expert on dumping--so I hope you'll spare me during the questions and answers.  But unfortunately I do have a fair amount of experience in the subject, most of it rather painful, expensive, and quite threatening in the antidumping process and its effects on the industry.  And I'd like to share my experiences with you here today.  But first, let me take just a couple of minutes to share with you a little bit of a background on the U.S. poultry industry, which is one of U.S. agriculture's most successful and impressive export success stories. 

U.S. chicken exports have actually tripled since 1991 from $627 million to $1.9 billion in that period of time--in just 10 years.  As recently as 1989, the United States was exporting just 4.7 percent of our total chicken production.  This year we'll export over 20 percent of our total production.  And during that same time period that our percentage of production exported has increased, so has our production.  Our production has grown by 78 percent during that same time period from 17 billion to 31 billion pounds.  In fact, exports are credited as being the driving force behind our industry's increased production.  As a result, there are over 350,000 Americans directly employed by our industry and many more in related spin-off industries.

Today, the United States is recognized as the leading exporter of poultry in the world, based in large part by our industry's efficiency of operation through vertical integration, as well as having access to an unlimited supply of quality feed products at competitive world prices.  This means that we're competing successfully with poultry industries in other countries.  And, I might add, nearly every country in the world produces poultry to some extent.  And because we can effectively compete with domestic poultry producers in most foreign countries, they view us as a threat and that we are injuring them, and that they don't like.  Of course, we don't concede to injuring foreign poultry producers, but according to them we are doing so, and we have come to realize that they certainly have much more clout with their governments than do we. 

So, our industry has become a victim, and one of the reasons this has occurred, and this is no secret, is that the predominant user of U. S. dumping laws is our steel industry.  And the steel industry doesn't export a heck of a lot, so they use these procedures, often with reckless abandon.  Often, other countries have suffered because of this overuse, and their own industries have learned to be just as aggressive with their antidumping laws as we are with ours.  So those U. S. industries that do export, like poultry and other agricultural commodities, have become vulnerable to attack because of the aggressive tactics of the U. S. steel industry and the support they receive from our own government, unfortunately. 

Our U. S. poultry industry has enjoyed its entire existence without a serious threat to our ability to export, at least until about two years ago, when the government of one of our less important markets, South Africa, levied dumping charges against our industry.  And isn't it ironic that this same country has been one of the targets of our steel industry in antidumping cases?  So obviously, they knew all the tactics to use against us.  Since South Africa is not an important market, some in our industry were willing just to walk away from their allegations.  But as the organization responsible for maintaining and supporting our industry's export, it used to be that we could not allow this to happen.  We knew that if left unchallenged, South Africa's allegations could become precedent setting for many other foreign export markets who are just looking for an excuse to keep our products from competing in their markets.  So as we quickly discovered, while our government often does not hesitate to bring antidumping charges against a foreign entity, when it comes to defending ourselves against foreign charges, we're pretty much on our own.  And unfortunately, we did not have a war chest to defend ourselves through lengthy legal hearings and investigations a half a world away. 

As some of you may know, the South African government imposed an antidumping duty on our exports using an outrageous methodology that the U. S. would never use.  For example, if you walk into a Safeway or a Giant or Shoppers Food Warehouse or whatever, and go to the meat counter, you'll find chicken parts sold at different prices.  And this is as close as you'll get to a perfect market.  It's highly competitive, as those prices reflect demand.  And you'll find that the chicken breasts sell for a higher price than the whole chicken, and that the whole chicken sells for a higher price than the legs or the leg quarters, and that's the way the market has been determined.  U. S. chicken processors sell those same pieces at similar prices both in the U. S. and overseas, whether the dumping laws make sense or not, because they don't dump.  We export our leg quarters overseas at the same low prices we sell them at home.  It wouldn't make economic sense for us to export them for a lower price to one country than to another, just as it wouldn't make economic sense for us to export any product for a lower price than we can sell it for here at home.  Why would we want to do that?

Well, South Africa didn't like the fact that we were competing successfully in their market, so they used a methodology that compared our price of legs to our cost of the whole chicken, rather than using either our U. S. prevailing or the cost which we reflect on our books, as we are required to do by the WTO.  So without letting or the facts or WTO procedures get in the way, one year later the South African board on tariffs and trade ruled that we had injured their industry, despite the fact that we were supplying less than one half of one percent of their market.  And with their dumping laws, they imposed a 200-500 percent duty.  Needless to say, we no longer export to South Africa.  And if this decision stands, we may lose many other markets as well, and they may not be as insignificant to us as South Africa.  In fact, while I don't really want to go into detail in public, we have witnessed similar antidumping threats from a number of other countries ranging from India, where we don't even export product, to countries such as Indonesia, the Philippines, and Russia.  And while South Africa was only a $21 million market in 1998, the last year we had significant sales there, Russia is a $570 million market, so that would concern us.

Which brings me to the second way in which we have become a victim of this process.  We're currently talking to the USTR about bringing a WTO case on this issue, and I must say our government has by and large been very helpful.  But the U. S. government has also openly said that it is worried that any position that it might take to defend our industry might jeopardize its ability to protect U. S. petitioners, or in other words our steel industry.  We strongly feel that challenging the South African decision does not in any way jeopardize U.S. antidumping procedures, either with respect to the fair value finding or the injury finding.  Our lawyers tell us that this is not the case where the ITA or the ITC should have any concern about a WTO ruling interfering with what they do.  So any resistance on the U. S. government side is unfortunately more political than legal.  And so our $2 billion in exports, which is a mainstay of our $28 billion U. S. industry, may fall victim, even at the WTO level, because U. S. exporters are being sacrificed to protect those who bring cases for our noncompetitive industries.

But perhaps the most sobering point is that many outside our poultry industry in the U. S. should be concerned over the fact that our government has not yet challenged South Africa's flawed methodology.  For if allowed to stand unchallenged, a similar fate could be in store for virtually every other U. S. agriculture commodity, from beef liver to corn gluten.  Thank you very much.

Dan Ikenson:

Thank you, Jim.  Your industry is at the front line.  Hopefully other industries will follow suit and seek USTR's assistance here.  Our next speaker is Chuck Lambert.  Chuck is the chief economist for the National Cattlemen's Beef Association, located in the NCBA center for public policy here in Washington.  Lambert works closely with legislative and regulatory staff to explain and influence the outcome of beef industry economics, trade, and marketing issues.  The National Cattlemen's Beef Association is the trade association of America's cattle farmers and ranchers, and the marketing organization for the largest segment of the nation's food and fiber industry.  He co-staffs the policy division of the NCBA international markets committee, and staffs the NCBA live cattle marketing council.  Chuck is a member and active participant in several professional economic organizations and economic research institutes.  Lambert graduated from Kansas State University with a B.S. in animal science and received an M.S. in animal science with a minor in agricultural economics.  He holds a PhD in economics from Kansas State University, with specialty areas in agricultural policy and international trade.  Chuck is here to share his experience and insights regarding antidumping policy, and how it has affected his industry.  Please welcome Chuck Lambert.

Chuck Lambert:

Thank you.  I also serve on the APAC with Jim and I know this is an issue that is becoming increasingly important and discussed by several commodities within agriculture.  As tariffs and tariff rate quotas and export subsidies are negotiated down and become less trade-inhibiting in the international trade arena, issues like dumping, countervailing duty cases, SPS issues will become more and more the protectionist measure of choice, or the means of choice to try to restrict trade and to throw up non-tariff trade barriers.  The U. S. has, I think, a proud history of sharing internationally ideas, democratic principles, and technology.  Probably sharing our dumping cases and our dumping laws with the world is not one of our prouder moments.  We have exported our trade laws.  As we were going through our case with Mexico our lawyer said basically that the government of Mexico picked up the U. S. antidumping laws, translated them to Spanish, and those are the laws that are being used against us.  And that is happening more and more in other countries around the world.  So I think it is coming home to roost.  We have a case study of this in our own industry that I'd just like to share with you for a little bit today.

Like Jim, the beef industry has become the world's leading exporter, or at least among the world's leading exporters.  Last year we were the world's largest exporter and world's largest importer of beef.  Our exports went from about a half a billion in the mid-'80's to a record $3.6 billion last year.  This came about by trade negotiation, opening of markets starting with the Japan beef-citrus agreement; the opening of Korea is 1990; NAFTA, which eliminated tariffs on beef and beef products to Mexico in '93; tariff reduction that was embodied in the Uruguay round, and so this expansion of exports that we've seen since the mid-1980s is largely due to market negotiations or trade negotiations and opening of markets.

Once we opened the market in Mexico and signed NAFTA into law, the Mexican Cattlemen's Association initiated a dumping case against the U. S. industry.  This was in May of 1994.  NCBA negotiated with our counterparts in Mexico and we worked out a memorandum of agreement that was signed in January of 1996 between our president and the president of our counterpart organization in Mexico and the secretaries of agriculture in the U.S., Secretary Glickman and his counterpart in Mexico.  So we agreed to do some information sharing, some technology sharing, pretty much had this issue put on the back burner as of January of '96. 

Now, I think at least some of you have handouts.  On the first graph is basically a graphic of what happened in beef prices during the 1990s.  And in the mid-1990s, the bottom black line shows the price of market cattle, or what we call "fed-cattle."  It declined about $20 per 100 weight between 1993 and 1996.  This is largely a function of the cattle cycle, and I'll discuss that a little bit, but typically, our numbers tend to be the highest in the middle of the decade, and therefore the price is the lowest in the middle of the decade.  And that is basically what was being reflected in the "fed cattle" or in the marketing cattle market. 

Also, we had record high grain prices in 1995-1996, and therefore the prices of lightweight calves, or the dash line in this graph declined to at or below the prices of market cattle.  And this did cause extreme market pressure and financial duress in farm and ranch country.  A group in the northern tier, a subset of our membership, or a subset of cattlemen basically pulled together and said that we are going to file dumping cases against Canada and Mexico because we're just sure that cattle imports are the sole reason that our prices are in the tank and we're all losing money. 

If you turn the page to the next page, this cattle cycle has been in place since the 1920s.  We tend to expand production for about 3-5 years until prices drop below the average cost of production for a majority of producers in the industry.  This triggers those producers to sell off their less productive cows and frankly, for some producers to go out of business.  Consequently, production reduces, prices go up, and this is about a 10-year cycle due to the biological process of beef production and the fact that we have about 800 thousand producers all responding to individual costs of production and individual marketing factors than the industry. 

So it's about a 10-year cycle, 5-year production expansion/price reduction followed by 5-year production reduction/price expansion.  That's the cycle that's been in place for nearly 80-90 years, as far back as we have data. 

Once this northern tier group, who, by the way, barely by hook and by crook, we would argue through the Commerce Department, gain standing.  I just barely had the minimal amount of production represented in that group; and there were cattle organizations represented in their standing that we had no idea even existed out there--and we are the national organization for the group.  But anyway, they did gain standing, they did bring this case against Mexico in October of '98.       

The case was filed October 1; ITC began their investigation October 8.  Lo and behold, October 20: The Mexican cattleman's association reopened their case against the U.S. industry for dumping beef into Mexico.  This northern tier group also filed dumping cases and counter-bailing duty cases against cattle imports from Canada, claiming that imports from both the northern and the southern borders were damaging our markets.

The cattle that we import from
Mexico are largely lightweight calves.  They are imported at 300-400 pounds.  They're marketed at 800 pounds, or at 1200 pounds, basically they are domestic content livestock by the time they go to market. They're a majority U.S. production.  They account for about 3 percent of the cattle market.  Cattle from Canada account for about 2.5-3 percent of the cattle marketed in the
U.S. and it is those numbers that this group was claiming was causing injury. 

In November 1999, ITC ultimately ruled that there was no injury from the Mexican cattle.  They did rule that there was dumping but no injury from the Canadian cattle.  They ruled that there were no counter-available subsidies in Canada.  So consequently, all the cases that this group had filed against, people exporting to us, were dropped.  However, the Mexican case is a different case.  They brought the case against not only cattle, but also beef and variety meats into Mexico.  The major companies that were exporting hired legal counsel, spent a lot of money, brought their data to the table, and we have the three major exporters in the U.S. with basically anywhere from zero to very small duties on a majority of the product that's shipped into Mexico.

The smaller and regional packers who basically thought, "Hey, this is a big guy issue"--so they didn't bother to submit data--were hit with very high, all-others duties in the beginning.  Now some of those countries have since been able to submit data, but they are still subjected to higher duties on their product, on the same products going into Mexico.  So really what has happened is that we have placed smaller and regional packers at a competitive disadvantage in Mexico, which is our second largest and fasting-growing export market.  We're left with this Swiss-cheese duty schedule, where the large packers have no duties, the mid-size, the small processors have varying ranges of duties.  And in the course of this, then, the Mexican government also imposed shelf life and quality restrictions on products exported to Mexico--which is outside the range, or outside the realm of dumping-duty cases.  Those restrictions are still being contested through a NAFTA panel and other channels but by-and-large we did end up with more punitive damage on the beef industry that we ultimately imposed on any of the exporters.

So NCBA is probably a minority among agricultural commodities and definitely minority among people as we go into the trade negotiations.  But we would support--we do not support weakening trade law; but we would support modification of trade law to make the definition of dumping more consistent with being in a cyclical industry where we do have price supports, where we rely on economic forces to regulate supply in response to prices and in response to consumer demand.  So we would support some modification of dumping that's more consistent with our industry; defining dumping as predatory pricing or using predatory pricing to buy market share; possibly using some multiple year average price instead of just a one-year or short-period pricing when these prices go to unprofitable levels for the majority of the industry at the middle of the decade. 

We do, and we are watching the poultry case with, I guess, interest and trepidation because we sell a variety of products, a variety of cuts all over the world.  And if there becomes a precedent set where we have to sell beef liver or variety meets or chuck roast at or above the average cost of production, we'll basically be left with selling just the high-value cuts into the export market and leaving the rest of those products in the U.S. market, and that is not the high-value market for many of those cuts.  There are export markets where those are much-- have much more utility than in the U.S. market.  So we're definitely watching what's going on in the poultry industry in this case and are working with others in agriculture who have some interest in at least discussing dumping issues as we go into the next round.  And hopefully we can get some reasonableness brought into this from the standpoint of agriculture so that it isn't just steel and manufactured goods that are driving the rules of the game in with respect to dumping. 

Thank you.  I'll be glad to address any questions.  Thanks.

Dan Ikenson:

Thanks very much, Chuck.  We're going to change gears here a little bit and switch from industry to academia.  Our next panelist is Thomas Prusa. Tom is a professor of economics at Rutgers University in New Jersey.  This year he is a visiting professor at Princeton University, which is also in New Jersey.  Tom is a research associate at the National Bureau of Economic Research in Cambridge, MA and is on the Board of Editors of the Journal of International Economics and the Review of International Economics.  Economic and political issues concerning the antidumping law have been the primary focus of his research since 1987.  He has published extensively on the impact of the U.S. antidumping law, and also on the factors that influence ITC decision-making.  His papers are widely circulated and cited, and are an integral part of the existing body of academic research regarding the complexities of antidumping.  Tom's most recent work is devoted to determining the motivations for antidumping filings around the world, and that makes him an essential participant in today's event.  Please welcome Tom Prusa. 

Thomas Prusa:

Thank you.  Just let me begin by saying that for more than a decade, I have studied and written about the evolution and the impacts of U.S. antidumping law, and in these studies I've looked at things like how, through a series of amendments, antidumping laws change from a relatively benign trade policy into the biggest threat to free trade; about how modern antidumping law is not designed to protect against unfair trade, but rather, to unfairly restrict trade, period; about how likely it is for almost any competently written antidumping petition to succeed in restraining trade.  And by that I mean an antidumping petition does not--to be successful--does not ultimately have to result in a win in affirmative duties being levied.  You have to understand that this will be a little bit outside of what I'm going to talk about, but antidumping duties just being levied during the course of the investigation has substantial impact on the exporters involved.  You can observe, in a lot of cases, exports essentially drop to zero, just during the investigation because of the uncertainty effect and the preliminary duties that are involved.  So for a lot of industries, merely the idea of filing cases--that alone is going to be a big win for them because they get essentially a year, a free ride of protection--even if they're ultimately rejected.

Now one question that frequently comes up when I give talks in antidumping is that if it's such a convenient vehicle--if it's so easy to win--why don't more industries and countries use it to escape from WTO obligations?  Why don't we observe more antidumping actions?  And for a long time, all I could do was shrug my shoulders and say, "Just wait."

Well, the wait is over.  The antidumping genie is truly out of the bottle.

Now today I'd like to talk about some of the recent trends and some of my views on the causes for the growth and worldwide antidumping use.  And a lot of what I say parallels the stuff that Brink and Dan have written about recently.  So before I get into details, let me just highlight some of the main messages of what I've written on and what I'll try and highlight today. 

First, on a worldwide basis, antidumping use is increasing, increasing pretty rapidly.  Number two, the main reason for the growth on a worldwide basis is the number of new users embracing antidumping law.  Three, the reason why these new users are turning to antidumping law is not merely because of trade liberalization.  Rather, there's compelling evidence that part of the explanation is what I will loosely refer to "tit-for tat" behavior.  And you heard a little bit about it in both the two industry people's talks.  That is, countries learn and they decide to respond in a rather retaliatory way.  And, in particular, what this means is that many of the most aggressive new users are really responding to lessons they've learned from the European Union and the United States.  Fourth, after adjusting for their size in the market, new users filed antidumping actions at a far more prodigious rate than the United States: Upwards of 15 to 20 times greater rate than the United States.  And if you're a U.S. exporter, you have to realize that new users are far more aggressive than even some of the shocking behavior we observe in the United States' antidumping actions.  And finally, I think what I'd like to conclude is that unless the leadership is taken by the European Union and the United States to reign in these abuses of antidumping law, the cost to these two large, developed countries, the leaders in antidumping, from antidumping trade restraints being imposed on them, is going to far exceed the benefits they perceive they win for their import industries.  Okay, so that's kind of an overview. 

Now, I also have a handout.  I don't know if you had a chance to pick it up at the table.  If not, I'll hold stuff up, but it'll be kind of hard to follow. 

The first table is more or less just a tabulation.  And what I have here is counting up the number of cases filed on a worldwide basis since the end of the Tokyo round.  The Tokyo round contained a number of important amendments to the antidumping statute, and is an important time to think of a break.  For a perspective, if you look in the 60s worldwide, we were probably talking 50 cases a year on average total being filed, and prior to the 1960s, in the 1950s, it's an absolutely miniscule number of cases. 

So you really have about three waves here.  You have a wave of a lot of antidumping activity in the early to mid 80s, and then you have a second wave in the late 80s and early 90s, and then you have this more recent wave, this third wave of antidumping use from the mid 90s on.  The chart stops in 1998.  If I had continued in 1999 and 2000 and certainly 2001, these bars would be going up far higher than they were in 1998. 

Now, what's important to realize, though is in terms of these waves, really what's behind this increase in antidumping activity has changed.  In particular, it's changed for this third wave, the highest wave, this final use of antidumping.  You turn to the second page of the handout, what I have is the change in distribution of antidumping actions.  And what I've done on this chart is break up the prior chart by what I refer to as "traditional" and "non-traditional" or "new users."  Now, traditional users were basically the United States, the European Union, Canada, Australia, and I also put New Zealand in because they traditionally have used it, but in fact they're not that big of a user.  So you basically only have 5 big users, really four of them constitute almost all the early antidumping activity.  Basically all the other users are people who've learned from the big guys.  Okay, and if you look, the line overlaid on top of the bar chart is the percentage of worldwide cases being filed by these new users--so countries who didn't have antidumping laws around active users until relatively recently.  And you can see, that beginning around 1993 these new users constitute more than half the cases being filed worldwide. It's really not just this. Users, mainly the EU and the U.S., kind of using the antidumping law often against each other.  In fact, the club has gotten quite big now, and we find many, many more countries using it. 

On table three, another way of thinking about the proliferation of the spread of these cases is what I have here as plotted out per year, is this kind of cumulative impact of particular countries who use the law or countries who have been affected by antidumping cases.  And you can see that the chart is just on a steady upward trajectory. 

Okay, the upper line is the number of countries who have been affected by antidumping investigations.  Okay, and I want to emphasize again that just being part of an investigation likely has--in almost all cases--has a significant effect on your exporters.  And then the bottom chart kind of tracks out the cumulative number of users over time. And you can see, in fact, throughout most of the 80s, I have fewer than 10 users up until the early 90s.  And then, the chart just zooms up--very impressive--and now there's well over 30 antidumping users. 

And again, the trend is not stopping.  It's just more and more countries are adopting laws largely based on European Union practice or U.S. practice.  That's one thing I'll talk about here in a couple minutes is that they borrow from the two bigger users--some of them borrow the worst aspects of U.S. law and then they decide that's a nice part of EU law; I want that one too.  So they often combine, pick and choose EU and U.S. law in a way that's particularly bad for exporters. 

Now, what does this mean?  We say we have a lot of antidumping activity.  If you turn to the next page, what's labeled as table three or page four of the handout.  What I've done here is try and control--what I've listed here are the number of countries, I mean the number of cases, initiated by the countries in the left hand column against everyone else in the world.  This would tell you, for instance, Argentina's use.  Argentina has filed 89 antidumping investigations.  And you can see as you work your way down, the United States and European Union are the two biggest users.  Now the thing we probably need to think about is that, in fact, the United States imports a lot of goods.  So again, from the U.S. perspective and anyone who studies U.S. antidumping law with perhaps the exception of an economist working for the steel industry, are quite disturbed at some of the U.S. patterns.  But in fact once you control for the volume of imports, and I've got then--that's the third column--I've indexed the U.S. at the rate at which we use as a fraction of our imports, at a 100.  So think that's just kind of a benchmark number.  We've got a U.S. index at 100 and you can see, basically, we're one of the, as a fraction of imports, one of the least aggressive users of antidumping law; even though when you're looking at U.S. practice, you can just shake your head and can't believe some of the cases we bring ourselves. 

That truly makes you worried about some of these new users. So you have countries filing at 15 to 20 times the rate of the United States, taken, once you take a step back, you realize, in fact, the two regions that service these countries the most, or the European Union and the United States, and these are the two countries that kind of used our assistance to decide how to design their antidumping laws.  So again these high numbers reflect that these new users are filing antidumping cases at far greater rates than the European Union and the United States.

Okay, now if you turn to, let's see.  Oh, I'm sorry.  The next table--what I have here--is just sketching out some of the factors that vary on a country-by-country basis and how they implement antidumping law. Okay, there are these broad GATT standards, or WTO standards that the countries have to follow when they design their antidumping law, but as we just heard in the South African case--in fact, the GATT standard would never define so precisely that you couldn't decide to use the price of a thigh or a leg but use the cost of the whole chicken on some bizarre basis.  They're not that detailed. 

So here are just some of the differences across countries.  Okay, so you have some countries, for instance, that don't allow the lawyers working on the case to have access to any confidential business information.  The United States, in fact, didn't allow access to confidential business information until sometime in the mid 80s.  So this makes it extremely difficult if you're defending your case, not to mention half a world away.  But in fact if you don't have access to any of the real information being supplied by the domestic industry laying claims against you, it's pretty darn hard to think of a good defense when the data you're receiving is not the true underlying pricing data that they're using. 

So these are just some: the timing of preliminary duty determination--some of these countries start collecting duties within 60 days but wouldn't determine the case for more than a year.  So what would this mean?  If the alleged duty is oh, 110 percent as of day 60, after the filing, any exports of that country you've got to put in a deposit 110 percent.  You may get it back at the end of the year, but for the next year, you're depositing 110 percent of the value of your exports.  And that makes it very difficult for an importer in that country to want to take the risk of buying your product because it may be that he's paying twice the price that he thought he did.  Or even more if they decide higher okay.  So there are a lot of differences across countries and different countries can pick and choose aspects of the law that work best for them. 

Now in terms of why countries initiate, there is a lot of debate.  Now there's certainly some evidence that countries start to embrace antidumping law once they've liberalized more.  So as the more open they get, as their overall tariff rates fall, they begin to file more and more antidumping cases.  But I don't believe that's the only motivations they have, okay.  There are certainly some just fundamental mercantilist approaches that some countries have.  You see a strong pattern that they tend to try and file after the biggest or, to a lesser extent, the countries that have big surges.  I also find in my own work that you tend to find countries filing in ways that have no bearing at all on true economics.  And I refer to these as either a "club effect" or a "tit-for-tat" effect.  A club effect is if you actually look at the filings, okay, and not getting into statistical details, there's a statistical significant impact of just being a member of the antidumping club.  Okay, so that is, people who use antidumping tend to use it against other countries that have been using it in the past, or just "club members."  So perhaps you've never use it against South Africa, but because you are one of the antidumping users, South Africa is much more likely to use it against you, whether or not€Â¦.

When I first told people about this so-called "club effect" in antidumping laws use they were a little bit puzzled.  But there are examples of clubs that aren't necessarily good clubs to be in.  We kind of think, ah, we'll join a club and it's a good thing.  But, for instance, those of us who watch the Sopranos on a regular basis know that being a member of the mafia--that's a club--but, in fact, very few hits are done on people outside that club.  So it's a good thing; on the other hand, it can be a bad thing to be in the club, too.  And I think that's a little bit of what you see in antidumping.  On table five, which is on page six, what I have here--oh, and I'm sorry--and the final effect is a "tit-for tat" effect, which is there is a really clear strong retaliation effect.  That is, we heard about it in the U.S.-Mexico beef dispute.  There's a lot of retaliation going on.  You hit me this year, and lo and behold, next year my same industry goes after you.  There's a strong tit-for-tat effect if you look at the patterns of filings. 

Now, one thing I want to get at is that countries who, how much they're exposed to being hit by antidumping, that also leads in to how much they decide to use antidumping.  So what I have on table five, which is on page six of the handout, is similar to the prior one, but this is telling you how exposed you're exporters are to antidumping use across the world.  The guys who did this table normalized the index to 100 for Japan because for a long time in the United States we often focused on Japan as the example we gave as an unfair trader.  So lets index the number of cases filed against Japan as a fraction of the amount of exporting they do.  Call that 100.  And lets look at how other countries, their amount of antidumping cases they get named against their exporters as a fraction of the size of exporting they do.  You'll see that the United States and European Union-there are exporters, at least right now, as a fraction of the volume exports we do--we're not that exposed.  We get hit a lot, but we export a lot, okay.  But some of these new users are just creamed, okay.  I mean, their exports--perhaps this is a sign of unfair trade, perhaps this a sign of that these are new entrants in the market causing pressure, okay, but you can see they're being named to 8 to 10 to upwards of 25 times the fraction of the United States.  And the final thing I'll say--I only have one minute left is this final table here, which is this pattern of when you've been beat up a lot in the past, you decide you're going to want to take a swing with the bat and start hitting other people too.  And that's what this final table kind of tracks out, which is, rather than on an annual basis, which is what the statistical analysis did, this is on blocks of time.  So, you look at the number of times you were targeted in 87-92 and then look at your filings over the later period and you'll see a strong correlation between countries who have been hit a lot and countries who decide to adopt a law and then start filing themselves.  And that's the final handout and I'll stick around and we can talk more about some of these findings, but I think my time is up.  Thank you.

Dan Ikenson:

Thanks a lot, Tom.  It's very interesting research perhaps you can give me an econometrics lesson after this so I can do some of that.  If you have questions please ask Tom.  I may have infringed upon his time a little bit.  Our next speaker is Brink Lindsey--Cato's own Brink Lindsey.  Brink is a senior fellow here at Cato and he's the Director of our Center for Trade Policy Studies, i.e. my boss.  Brink is an attorney with extensive experience in international trade regulation.  He has defended free trade interests in antidumping, countervailing duty and section 201 and section 301 investigations, and in WTO disputes.  Brink has written and spoken widely on trade policy issues in addition to his numerous publications for the Cato Institute, he is a contributing editor of Reason Magazine and his articles have appeared in the Wall Street Journal, Journal of Commerce, the Washington Times, Chicago Tribune, Weekly Standard and elsewhere.  He has testified before Congress and has appeared on CNN, CNBC, National Public Radio, and many other media outlets.  He is also the author of a forthcoming book on globalization called Against the Dead Hand: The Uncertain Struggle for Global Capitalism.  Just a thought, this book would make a great holiday gift for you or a loved one, so please help me welcome Brink Lindsey. 

Brink Lindsey:

Thanks, Dan.  Well, we've heard from Dan and Tom the alarming figures about the rate of antidumping proliferation, and then we've heard Chuck and Jim, their sad and frustrating stories about how antidumping has come home to roost and plague U.S. exports.  What I want to address is how we get out of this mess.  And basically, the answer is clear-cut: through trade negotiations.  Through negotiation of new rules on how dumping is calculated and how antidumping investigations are conducted either at the regional level or the multi-lateral level. 

There is currently a WTO agreement on antidumping that, to some limited extent constrains national policy-makers on what they can and can't do in the name of antidumping.  Likewise, we have the opportunity at the regional level in the upcoming negotiations on the free trade area for the Americas to negotiate special new rules that might apply only to FTAA members.  So the path forward is clear-cut and so is the obstacle.  The obstacle to anti-government reform is the position of the U.S. government.  The U.S. government is absolutely intransigent, has been for a number of years, looks like it's going to continue to be for the foreseeable future in opposing even discussions of antidumping reform, much less agreements to change antidumping rules.  In the WTO, the U.S. has put forth proposals to exclude antidumping from the agenda from the new round that may get under way in the ministerial meeting in a couple of weeks in Doha, Qatar.  And the U.S. has been joined in its position by precisely zero of its 141 fellow WTO members.  Likewise, in the FTAA, the U.S. is firmly opposed to inclusion of antidumping on the agenda, not withstanding the fact that Brazil and a number of other countries have said no antidumping reform, no FTAA, period.  So that's the big problem: how do we change the U.S. government position.  And the simple fact is nothing is going change, nothing significant is going to happen until the U.S. interests that support antidumping reform, the U.S. interests that are victims of the current U.S. government position become mobilized and start exerting some countervailing pressure to offset the extremely muscular efforts of the U.S. steel industry and other antidumping supporters. 

There are three potential domestic constituencies for antidumping reform.  We've seen a couple of them here today.  Exporters that are nailed by foreign antidumping actions--that is a constituency with increasing numbers.  But I think as of yet they have no particular group identity, no sense of a common cause across industry lines, that exporters hit by foreign antidumping actions have something in common.  And furthermore, no general recognition within that group that the U.S. government bears a good deal of the blame for their plight because of setting the bad example for other countries and then opposing antidumping rules changes that might restrict the ability of foreign governments to set out after U.S. exporters.  So this is a constituency that is starting to be heard and we salute the pressures that USAPEEC has been exerting to try to get the WTO case against South Africa and the pretzels that forces U.S. members of Congress to tie themselves in.  But this a constituency that is more latent than actual at the present time. 

Even more directly in the crossfire are import users, downstream industries that are affected negatively by U.S. antidumping actions.  We see some efforts by U.S. import-using industries to level the political playing field, so to speak, by offsetting the lobbying pressure of import-competitors.   There is in particular one--new trade association--the Consuming Industries Trade Action Coalition, or CTAC, that has brought together steel users and a number of import-using industries to try to demonstrate the other side of the coin, to try to show that for every one steel mill job there's nearly 60 steel using jobs and similar statistics in other industries.  At present, it's a plucky little effort: needs money, it needs more members, and it needs more time to exert more of an influence.  But at least it's on the map now.  It's really only a year or two old, I think.

The biggest potential constituency, and the one I think that holds out the most hope, realistically, for pushing the administration and Congress to reconsider its position are just general U.S. multi-national interests that have traditionally been the bedrock of support for trade liberalization of the WTO regionally, bilaterally, and otherwise.  These companies, the General Electrics, the Microsofts, the Citibanks, the ag. interests that may have nothing to do with dumping at all and had written it off as sort of an ugly little back corner of U.S. trade policy that doesn't affect them and they don't have to worry about. But it is becoming increasingly clear that antidumping does affect them because the price the U.S. has to pay for sticking up for its antidumping status quo is a failure to make progress in trade liberalization initiatives that are of direct interest to these other multi-national corporations. 

So, for example, in 1999, we tried to start a new WTO round with the calamitous ministerial meeting in Seattle.  Aside from the protests that got all the press, there was an internal failure as well, that is, the ministers couldn't get together and launch a new round.  One of the major problems that kept the countries apart and kept them from agreeing to a new round was this split on antidumping, when one country gets all the rest.  The United States refusing to put antidumping on the agenda and dozens of countries or more insisting that it be on there.  The U.S. hasn't changed its attack since then, and going into Do ha, this remains a major problem.  Perhaps they'll fudge it, for purposes of just getting the round started, but good luck getting the round actually completed so long as this current impasse is preserved. As
U.S. multi-nationals perceive this, perhaps they'll start applying pressure on the administration, says, "What in the world are you doing holding the interests of one industry with 200,000 workers in a 140 million worker economy above the interests of all the rest of us?"

So, there is some hope, I think, that the downstream interests and the other constituencies for antidumping reform can exert enough pressure to complicate the political equation and move the U.S. government off its current position.  Right now, its not that the steel industry is so incredibly powerful; it's a pretty small industry.  The point is that there just isn't any effective counter pressure on the other side.  So members of Congress, members of the administration pursue very simple logic, that is, they just want to get through the day without anyone yelling at them.  And in the antidumping context, if they go steel's way, they get a pat on the back from steel and nobody yells at them from the other side.  But if they buck steel's interest then they hear plenty of yelling and they get nobody to back them up on the other side.  So right now the path of least resistance is clear.  It is to do what steel wants.  And until that changes and people start yelling on the other side, good luck seeing them change their position. 

So, once domestic constituencies mobilize they have to really take it to the protectionist pressures.  They have to challenge the moral high ground that the antidumping supporters have arrogated to themselves.  In particular, this wonderful rhetoric about fighting against unfair trade and, "Oh, we're not protectionists, we're just for a level the playing field."

Any decent scrutiny of the antidumping law will let you know that this law has nothing to do with a level playing field.  It's just outright protectionism.  That point needs to be brought home and not just by economists, with all due respect to Tom, but by politicians and policy-makers as well.  By and large these days, even free trader politicians are scared of saying what's what with respect to antidumping. Furthermore, we really need to stress the victims of antidumping as opposed to just the beneficiaries.  These guys--the exporters, the import-users, the MNCs have to get out and really make a stink. 

But finally, I'm afraid, we face the pragmatic necessity of buying off the opposition.  I don't see any hope for any progress at all unless we do something to accommodate the political opposition posed by the steel industry and some others.  It's fine to rail against antidumping; economists have been doing it ever since it came to their attention.  But if we're going to move forward and actually make this a better world, we're going to have to accept a half a loaf at least in the beginning.  In particular, my suggestion is that we look at the safeguards law as a real key to making progress on antidumping. 

In fact, the safeguards law in the
U.S., section 201, is really what the antidumping law has become.  The safeguards law has no pretense of being about unfair trade.  It's just a law that allows protectionism, temporary protectionism, if a
U.S. industry or a domestic industry is hit by increasing imports that cause it serious injury.  So, there's no pretense of it being about level playing fields or unfair trade.  It's just corporate welfare pure and simple.  Affected industries go hat-in-hand to
Washington and say, "We're slammed against the wall.  We need help.  Please bail us out for a few years until we have time to adjust."

That's really what the antidumping law is, despite the pretense that it has an unfair trade aspect as well as an injury aspect.  The Commerce Department finds unfair trade about 95 percent of the time.  So in reality, the supposed hurdle of proving unfair trade doesn't exist and the hurdle of proving injury is much lower in a dumping case--it's only material injury, which means non-diminimous injury, as opposed to the serious industry injury standard in a safeguards case.

With rule changes over time to expand the definition of dumping, what we've gotten is the antidumping has morphed into a kind of poor man's section 201, or a poor man's safeguard provision.  As a result, antidumping activities exploded while safeguard activity has languished.  I think that as a free trader, I've got no use for the safeguard provision either.  It's just a direct denial of free trade principles, but it has the signal advantage of being intellectually honest.  And I think that imposes some political constraints that are very important over and above the legal constraints on the safeguards remedy. 

The safeguards remedy does have, at present, a number of very important legal restraints.  In particular, the amount of protectionist relief is limited to offsetting the injury in question, as opposed to an antidumping where you can get these 300-500 percent duties that have nothing to do with anything except driving exports out of the market all together.  Furthermore, safeguards relief is explicitly temporary.  It has to end after a certain period of time and over the course of the relief period it has to be gradually wound down.  So with these legal restraints, on top of which are the political constraints of the intellectual honesty of it all--the fact that nobody can hide behind this level playing field canard--they have to admit that they just can't compete and they need temporary help.  I think the safeguards law is one that, if we relied on it a lot more and a lot less on antidumping, we'd have a much more free trade environment.  In particular, I think the political constraints on the use of safeguards are so real that we can afford to relax some of the legal constraints at the margins and we'd still end up in a lot better world than we are now.

So I think that suggests a tradeoff of significant changes in the definition of dumping and other procedural changes and how antidumping investigations are conducted in exchange for some accommodation in safeguards remedies to make them a little bit more user-friendly.  If that could be arranged, then I think that the steel industry could conceivably find this an attractive bargain. 

The steel industry has been using the dumping strategy for a number of years, from 1984 to 1992, they had nirvana: they had voluntary restraint agreements or quotas on basically global steel imports, so were projected against a solid protectionist wall for that period of time.  Ever since then, they've been striving to get back to nirvana through the antidumping and CVD route, and it hasn't worked.  They've lost enough cases so that there are holes in the protectionist wall they've built or they've only filed cases against the biggest suppliers and they've knocked them out of the market only to see third country suppliers rush in and fill the vacuum.  Since '92, they filed just umpteen dozen cases against just about every steel supplier in the world and they're still not satisfied.  The only people who are satisfied are their lawyers, who get to make money one case at a time, one country at a time, as opposed to safeguards cases, which are against the entire world at one time. 

So, at the present time, steel industry finally decided to go with the safeguards route.  They've coerced the administration into initiating a section 201 investigation and that, I think, affords some opportunity, that the administration has some leverage, a good deal of which it frittered away by self-initiating the investigation and therefore identifying itself with its outcome.  But nonetheless, it has some leverage over the nature of the remedy and could extract some price from the steel industry saying, "We're going to give you your temporary few years of relief here under section 201 against the world.  In exchange for that, you're going to have to let us do something that makes sense on the dumping side." 

Furthermore, they can sweeten that pot with the prospect of negotiations on the safeguard side, as I mentioned, make a safeguard remedy slightly more user-friendly than it is today and if it's necessary, I think it would still be worthwhile to throw in some non-trade sweeteners as well--just explicit subsidies to the steel industry to buyoff their acquiescence in putting some kind of lid on this antidumping plague.  So I think there is a package that is politically viable, one that the steel industry can sign off on, and one that makes free traders breathe a sigh of relief that this antidumping plague has been responded to effectively.  All it takes, all it will take, is a little bit of political imagination and a little bit of intellectual daring.  And so we'll look forward to seeing those qualities emerge in the Bush administration.  Thank you very much. 

Dan Ikenson:

We're going to have a question and answer period here.  Jim, are you going to be able to stick around for just a couple of minutes?  If you have a question, a question for Jim, please raise your hand first because he's going to have to catch a flight out of National.  So raise your hand and someone will approach you with a microphone.  Please speak into the microphone, state your name and affiliation, and make your question as concise as possible.  And please identify to whom your question is posed. 

Audience Member:

From the Malaysian Embassy.  I have a question I think for both the practitioners, as well as the researchers in the issue of the trade disruptiveness of antidumping investigations.  I think Thomas mentioned earlier that at the early stage of the investigations, especially at the preliminary determination where you can actually slap a dumping duty and proceed with the investigation until you reach the final stage where you could say there was no case at all.  I think that has been some of the experience that we have faced.  I was wondering whether from the practitioners' point of view whether, for example, in the cattle industry and poultry industry and some of the U.S. industries experience whether this has been the case in terms of the trade disrupting effect of antidumping investigations.  And also, for Tom, you have mentioned in the charts you have indicated a number of filings.  But I think, perhaps it would be interesting also to know which are the ones that end up as final cases and those that have been dropped and the comparison

Dan Ikenson:

So you're first question is basically: is the threat of bringing a case disruptive? 

James Sumner:

Yes, we were affected by the preliminary duties while it was under investigation, which was for the period of about, I think, nine months.  So I'm not sure I recall the exact level, but it basically made the market prohibitive for us, so it was a major problem.

Chuck Lambert:

In our case, there were never any preliminary duties on Mexican cattle so that ruling was early enough and that trade was relatively not affected.  In the Canadian case, there was a preliminary ruling of dumping.  And while they did the injury study, we tracked weekly imports of cattle from Canada.  And as I recall, there was a five-week period where imports decline.  I mean, you could just track the U in the imports.  I think it was two to three weeks before the duties began that those declines took place and then once importers and exporters had a chance to learn and understand about putting these funds in escrow, and I would assume that there was pretty good expectations that in the end, that they were going to prevail because we did see the imports then resume to pre-duty levels and I've tracked that it was a five-week disruption in imports before the market came back to what we would consider equilibrium. 

James Sumner:

In adding insult to injury, they gave us their final ruling on the Fourth of July. 

Thomas Prusa:

Let me just say a little bit on both aspects of your question.  First, there is a very fine study by the Brookings Institution.  They looked at a large set of cases.  They found out that about half the impact of a dumping case happens during the investigation.  This is a period before the exporter, or foreign country has been found to be guilty, yet half of the ultimate impact is happening during the case.  So this is substantial.  Again, there's no doubt about it.  You win just by filing.  If you can get past this early stage, the thing we want to mention about that is it varies how quickly these preliminary duties go on by country.  So there's some countries that within two months, and believe me, not much happens within two months, duties are going on.  The United States is a little bit better than that, so in a lot of other countries again, in terms of exposure to the United States' risk, there are a lot of countries that will essentially see our trade fall precipitously within two months of the filing.  In terms of the measures taken, I didn't have charts.  That data is collected and there are differences--I think the study by Brink and Dan--they do have measures taken in their paper, on the measures taken by countries by new vs. old. 

Brink Lindsey:

Let me just make a comment sort of more broadly about the disruptiveness of antidumping actions, because it's a topic I think that isn't very well understood.  Often, antidumping supporters will claim that there's really no problem here because look at how few imports are affected by antidumping actions.  So what's all the fuss about?  Why are countries pinning the U.S. to the wall and giving it such a hard time when antidumping duties really don't cover that many U.S. imports and not that many U.S. exports are covered by antidumping actions abroad?

In our paper, Dan's and my paper, which came out in July, we used a formulation that now seems somewhat flippant and I wouldn't have used. But we contrasted antidumping with what people normally talk of as trade wars. We said antidumping is a little more like trade terrorism.  I don't mean that in any sense to convey any sort of moral equivalence but the fact is, antidumping, because of its total unpredictability and because of its severe disruptiveness, has kind of a chilling impact on trade beyond the number of people who directly take a hit.  Antidumping investigations are completely unpredictable.  As an antidumping lawyer, we were constantly chasing the rumor mill and looking to see when the next case would be filed so we would be first in line to try and get the business.  But we were routinely blindsided by cases.  And even if you knew that one was coming one of these days, you never knew when it was coming.  Furthermore, the disruptiveness of antidumping duties is far above that of normal protectionism.  Normal protectionism, you know what it is, you can plan around it.  Antidumping comes in out of nowhere, you're faced with a 200 percent dumping margin, you're out of that market, period.  And so, with this combination of unpredictability and disruptiveness, you have a chilling effect on the international trading system far beyond the actual imports that are in the cross hairs.  And you also store up animosities among members of the trading system far beyond what you see with endemic trade barriers like tariffs, or other non-tariff barriers. 

You look at the WTO trade dispute settlement system now and a wildly disproportionate number of the cases in the docket concern antidumping actions because of their unpredictability, because of their disruptiveness they've really aroused the ire of domestic interests at home; and furthermore, because of the moral posturing of pointing the finger at the exporter and accusing him of being an unfair trader, you get people's blood up.  And so this regime is terribly destructive to the overall health and stability of the international trading system above and beyond the imports directly affected. 

Audience Member:

Control Risk Group.  I was very intrigued at Brink's suggestion for resolving it.  It sounds like a good solution.  What do you think would happen in terms of counting noses in Congress on that.  Would they go along with that?  And what's your view on Bob Zoellick's views on the solution you propose?

Brink Lindsey:

I think that to get members of Congress to dis-attach from the antidumping status quo is going to require a fairly significant educational effort.  They are fairly unthinkingly and reflexively wedded to the antidumping status quo; you see all the pressure these days in the TPA, Trade Promotion Authority, debate.  It's all about preserving the existing trade remedy laws, period, not about preserving our ability to protect U.S. industry against unfair trade or against disruptions.  That might suggest a flexibility, as to means. They are currently quite inflexible about the means.   Nonetheless, I think it's a chance and one that does speak to the bottom line concerns.  A few years back, antidumping reformers tried to make a go of it by linking antidumping and competition policy since the theory of antidumping is that it's predatory pricing.  The idea was, well, if we have international rules on competition policy that outlaw predatory pricing, then we don't need a dumping law--which sort of answered theoretical issues, but had nothing to do with political reality because the political reality of antidumping laws never had anything to do with predatory pricing.  It had to do with protecting import competitors against increased import competition.  So, linking safeguards and antidumping really gets to the political reality.

As far as Ambassador Zoellick is concerned, I think that the Bush Administration is generally economically literate enough to know that the antidumping law is a trade barrier.  They're committed in principle enough to free trade to know that this is something that, in a better world, would be less of a problem and I think they are increasingly cognizant of the international political reality.  That whatever the domestic political reality is regarding the steel industry, the international political reality is they're not going to get anything they want on their trade agenda in FTAA or WTO unless they bend some on antidumping.  Up to now, their tack has been to try to finesse all of this until after the TPA vote.  So basically they've not made a peep of protest to steel, either rhetorically or in action and have really tried to buy them off with a 201 self-initiation and so forth until the TPA vote.  I'm not sure that was a terribly clever strategy.  I don't think it's bought them a lot of votes.  And furthermore, it's dug them into a hole where they're going to have to do a 180 over the course of negotiations and then sell that reversal politically on Capitol Hill.  That, however, is, I think, their strategy. 

Audience Member:

From George Washington University.  U.S. exporters have long been targets of antidumping.  The European Union long ago targeted U.S. exporters.  I'm wondering why this coalition of U.S. exporters you've been trying to build hasn't coalesced before because, I mean, frankly, I mean Argentina is a fine country, but it's not a big market for U.S. exporters.  European Union is, Canada is.  So some of the traditional users of antidumping against U.S. manufacturers were really more of a commercial threat to U.S. exporters.  Is it plausible to think that this might be able to happen now when small users are targeting U.S. exporters?  That's either for Tom or for Brink.

Brink Lindsey:

Well, I think you're right: that our biggest markets have been traditionally rich, industrialized countries and they traditionally have been antidumping users.  But a lot of our fastest export growth is in emerging markets and a lot of existing trade barriers of late that we've been trying to get rid of have been in the developing countries.  And so, right now we see the fastest growing markets, and markets where we're doing the most to achieve market access being threatened by antidumping proliferation--so there is that.  Furthermore, there is the systemic threat to the trading order of this becoming a global phenomenon that the U.S. is having a general interest in the health of the world trading system.  This is now a bigger deal.  It's no longer just a little sort of secret private vice of the rich countries; it's now a global phenomenon.  But I think it would be unrealistic to expect merely the lobbying pressure of exporters are hit by new country antidumping actions to be the difference in any change in U.S. policy. 

But it is a part of the equation, and it gives U.S. policy-makers who know better a rhetorical hook to do the right thing that did not previously exist.  For better or worse, let me just say that for worse, U.S. trade policy has always been driven by exporter interests and not by consumer interests.  And so even when we do the right thing and lower trade barriers, it's usually sold in the name of mercantilism, that is, that we need to promote our exports.  So when we see more and more export interest in more and more markets impinged upon by antidumping actions, there's a new muscularity to the mercantilist argument for antidumping negotiations. 

And we're seeing that in the debate over TPA provisions. The folks who are holding the line against language in the TPA bill that prohibits any negotiations to, "weaken U.S. trade laws" have been highlighting the threat that foreign antidumping actions pose to U.S. exporters, in particular, the proliferation of antidumping laws.  When Ambassador Zoellick makes any noises to the effect that he might be willing to concede something on antidumping, he always raises the issue that, "Hey, U.S. exporters are getting hit by foreign actions and that's something we have to pay attention to."  So there is a political utility to this antidumping proliferation as far as how it helps the cause of antidumping reform.  It goes beyond the bottom dollar amount.

Dan Ikenson:

Are there any questions for Mr. Lambert?  I think we're going to lose him in the next five or ten minutes as well. 

Audience Member:

Korea Economic Institute.  Just sort of following up on the last question, some of Brink's comments.  I wondered Mr. Lambert, you had commented briefly on sort of what your organization might support in the way of AD law reform and I'm wondering if you foresee in the future a force emerging among exporters to really affect changes in U.S. laws. 

Chuck Lambert:

I think there are a growing number of commodities that are being affected by these and it's still a small but growing coalition.  About a year ago, poultry industry probably would not have had an interest in this topic.  The corn sweeteners, have had a long and tortuous path in Mexico--I know they're interested.  Rice growers have shown some indications.  Now there are commodities on the other side that have prevailed in dumping cases against imported products.  So it will not be a united agricultural community when we do this.  But there is at least a subset of the agricultural community that is moving in that direction.

Thomas Prusa:

Can I say one thing about this?  Following up Brink to Mike's question also, I guess I'm a little less optimistic anything is going to happen soon.  So in terms of this question, in terms of this coalition of export interests, I view this as a long and tortuous path; because I think we're extremely naïve if we think that steel is happy to have 201 relief yet weeks later they file a massive, 20 country cold-rolled case because they view it just as simply win-win.  So I think it's going to be a long, long time until we can see some kind of progress.  But I do think just the sheer number of countries that are using it against us because there are some of these new users who are particularly egregious in their--you know we think quite often Commerce Department calculations are disturbing, and some of these other countries have even more hard-to- understand ways of comparing, as we saw in the chicken case. So, I guess my opinion is, in terms of export coalition formation, my view of it is, when textile--if we actually really do have the end of the MFA--there is going to probably be a lot of action in antidumping activity on textiles.  This is a product that essentially has been protected for 40 years without any free trade.  It's been a nice, stable market; as soon as the rules of the game--the restrictions--come off, these various textile-exporting countries will find that they can actually compete with one another.  And we're probably going to find consumers, in particular, the United States, now finding themselves at risk.  There's going to be strange antidumping cases being filed that essentially undoes what was a very difficult-to-negotiate end to the MFA.  In that sense, we're going to be finding people like a Wal-Mart of a K-mart deciding that they actually want to see antidumping reform.  But I think it's going to be a long time of coalition building before we can finally get enough power to offset what will be the steel industry's traditional success at promoting.

Daniel Ikenson:

I think there are still quite a few exporting industries that have not been heard from. The number one
U.S. targets of foreign actions are chemical and pharmaceutical companies.  If they start raising their feathers and start petitioning the USTR to go to bat for them, then there will be more of a counter balance to the current gridlock. So, that's maybe a little bit more optimistic then you are Tom.

Audience member:

From the OAS Trade Unit. Why is it that
Japan doesn't use Anti-dumping?

Brink Lindsey:

It's a good question; they have used it a little bit. They do have a law, they have brought a couple of cases, but by in large they've been burnt so profoundly by it as exporters that their trade policy institutions have resisted using it for fear that it would under cut their position to negotiate a change in the law. So what we see, with a lot of countries now, is even though they're new antidumping users, they're much more flexible about negotiating antidumping changes. They're much less wedded to antidumping than we are because they were antidumping victims long before they were antidumping users, and so their victims lobby has been around a long time, is well organized, knows what dumping is all about. Their user lobby is relatively new and the government's worldview has been shaped by being mad at antidumping actions brought against their exports, rather than about lusting after the opportunities to stifle foreign competition. So, that's, I think, a major reason why you have many dozens of countries using antidumping laws and yet all of them being willing to negotiate, at least to put the subject on the table except one, the United States, where we have been users a lot longer than we have perceived ourselves to be victims. 

Audience Member:

Good afternoon, International Trade Administration. In trying to paint the landscape of antidumping, to use your words, what portions of antidumping suits have been intellectually honest? And a follow up question, if reform is needed for
US law and antidumping, should we look to the WTO text as the framework by which to address these legal reforms? Or what other type of framework are you looking towards to achieve a more intellectually honest framework for antidumping legislation?

Brink Lindsey:

Let me say, just as a general matter, I did a paper a couple of years ago, a Cato Institute paper, called, "The US Antidumping Law: Rhetoric vs. Reality," where I evaluated U.S. antidumping practice not in light of economic analysis but simply in light of what antidumping supporters say the law is supposed to do. Antidumping law is supposed to offset artificial competitive advantages created by underlying government caused market distortions.  Things like sanctuary markets, closed anti-competitive home markets, subsidies, structural flaws in commercial policy that allow companies to lose money year after year with out going out of business, or shrinking their operations. And there is some of that stuff going on in the world; there is plenty of that stuff going on in the world.  And as a pure free trader I might not think that two wrongs make a right and that the appropriate response to market distorting practices abroad is protectionism at home, but at least there's a case to be made that US industries are being victimized by what we can all agree is unfair or at least wrong headed conduct abroad, and one plausible response to that might be offsetting duties. But to get to there, to get to match up with antidumping reality with antidumping rhetoric, you'd have to change really the whole structure of how dumping is defined.  And I don't want to go into all of that right now but in that paper at the end I go through, first throughout it I go through the ways in which the dumping law doesn't do what it says its supposed to do and then how it would have to be changed, how the definition of dumping would have to be changed to make rhetoric and reality cohere.

Thomas Prusa:

In terms of the percent, that's hard.  You really have, its clear, I think almost everyone who looks at some of the Commerce Department decisions where the dumping margins are just so hard to believe, when you actually look at the market prices, when you actually look at the market price and the home country and you look at the market price of the same goods sold in the United States, there is a 10 percent difference. Yet the margin comes up at about 175%. It's hard to justify, so if nothing else, I think one way to start would be to have the
US start to respond to the WTO decisions that have rejected Commerce and ITC methodology. It seems as of yet there has been no changes in Commerce or ITC behavior as a result of the WTO dispute decisions.  And number two, I certainly would like to see the United States move to a lesser duty rule, to where in fact the Europeans have, which only allows you to impose the duty up to the extent of the injury rather than essentially the goal being to remove the foreign competition from the market. So even if commerce department procedures lead to 175percent duties we would only have a duty of say 10 percent to account for, the extent that injury being caused.  That to me would be a huge change, since then dumping wouldn't be used to essentially roll back to no trade.

Brink Lindsey:

Just one further thought, as far as a ballpark estimate of what the antidumping caseload would look like, if antidumping law had something to do with unfair trade it would look like the countervailing duty caseload. The countervailing duty law has plenty of flaws, but in the middle of it are policies that economists recognize are problematic, subsidy policies, market distorting policies, and there are methodological flaws with how subsidies are calculated and there are problems with the failure to offset subsidies abroad with subsidies at home and a the like, but never the less, there is a reality at the core of the focus of CVD that isn't there with antidumping at present. So there is a significant restraint on the number of CVD cases. I think if antidumping law had to live up to what its supposed to be about, to actually being tied to clear evidence of market distorting conduct, I think you'd see something more in the range of the CVD caseload.

Audience Member:

From Danish Embassy. One little question on the new users of antidumping instruments.  Is it such that those new users at the moment, Mr. Lindsey, argue they are more flexible in negotiating antidumping laws internationally? Is it such that they are changing that precision of the indicators, that they are changing their flexibility, and if it is so aren't we kind of in a hurry of changing American precision before they jump the wagon, so to speak?

Thomas Prusa:

I think that is exactly correct. I agree with that completely. I think the longer we wait, the more difficult it's going to be to get countries to change. Similar to agricultural policy, in that perhaps in 1963 we would have found many more countries willing to be flexible than we now find in the year 2000, so I agree with you, the sooner the better. I guess I just feel its going to take a while for more and more exporters to start realizing some of the absurdity of the law till t