Stuck Between Zero And One Of Non-Tariff Barriersff

The recent US stance on “zeroing” as part of its anti-dumping investigations is not the first instance of protectionist policies framed by what is said to be one of the world’s most liberal economies. Neither is it the first occasion that the WTO’s Dispute Settlement Body (DSB) has endorsed an unreasonable US position in an inter-governmental case.

The US has a history of promulgating clever but perverse trade rules to ward off competition to its domestic industry. In this case, to arrive at a “dumping margin”, which is the gap between the weighted average price of the product imported (allegedly dumped from overseas) and the domestic price of that (or a similar) good in its country of origin, only the figure that emerges positive has been taken into consideration, while the negative margin has been “zeroed” (that is, ignored), dubiously.

To the dismay of observers, the WTO panel has succumbed to US pressure and found its method of zeroing WTO-compliant. This, while the WTO Agreement on Anti-dumping calls for a fair comparison between the export price and normal value (in the exporter’s domestic market). The use of a weighted average is intended to offer broadbased data for price comparisons. Zeroing betrays the very objective of a realistic evaluation.

Earlier too, the US had imposed unjustifiable trade barriers on imports in the guise of setting higher technical standards. The tuna/dolphin and shrimp/turtle cases are fresh in memory; the US had imposed restrictions on tuna and shrimp imports on the pretext that the production techniques allegedly endangered the protected species of dolphin and turtle, respectively, regardless of where the fishing was done or actual methods in use. Astounding as it may sound, such extraterritorial application of its domestic laws by the US was accepted as reasonable by the WTO Appellate Body in the second case, though the laws’ validity was later rejected on other grounds.

While applying such rules to imports, the US usually takes refuge in the “general exceptions” enshrined in Article XX of Gatt, 1947, particularly in clauses (b) and (g) thereof. The first permits a member to impose restrictions on international trade if necessary to protect human, animal or plant life or health, and the second relates to conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.

These grounds for restrictions should be used to attain the underlying objectives in the territory of the restriction imposing country. Under the Gatt text, if any import or export jeopardizes human, animal and plant life or health in an importing or exporting country, as the case may be, or can potentially cause the depletion of its exhaustible natural resources, only then can such restrictions be deemed reasonable. However, if such restrictive policies are imposed on a pretext of achieving the said objectives in an alien territory, it only amounts to an extra-territorial application of a member country’s laws and a tool of self-aggrandizement in the global political environment.

Such legal details are important in a world that is given to non-tariff barriers. Under the WTO regime, permissible barriers tend to be product-centric, as exemplified in the Agreement on the Application of Sanitary and Phyto-sanitary Measures and Agreement on Technical Barriers to Trade. These relate to the quality of the traded product and do not concern anything that has an effect on anything beyond a WTO member’s territory.

It is high time that the Bric countries join hands to thwart any designs by developed countries to let non-tariff barriers proliferate. The WTO’s DSB should not succumb to the pressure of developed countries seeking to legitimize such measures adopted to impede free trade. Not only must the DSB panel be independent in structure, it should have adequate representation from developing countries, at least in cases involving such a country’s exports or imports. Such representation should not only be symbolic, but effective and proportionate.

Source: Written by Jagvir Singh, The Financial Express