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International Spread of Anti-dumping Measures and Diversification of Investigation Methodologies: Effects and Policy Implications trade policy, anti-dumping system

Author Moonhee Cho, Cheon-Kee Lee, Minji Kang, and Minchirl Chung Series 21-20 Language Korean Date 2021.12.30

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As global economic growth has lost momentum due to the COVID-19, concerns about the spread of protectionism are growing. In particular, anti-dumping (AD) measures are more likely to expand in the future in that they are relatively easy to take and have a direct effect on trade compared to other protectionist trade policies. Accordingly, this study examines the spread of AD measures and the effects of AD measures on trade. We also pay attention to the fact that AD investigation methodologies are being diversified.

 Global AD measures decreased in the 2000s, but have been on the rise since the global financial crisis in 2009. AD measures are mainly taken in the metal, chemical, plastic and rubber industries. In many cases, developed countries are taking AD measures against developing countries, while AD measures within developed or developing countries are increasing in recent years. AD measures against Korea are also mainly taken in the metal, chemical, plastic and rubber industries. In an empirical analysis using data from 2010 to 2019 for 120 countries around the world, we find that AD measures have a negative effect on trade. Furthermore, AD measures have a negative effect on trade in empirical analyses conducted by splitting all product datasets by industry or production stage. Next, it is found that AD measures taken against Korea have a negative effect on Korean exports for the chemical, rubber, plastics industry as well as metal industry. Finally, we also analyze whether the trade diversion and trade refraction effects of AD measures occurred in the above two industries, focusing on cases where the United States conducted investigations against Korea. The results of our empirical analysis indicate that the trade diversion effect does not occur in the chemical, rubber, and plastic industries, but is found to occur in the metal industry. The trade refraction effect occurs in the chemical, rubber, and plastic industries, but not in the metal industry. 

This study finds that major AD users such as the United States, the European Union, Australia, India, and China have recently granted their investigating authorities expansive authority and discretionary powers in conducting AD investigations and calculating dumping margins, thereby adding further diversification and technical complexities to the previous AD methodologies. Such tendencies can be seen in application of “particular market situations” or “PMS,” and “adverse facts available” or “AFA” provisions under the United States’ AD investigations. Since the enactment of the Trade Preferences Extension Act of 2015, and more noticeably under the Trump administration, the United States Department of Commerce (DOC) has repeatedly applied PMS and AFA against imports from Korea. Following the United States’ practice, other major AD users including the European Union, China, and India are preparing or have adopted similar measures in their AD laws. A PMS is deemed to exist where the domestic price of an exporting country is distorted such that it cannot be accepted to be the normal value in dumping determination. Where a PMS is found, the investigating authorities can use a third country price or construct normal value. An AFA is applied where a respondent subject to an AD investigation is non-cooperative to the investigating authorities’ request for information, or where it submits information in an incomplete or inaccurate manner. In this case the investigating authority can take into consideration any information available to itself, usually leading to adverse inference against the respondent. As witnessed in AD investigations against Korea’s oil country tubular goods or “OCTG” where PMS and AFA were repeatedly applied during the original investigation and subsequent administrative reviews, such AD methodologies can significantly affect dumping margins to change market competitive conditions in the U.S. market. Despite criticism on the part of its trade partners, the possibility seems rather low that the U.S. Congress will amend the laws to reduce the administration’s powers in AD investigations. There have been several instances, however, where the Court of International Trade (CIT) reversed the DOC’s AD determination based on PMS and/or AFA and remanded them for reasons of lack of evidence, the DOC’s failure to meet the burden of proof, or a violation of due process. Exporting companies mainly or frequently subject to PMS and AFA can strategically use the reasoning made by the CIT in future AD investigations against the DOC. Further, given the recent WTO panel rulings in DS539, where most of the U.S. applications of its AFA provisions were held inconsistent with the WTO AD Agreement, it can still be deemed important and relevant to argue WTO inconsistencies of such AD methodologies against the United States before the WTO dispute settlement system.

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