Commentary

Will the Sun Ever Set on Protectionism?

By Aaron Lukas
June 22, 1998

An important achievement of the Uruguay Round of the General Agreement on Tariffs and Trade was its new international rules for investigating “dumping,” or selling at less than “fair” value.

All anti-dumping orders are now revoked automatically within five years unless a “sunset review” determines that their removal would likely lead to further dumping and injury.

Many anti-dumping orders expire soon. Over 300 “transition orders” — already 5 years old when the agreement started in 1995 — face a July review.

Anti-dumping duties often stay on the books. The oldest U.S. order in effect was imposed in September 1966 on Canadian steel jacks.

Now automatic revocation is supposed to be the norm and continuation the exception. But several contested legal issues must be settled before any reviews begin. Predictably, protected U.S. industries are using those to gut the agreement’s intent.

The Commerce Department and International Trade Commission should resist that pressure. The issues are complex, and at least three threaten to undermine market openness.

First, the agencies should recognize that the U.S. Statement of Administrative Action often contradicts GATT intent, is not binding and was crafted with close cooperation of involved U.S. industries.

In discussing rules for determining the likelihood of injury, for example, the statement advises that “an improvement in the state of the industry … may suggest that the state of the industry is likely to deteriorate if the order is revoked.” That Catch-22 means that if a domestic industry performs either poorly or well, anti-dumping protection should continue.


Anti-dumping measures ostensibly protect U.S. firms from predatory pricing — underpricing to kill competition and achieve a monopoly. Unfortunately, firms also use the system to hide from healthy global competition.


Second, the ITC should insist on realistic estimates of how much import prices will fall, if at all, after an anti-dumping order ends — an important element in sunset injury determinations. The ITC should not be bound by the dumping margins cited by Commerce in the original investigations, which are hopelessly outdated and sometimes rely on methodologies since outlawed under World Trade Organization reforms. Original dumping margins are nearly always higher than later review margins.

Third, ITC must stick to a strict understanding of causation. Even when Commerce determines that dumping exists, there is no finding of injury unless dumped imports are the real problem.

In original investigations, imports need only be a cause of injury. But sunset reviews carry higher standards. Anti-dumping orders must end unless the ITC finds that revocation would likely cause a recurrence of material injury within a reasonably foreseeable time.

Opponents of a meaningful review process are trying to turn this standard on its head. They argue that an anti-dumping order must continue unless it is proved that material injury is unlikely, and that “reasonably foreseeable” means up to five years. This reasoning would make it more difficult to revoke orders under sunset reviews than under initial investigations.

Thus foreign firms would be considered guilty until proven innocent — flying in the face of U.S. legal tradition and the spirit of reform.

Anti-dumping measures ostensibly protect U.S. firms from predatory pricing — underpricing to kill competition and achieve a monopoly.

Unfortunately, firms also use the system to hide from healthy global competition. U.S. law already protects against predatory behavior, making most anti-dumping orders unnecessary. As a recent study by trade economists Brian Hindley and Patrick Messerlin concluded, “Anti-dumping in its present form has no proper purpose that cannot be better served by other means.”

So far, trade officials have avoided tough reform issues. Commerce and the ITC should use sunset reviews to curb abuses and open the U.S. market to international trade — and not take that responsibility lightly.

Aaron Lukas is an analyst with the Cato Institute’s Center for Trade Policy Studies.