June 20, 2012 9:46AM

Could Trade Remedy Reform Be on the Horizon?

Traditionally, it has been the U.S. and EU who are the biggest users of anti‐​dumping and countervailing duties (the most important of the so‐​called “trade remedies”), which allow domestic industries to take action against what they call “unfair” trade, through the imposition of additional tariffs. In recent years, though, developing countries such as China and India began to catch on to how this kind of protection can be used, and have become active participants in this area. (Brink Lindsey and my new boss Dan Ikenson discussed this in a long ago trade policy analysis.) Thus, we now have the odd situation where China imposes these tariffs against U.S. industries on the basis of alleged subsidies and low pricing. The tables have been turned as China is now, in effect, accusing the U.S. of unfair trade!

An example can be seen in last Friday’s WTO panel report relating to China’s anti‐​dumping and countervailing duties on certain steel products. The U.S. complained to a WTO dispute settlement panel that China’s tariffs were not applied consistently with WTO rules, and the WTO panel agreed, finding a number of violations.

For those looking for a reason to be optimistic about the future of free trade, perhaps these developments can give us hope. While the spread of anti‐​dumping and countervailing duties is not good news, the U.S. challenge to these tariffs at the WTO perhaps indicates that the duties have caused significant financial pain and concern to the U.S. producers who were affected. Companies who have traditionally used the trade remedy system to keep out imports, such as the U.S. steel companies affected in this case, are taking notice that these laws can also be used against them. Maybe, just maybe, this could lead to some of trade remedies’ biggest supporters re‐​thinking the value of the current system, and could pave the way for real reform.