U.S. policies have been the subject of more World Trade Organization disputes (119, followed by the EU with 73, then China with 30) and have been found to violate WTO rules more frequently than any other government’s policies. No government is more likely to be out of compliance with a final WTO Dispute Settlement Body (DSB) ruling — or for a longer period — than the U.S. government. To this day, the United States remains out of compliance in cases involving U.S. subsidies to cotton farmers, restrictions on Antigua’s provision of gambling services, country of origin labeling requirements on meat products, the so‐called Byrd Amendment, a variety of antidumping measures, and several other issues, some of which were adjudicated more than a decade ago. In some of these cases, U.S. trade partners have either retaliated, or been authorized to retaliate, against U.S. exporters or asset holders, yet the non‐compliance continues as though the United States considers itself above the rules.
Despite all the official high‐minded rhetoric about the pitfalls of protectionism and the importance of minding the trade rules, the U.S. government is a serial transgressor. Nowhere is this tendency to break the rules more prevalent than it is with respect to the Commerce Department’s administration of the antidumping law. Nearly 38 percent (45 of 119) of the WTO cases in which U.S. policies have been challenged concern U.S. violations of the WTO Antidumping Agreement. The epidemic of targeted dumping findings — such as the one concerning washing machines, if the U.S. International Trade Commission renders an affirmative injury finding next week — will more than likely produce new WTO cases.
The antidumping law is purported to exist to protect American companies and their workers from the effects of foreign competitors selling their products in the United States at “unfairly low” prices. Why price competition — encouraged as it is between domestic rivals — suddenly becomes unfair or worth thwarting when foreigners are offering the lower prices is a question without a satisfactory answer. The public is under the false impression that trade is a contest between Team America and the foreign team, and that they should cheer when our government erects barriers to defend us against foreign commercial success. The persistence of that mindset shields U.S. antidumping policy from the scrutiny it deserves.
Instead, the law has become a mechanism through which domestic companies — with the assistance of creative lawyers and a captured government agency that is committed to keeping America safe from imports — can saddle their competition (both foreign and domestic) with higher costs, control supply, increase their own prices, and reap higher profits. Nevermind that this “success” comes at the expense of consumers and firms in downstream industries that require access to the restricted product.
While President Obama urges U.S. companies to become more competitive at home and abroad, the U.S. antidumping law kneecaps these very same enterprises by making their industrial inputs and intermediate goods scarce and more expensive — as described and documented in this paper. It also inspires retaliatory protectionism abroad.
In general terms, dumping is defined as the sale of a product in a foreign market at a lower price than the price obtained by the same producer in his home market. Dumping is measured by comparing a foreign producer’s U.S. and home market prices over a specific period of time. For each comparison, the difference between the U.S. price and the home market price is considered the unit margin of dumping. A positive dumping margin results when the U.S. price is lower than the home market price and a negative dumping margin is the result when the U.S. price exceeds the home market price. The antidumping duty ultimately imposed is, in theory, equal to the weighted average dumping margin calculated for all U.S. sales expressed as a percentage of U.S. sales value.
Under the WTO Antidumping Agreement (ADA), governments are permitted to have antidumping laws and to apply antidumping duties to redress dumping that is found to be a cause of material injury to the domestic industry producing the same or similar products. Although the ADA is deferential to national governments when it comes to the details of implementing their antidumping laws, it does articulate certain minimum standards intended to limit the scope for abuse, such as reaching affirmative findings of dumping when no dumping has occurred or manufacturing punitively high antidumping duty rates, for example.
But this seemingly mechanical exercise of comparing prices and calculating margins is rife with subjective interference and methodological sleights of hand. Under the U.S. antidumping law, the Commerce Department maintains considerable discretion when it comes to determining the existence and measuring the magnitude of dumping. Which sales should be included in calculating average prices? What product models should be collapsed together and treated as a single model for purposes of calculating average prices? What expenses should be subtracted from gross prices before net prices are compared between markets? Is there evidence of targeted dumping?
Those are just a few of the many kinds of consequential, results‐changing decisions the Commerce Department renders during the course of an antidumping proceeding. That broad discretion has been abused over the years, as confirmed by the hundreds of U.S. court rulings that have found the Commerce Department acting illegally or otherwise beyond it authority.
Just as U.S. antidumping administration has so frequently run afoul of the U.S. law, it has also been found on dozens of occasions to violate U.S. obligations under the WTO Antidumping Agreement. In 12 of the 45 cases in which ADA violations were alleged by U.S. trade partners, the methodological trick known as “zeroing” was at least one of the subjects of controversy. Ultimately, this issue is the motivation behind the Commerce Department’s shenanigans in the case involving imported washing machines, targeted dumping, and Black Friday sales.