Book Chapter
The Problem of Contingent Protection

The most often used form of contingent protection is the anti-dumping (AD) mechanism. In 1999 the number of AD cases initiated accounted for 86.32 per cent of the total of three main types of contingent protection measures used; countervailing duty (CVD) cases launched accounted for 10 per cent; and Safeguard investigations (SG) started accounted for 3.68 per cent. But it should be noted that the CVD investigations have shown a clear increase between 1997 and 1999. Imposition of AD duties requires affirmative finding of dumping and material injury (or the threat thereof) to the like product domestic industry. The AD system used by (an increasing number of) WTO Member countries is riddled with a number of ambiguities and operational problems. A few industrialized countries accounted for nearly 90 per cent AD cases launched till early 1990s. In recent years there has been a spectacular growth and proliferation of AD investigations. The number of AD investigations launched in 1999 was more than double that of those started in 1995. Our analysis of the data shows the surprising fact that two-thirds of the anti-dumping investigations started against the small, vulnerable economies (countries with a GNP of US$ 50 billion or less and a per capita GNP of US$ 800 or less in 1997) during 1987-1997 were filed by the developing and the newly industrialized countries. The number of definitive AD measures imposed against the small vulnerable economies by the developing countries and newly industrialized countries was slightly greater than those taken by the industrialized countries. So the proliferation of anti-dumping measures has clearly worked to the detriment of small, vulnerable economies. The narrow definition of the product in AD investigations increases the probability of finding dumping and injury. The decision to 'construct normal value' increases the room for administrative discretion. Non-market economies are particularly vulnerable. Market shares of vulnerable low income economies, and vulnerable lower middle income countries are sometimes cumulated with those of co-respondents like USA, Russia and Brazil. This is a perfectly legitimate practice under WTO rules, but it substantially increases the probability of affirmative injury finding. In most jurisdictions, systematic counterfactual analysis is not used in calculating the injury margin. The public interest clause seems to give greater weight to the producers interests than those of the users. To use the anti-dumping system as a tool to facilitate the transition to a liberalized trade regime is a very risky strategy. Neither the retaliatory use of the AD mechanism, nor pleading for special and preferential treatment are the roads which small vulnerable economies should take. They have much to gain by trying to build a broad coalition not only with like-minded governments but also with potential partners in different Member states (consumers' organizations, big retail chains, manufacturers with offshore production facilities) who seem to be concerned about the adverse effects of anti-dumping measures. The first best option would be to dismantle the AD mechanism as a separate trade policy unit and merge the defendable elements of it with the competition policy units of the Members. If this is not politically feasible, various 'fall back positions' could be considered. The scope of the AD system could be limited to monopolizing dumping (particularly predatory cases) alone. Progressive replacement of the AD system with a flexible Safeguard system is a suggestion, which in spite of the criticism it has attracted, deserves serious consideration. In the meantime small vulnerable economies could try to find common ground with other Members and attempt to modify at least the most objectional features of the system such as the cumulation of market shares of the respondents and the lack of counterfactual analysis in the inJury determination. The public interest consideration should be seriously taken into account by estimating the injury of AD decisions not only to the producers but to the economy as a whole. In addition, some of the proposals put forward by practitioners for change on specific points in the Anti-dumping Agreement, deserve consideration. Policy proposals of the type outlined above are economically consistent and defendable without resorting to special interest arguments. And they could serve the interest of all Members and certainly those of small, vulnerable economies.