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United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products From Japan (AB-2003-5, WT/DS244/AB/R): A Legal and Economic Analysis of the Appellate Body Ruling

  • Robert Howse (a1) and Robert W. Staiger (a2)

The WTO Anti-Dumping (AD) Agreement requires that anti-dumping duties be reviewed at least every five years (Art. 11.3); pursuant to this requirement, domestic trade authorities in the United States are charged with the task of making a determination as to whether, after five years, revoking the duties would be likely to lead to continuation or recurrence of dumping (Commerce) and of material injury (US International Trade Commission, or USITC). This is called a Sunset Review; a negative determination of likelihood, either with respect to dumping or injury, will result in the duties expiring, the “sun” setting, as it were.

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* We thank participants at ALI meetings, where we presented this paper, for helpful comments.

1 See ILC Art. 2: state responsibility is incurred by any “action or omission” that is attributable to a state and that is a breach of an international obligation. There is no distinction between mandatory and other acts of states. In the Iran Hostage case, the International Court of Justice suggested that in some circumstances mere governmental encouragement or endorsement of the conduct of private actors could give rise to state responsibility.

2 Strauss P. L.Publication Rules in the Rulemaking Spectrum: Assuring Proper Respect for an Essential Element, 53 Admin. L. Rev. 803 (2001).

3 See the criticism by Howse and Neven of a panel report that adopted a similarly rigid approach where the question was the practice of the Canadian Export Development Corporation, “Canada-Export Credits and Loan Guarantees for Regional Aircraft (WT/DS222/R): A Comment,” ALI Reports 2003.

4 Mendelson N. A.Agency Burrowing: Entrenching Policies and Personnel Before a New President Arrives78 NYU. L. Rev. 557, 573–576 and accompanying footnotes (2003). See also, Bressman L. S.Schecter Poultry at the Millenium: A Delegation Doctrine for the Administrative State,” 109 Yale L.J. 1399 (2000).

5 Doe v. Hampton, 566 F.2d 265, 280–281 (1977).

6 See pp. 124–128 of Janow M. E. and Staiger R. W.Linen EC-Bed in Horn H. and Mavroidis P. C. (eds.), The WTO Case Law of 2001, Cambridge University Press, 2003.

7 We observe that, even in the presence of order-wide Sunset Reviews, it would still be possible for individual companies named in an anti-dumping order to take actions which could eliminate the actual duties that they pay. This possibility is provided for in Art. 9 of the WTO AD Agreement, which stipulates that anti-dumping duties shall be no more than the margin of dumping, which typically (except as provided in Art. 6.10) varies from company to company. It might then be wondered whether the potential free-rider problem associated with order-wide Sunset Reviews that we have described above has significance: After all, a company can always take actions that eliminate the anti-dumping duties it faces, and what more could it gain from a favorable Sunset Review at that point anyway? There are two problems with this sanguine view. First, as we discuss further below, the results found by Blonigen B. A. and Park J. H.Dynamic Pricing in the Presence of Anti-dumping Policy: Theory and Evidence, American Economic Review 94(1), March 2004, pp. 134154, suggest that the details of the administrative review processes under which the duty adjustments provided for in Art. 9 are made can (at least in the case of the administrative review process in the United States) create strong disincentives for companies to actually take actions to reduce the duties they face. And second, even if a company has succeeded in taking actions which eliminate its dumping margin and therefore the anti-dumping duty that it faces, it can still gain from a favorable Sunset Review, because a favorable Sunset Review terminates the administrative review process and, hence, the continuing risk of future positive-margin calculations and the implied anti-dumping duties. These so-called “investigation effects” have been shown to have significant impacts on trade volumes and prices (For example, see Staiger R. W. and Wolak F. A.Measuring Industry-Specific Protection: Anti-dumping in the United States, Brookings Papers on Economic Activity: Microeconomics, 1994, pp. 51118, and Krupp Corinne M. and Pollard P. S.Market Responses to Anti-dumping Laws: Some Evidence from the US Chemical Industry, Canadian Journal of Economics, 29(1), February 1996, pp. 199227).

8 The recent empirical results of Olson, Kara M., Free Riders Among the Rent-Seekers: A Model of Firm Participation in Anti-dumping Petitions, April 15, 2004, unpublished manuscript, document important free-rider effects in the context of the anti-dumping filing behavior of US companies, suggesting that the kinds of free-rider effects emphasized above in the context of order-wide Sunset Reviews could also be quantitatively important.

* We thank participants at ALI meetings, where we presented this paper, for helpful comments.

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World Trade Review
  • ISSN: 1474-7456
  • EISSN: 1475-3138
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