2.3.1 Is a Counterfactual Necessary?

In para. 3.7, the Arbitrator mentions that, in the past, there were N/I proceedings where the level of retaliation had been calculated without recourse to a counterfactual. The Arbitrator, in footnote 42 of the report, lists nine disputes where counterfactuals were used.Footnote ⁹ That list omits three disputes adjudicated under Article 22.6: US–FSC (Article 22.6-US), US–Offset Act (Byrd Amendment) (Article 22.6-US), and US–1916 Act (Article 22.6-US). Yet in these three omitted disputes, a counterfactual was used.

In US–FSC, the question was how should the term ‘appropriate’ countermeasures be understood. The Arbitrator linked it to the level of subsidy paid, as the export subsidy involved therein was, by legislative fiat, illegal. Hence, in the Arbitrator's view, the damage was the amount of subsidy paid, and there was no need to discuss the issue any further.Footnote ¹⁰ Effectively, the counterfactual was based on the full removal of the subsidy.

In US–Offset Act (Byrd Amendment), the issue concerned future, quantified (and quantifiable) disbursements. The implicit counterfactual was a world where similar disbursements would not occur.

Similarly, in US-1916 Act the issue concerned future, quantified (and quantifiable) final judgments and settlements. Consequently, either explicitly or implicitly, in all 12 prior N/I proceedings the Arbitrator has always had recourse to a counterfactual in order to calculate the level of permissible retaliation.

2.3.2 Who Constructs the Counterfactual?

The law is silent on who constructs the counterfactual, as it simply mandates the Arbitrator to observe equivalence between damage and retaliation without any further guidance. In practice, the original complainant will propose a counterfactual. If accepted, then the Arbitrator will use it. For the original defendant to rebut the proposed counterfactual, it must, not only point to alternatives, but further demonstrate that:

If not persuaded by any counterfactual proposed by the parties, then the Arbitrator will construct its own. This is what happened in US–Washing Machines.

2.3.3 The Counterfactual Must Be Reasonable

Awards typically include the phrase that ‘the counterfactual must be reasonable’, or something to this effect.Footnote ¹² The term ‘reasonable’ suggests discretion. In para. 3.9, the Arbitrator acknowledges as much, stating nonetheless that it cannot speculate as to what the likeliest counterfactual is. The counterfactual should be a plausible means to comply, which neither over- nor underestimates the level of retaliation.Footnote ¹³ There is, anyway, an upper bound: as already mentioned, it cannot lead to a sum beyond what has been requested (non ultra petita), and anyway not beyond and above the sum resulting from the quantification of the damage suffered (para. 3.11):

In para. 1.16, the Arbitrator confirms standing case law to the effect that the methodology when constructing the counterfactual is a matter of its own discretion.

2.3.4 Past Practice

The counterfactual in a typical case, when recourse to a counterfactual is made, is a state of the world where the illegal measure does not exist, the illegal measure is removed or revoked. This has been the preferred scenario in all but three cases.

Of immediate interest to us are precisely the three cases where recourse to a ‘reasonable’ counterfactual was made. In these cases, the counterfactual was a world where another measure (other than the challenged) had been adopted, and not a world, where the illegal measure was simply considered inexistent.

In US – Section 110(5) Copyright Act, the EU claim was that the US authorities had not enforced intellectual property (IP) rights, depriving EU right-holders of their dues. The question was what the European Union could expect from the US in terms of enforcement. Strictly speaking, this was not an Arbitral Award issued under Article 22.6 of the DSU. Nevertheless, the function of the Arbitrator (established under Article 25 of the DSU) was akin to that of the Arbitrator operating under Article 22.6 of the DSU: the only question before it was the quantification of the amount of permissible retaliation, as there was no dispute between the parties that the illegality committed by the United States had not been withdrawn. The Arbitrator constructed a state of the world, where enforcement would depend on a cost–benefit analysis: the US authorities would enforce IP rights whenever costs of enforcement did not exceed the sum of royalties paid. They would cut their coat, in other words, according to the cloth (Grossman and Mavroidis, Reference Grossman, Mavroidis, Horn and Mavroidis2007)

TRIPs (Trade-Related Intellectual Property Rights) is the only positive integration agreement in the WTO. Positive action is expected, and the only question was whether the European Union could reasonably expect that the US authorities enforce IP rights, even when the cost of enforcement activities exceeded the revenue from royalties, especially since non-enforcement in similar cases was non-discriminatory. The Arbitrator responded in the negative.

In EC–Bananas III (Article 22.6-EC),Footnote ¹⁵ the Arbitrator constructed a counterfactual in order to remedy the violation of Article XIII of GATT (allocation of quotas respecting historic shares), which was not covered by the waiver in favour of EU imports of bananas of ACP origin.Footnote ¹⁶ In its view, a tariff quota regime, similar to the one proposed by the defendant but with a lower in-quota tariff was a reasonable counterfactual (paras. 7.1 et seq.). All that the Arbitrator did in this case was to differentiate the quota allocation.

In US–Gambling (Article 22.6-US),Footnote ¹⁷ the United States had justified its measures banning Internet gambling by invoking public order. The Appellate Body had found that the measures could not be justified, since the US statutes allowed Internet gambling through one measure, the Interstate Horsing Act (IHA). Nevertheless, only domestic suppliers could trade services under IHA. The Arbitrator, for reasons that are hard to understand, constructed a counterfactual, whereby the United States would have to open up IHA to foreign suppliers as well (paras. 3.57 et seq.).

This is a problematic counterfactual. First, as the dissenting opinion correctly pointed out (paras. 3.67 et seq.), what is the guarantee that the opening of one segment of the wider Internet gambling market suffices for the US measure to become legal? In fact, the intuitive response is that the suggested counterfactual is WTO inconsistent: the Arbitrator has artificially divided the Internet gambling market into two sub-markets, imposed openness in a small part of it, accepted total closure in the other, all in the name of avoiding discrimination. Discrimination though, is but one of the two legs to ensure conformity with Article XIV of GATS. The party invoking this provision must also show that the measure is necessary to protect public order. How is it ever necessary that public order, as invoked in this case, justifies the artificial division of the Internet gambling market? Second, one might legitimately question whether, when constructing a counterfactual other than in a world without the illegality present, the Arbitrator has in fact, ipso facto, exceeded its institutional mandate. We explain. All Arbitrators have consistently held that, under Article 22 of the DSU, they are required to provide a number, that is, the maximum extent of permissible retaliation. Their mandate does not extend to findings of (in)-consistency. This finding should have taken place at the compliance-panel stage. When assuming that the illegality has not been committed, they respect their mandate. All they do is calculate the damage by comparing the world with the measure found to be illegal, with a world where the challenged measure had not been adopted. When they construct any other counterfactual, they do not simply provide a number. They provide a number based on the assumption that their chosen counterfactual is WTO-consistent. What is the guarantee for that? And since arbitral awards under Article 22.6 are not appealable, no one can contest the legality of the chosen counterfactual.

With the exception of US – Section 110(5) Copyright Act, which is eminently defensible (because, under Article 25 of the DSU, the Arbitrator could, by virtue of the request by the parties to this effect, decide on the consistency of a reasonable counterfactual, and then calculate the amount of permissible retaliation), the other two, and especially the third case, raise more questions than answers. The argument in favour of the approach in the second case (the EC–Bananas dispute) is probably its endorsement by the defendant through its prior submissions (albeit at a different quota level). With this in mind, we turn to the discussion of US–Washing Machines.

2.3.5 Calculating the ‘Reasonable’ Counterfactual in US–Washing Machines

US–Washing Machines is the first Article 22.6 dispute involving WTO inconsistent antidumping and countervailing duties. Three key issues emerged:

1. a) Does WTO consistency require termination of the order?

2. b) If not, how does the Arbitrator calculate a ‘reasonable’ alternative WTO consistent duty level?

3. c) Regardless of the answer to (a) and (b), how does the Arbitrator estimate the counterfactual value of trade in the remedy year (which occurs many years after the duty was initially imposed)?

In US–Washing Machines, the WTO inconsistent AD measure was the use of zeroing by the US when calculating the AD duties on Korean exporters. In paras. 3.20 et seq., the Arbitrator implies that AD duties would have been imposed even if zeroing had not been used. The Arbitrator goes so far as to state that Korea could not have reasonably expected its benefits under Article 2.4 of the AD to lead to termination of duties (para. 3.21). The Arbitrator thus, thwarted Korea's counterfactual (paras. 3.13 et seq.), which amounted to a state of the world where duties would never have been imposed.

Conversely, the United States had argued in favour of endorsing a reasonable counterfactual, e.g., another US AD measure. The Arbitrator effectively sided with the US proposal: instead of using W-T, it used W-W without zeroing.Footnote ¹⁸ The US investigating authority, the US Department of Commerce (USDOC), had used W-W during an administrative review of the margins, and then decided to privilege imposition of AD duties using W-T.Footnote ¹⁹ Korea explicitly objected during the process to the use of W-W as alternative.

Still, the Arbitrator moved to construct a counterfactual using W-W (paras. 3.25 et seq.) and concluded that the AD duty for LG Electronics should be reduced from 13.02% to a [redacted] percent and for Samsung should be should be reduced from 9.29% to 0%. Importantly, these alternative ‘WTO consistent’ margins are directly reported in the SAS code used by the USDOC to compute the margins; the SAS code reports margins with and without zeroing under the two preferred calculation methods, W-W and T-T, before the USDOC decided to switch from W-W to W-T (para. 3.27). Neither the US nor Korea challenged the validity of the margins reported by the USDOC. Consequently, the Arbitrator did not have to produce the new WTO consistent margins on its own.

2.3.6 Measuring the Value of Lost Imports

We now discuss the difficult task of computing the counterfactual value of trade in the remedy year. The chief challenge for the Arbitrator is that only the actual value of imports in each year is observed. How can one determine what would have happened in the market ‘but for’ the WTO inconsistent policy?

We begin by discussing the short-run vs. long-run effects of duties. This is an important consideration given that (i) countries often delay bringing a case to the WTO and (ii) WTO dispute proceedings take several years (or longer) once the dispute is initiated. It can easily be the case that the remedy period in an Article 22.6 proceeding is a decade after the duties were initially imposed. In the US–Washing Machines dispute the remedy period was five years after the WTO inconsistent duties were originally imposed.

Both the economic models submitted (by Korea and the US) use short-run predictions to make inferences about the long-run impact. While the two models differ, the crucial difference involves the starting point for evaluating the impact. In the case of Korea, the starting point is the subject supplier's share of the US market immediately before the duty was levied. Then, based on work done by Bown and Ruta (Reference Bown, Ruta, Bown and Pauwelyn2010), Korea adjusts the pre-duty market share for expected price changes (due to the duty). Korea then applies the adjusted market share to the actual size of the US market in the remedy year as its estimate of what exports would have been without the duties. The clear assumption is that the short-run impact on market share is the relevant metric for assessing the longer-run effect.

The US proposed a more elaborate Armington elasticities model to assess the impact of the duty; the US model is quite similar to the style of models used by the US International Trade Commission (USITC) in its trade policy analysis for more than two decades. The Armington model allows washing machines from different sources to be imperfect substitutes for one another. The US’ Armington model captures not just how the duties affect subject producers but also how domestic consumers and other producers supplying the product respond to the duty and in this respect it captures the broader impacts of the duties. However, perhaps the most critical aspect of the US approach is that the starting point for the US computations is the actual size of the US market in the remedy year, including the actual value of trade for all key suppliers, including subject imports. In effect, the US’ position is that the only market information needed to compute N/I is the sales values in the remedy year. According to the US, using the remedy year market shares as the starting point, an Armington elasticities model can be used to predict the increase in subject supplier's sales if the duties were lower.

Both approaches are problematic. Korea assumes that market shares before the duties accurately predict market share in the remedy year. Effectively, Korea is assuming all subsequent market developments, including new entrants or any other advances that might alter the competitive position of the Korea vis-à-vis others, are a result of the duty. For Korea, the immediate short-run impact accurately captures the long-run impact.Footnote ²⁰

The US, on the other hand, argues the market shares in the remedy year are the rightful starting point for evaluating N/I. The problem with the US approach is most clearly seen in the case when (i) the WTO inconsistent duties are so large as to be preclusive (i.e., they drive subject suppliers out of the market) and (ii) the WTO consistent duties are small. In this scenario, the large WTO inconsistent duties will mean that the starting point for evaluating how a reduction in duty will benefit the subject country is a trade value near (or perhaps even) zero. As a result, the US approach will predict that lowering the duties will have a very small impact. This is because in an Armington model (with standard elasticity assumptions) starting from a very low trade value means the gains from compliance are inevitably small.Footnote ²¹

For example, suppose due to the WTO inconsistent duties subject supply in the remedy year is small (say, $100); the US’ Armington model will inevitably predict a small N/I value since even if the model were to predict a large percentage increase in subject supply (say, 10,000%) the actual change in trade value will be tiny. In the limit, if subject trade were driven to zero by WTO inconsistent duties, an Armington model will predict the subject suppliers will remain at zero trade even if the duties are lowered.Footnote ²²

2.3.7 Using Armington Models to Calculate the Value of Lost Imports

The Armington elasticity model, as formulated by Francois and Hall (Reference Francois and Hall1993), is one of the most common techniques for measuring price and volume effects of a change in trade policy on each source country.Footnote ²³ A typical Armington elasticity model is graphically depicted in for a case where there are three suppliers – domestically produced (denoted with the subscript d), subject imports (denoted with the subscript s), and non-subject (denoted with the subscript n). For simplicity, one may think of the y-axis measuring price (in USD) and the x-axis measuring the quantity of product. For technical reasons, in Figure 1 we denote the price and quantity in logarithms because that more accurately captures the functional forms used in the actual Armington elasticities model.

The supply and demand curves for each supplier are depicted in their own subfigure. In each chart, the initial equilibrium is given by the point A (where each supplier's demand curve D intersects its supply curve S).

Figure 1.

Policy Analysis in an Armington Elasticities Model

When the United States imposes its WTO-inconsistent duty (denoted as $\tau _{}^{INCONS} $). the relevant supply curve for subject (Korean) exporters to shift from S to $S_{INCONS}^\tau $ (depicted in the middle chart) and causes the equilibrium to shift from point A to point B (the shift is denoted by the ‘1’ in the subject supplier chart). As a result of the increased duty, subject exporters sell fewer units to the United States and US consumers pay a higher price for those units.

The duty imposed on subject exporters impacts the other suppliers in the market. The demand curve for products sold by (i) US producers and (ii) exporters from the rest of the world both shift out and to the right (depicted as the shift from D to D ^′); the shift is indicated by the ‘1’ in each chart.

The question for the Arbitrator is, what would be the sales by subject suppliers if the WTO-consistent AD duty were imposed? We denote the WTO-consistent duty as τ ^CONS, where τ ^CONS < τ ^INCONS).

If the US had adjusted its AD policy so its AD duties were WTO-consistent, the size of the duty would decrease and the relevant supply curve for the subject exporters would shift from $S_{INCONS}^\tau $ to $S_{CONS}^\tau $. This decrease in the duty causes the equilibrium to shift from point B to point C (the shift is denoted by the ‘2’ in the subject supplier chart). As a result, relative to the WTO-inconsistent duty the market outcome (depicted by point B), subject exporters sell more units to the United States and US consumers pay a lower price for those units.

The reduction in the duty on subject exporters also impacts the other suppliers in the market. The demand curve for products sold by US producers and exporters from the rest of the world both shift in and to the left (from D ^′ to D ^′′; this shift is indicated by the ‘2’ in the non-subject and US supplier charts).

While the Koreans submitted a different economic model, the Korean's approach was an attempt to capture the impact on subject sales of moving from point A to point B, and then from point B to point C. Crucially, Korea proposes evaluating the impact using trade values before the duties were imposed and then extrapolates that market impact to the remedy year,

By contrast, the US proposed the Arbitrator use an Armington model to calculate the difference in subject imports between point B and point C using remedy year trade values for the analysis. The Arbitrator correctly rejected the US approach noting that the trade value in the remedy year reflects the depressing effects of the WTO inconsistent duties imposed many years prior (para. 3.118).

Confirmation that the US’ proposed starting point is inconsistent with the underlying Armington model can be seen most clearly if one supposes the WTO-consistent duty were 0% (i.e., a de minimis margin). In such a scenario under a properly specified Armington model, the curve $S_{INCONS}^\tau $ would shift all the way back to S. In this case, the decrease in duty would cause the equilibrium to shift from point B to point A. In other words, when the tariff is reduced from τ ^INCONS to 0% the Armington model should predict that subject imports would return to the level they were before the duties were imposed. However, the Armington elasticities model is a short-run model; this prediction only occurs if the starting point for the calculation corresponds to the short-run value.

The conceptual problem with the US’ proposed starting point is depicted in Figure 2. Implicit in the US’ position is that the model's short-run prediction accurately describes the long-run trade values observed during the remedy period. This is depicted in the left-side panel where the short-run equilibrium (point B) also accurately depicts equilibrium in the remedy year. What occurred in US–Washing Machines, on the other hand (and is very likely a concern in any case where many years have passed since the WTO inconsistent duties were imposed) is that market has moved to a new equilibrium, as depicted by point B ^′ in the right-side panel. As depicted, the initial short-run shift in supply is denoted by ‘1a’ and in the longer-run subject supply has experienced an additional shift (denoted by the shift ‘1b’ in the figure). Starting the N/I counterfactual analysis from point B ^′ would result in a simulated new equilibrium that bears little resemblance to the relevant point implied by the economic theory, point A.Footnote ²⁴

Figure 2.

Does Armington Model Capture Actual Market Dynamics?

2.3.8 The Arbitrator's Solution – A Two-Step Armington Model

While the Arbitrator recognized Korea's view that the market shares in the remedy year were distorted and that consequently that data from the remedy year alone were insufficient to analyse the effects of WTO inconsistent duty, the Arbitrator felt the analytical approach proposed by Korea was too simple. The Arbitrator felt the Armington model proposed by the US was more flexible. Nevertheless, the US model suffered from the serious problem of producing short-run predictions when what was needed was a model that estimated long-run market outcomes. The Arbitrator resolved these issues by creating its own modelling approach – a two-step Armington model.

As the first step, the Arbitrator applied an Armington elasticities model to the US market as it existed prior to the imposition of the WTO-inconsistent duties. This first step estimates the impact of imposing the WTO-inconsistent duties on the sales of the subject products by each of the suppliers.Footnote ²⁵

As the second step, the Arbitrator then applied the counterfactual market shares of each of the suppliers (simulated under the first step) to the actual 2017 total value of the US market. This produces a counterfactual estimate of the value supplied by each of the suppliers in 2017 under the assumption that WTO-inconsistent duties are applied. This intermediate calculation is an attempt by the Arbitrator's to isolate the pure effect of the duties and abstract from other changes that have occurred in the US market over the period of time that the WTO-inconsistent duties have been imposed.

With the counterfactual 2017 sales as the starting point the WTO-inconsistent duty is replaced with the WTO-consistent duty and a second Armington policy simulation is performed. This second step simulates the impact of imposing the (lower) WTO-consistent duty on the sales of the supply sources.

The Arbitrator then computes N/I by subtracting Korea's counterfactual 2017 export value with WTO-inconsistent duties (which are the result of step one) from Korea's simulated 2017 export value with WTO-consistent duties (which are the result of step two).Footnote ²⁶ Importantly, under the Arbitrator's two-step method, N/I is based on the difference between two counterfactual estimates. Korea's actual Washer sales in 2017 do not enter the N/I calculation.

The Arbitrator argued the two-step approach results make them a more reasonable proxy for long-run results than either Korea's or US's proposals. The crucial innovation is the use of the immediate (or short-run) simulated market shares as a benchmark from which to evaluate the N/I. In addition, if one assumes the key difference over time can be captured by the change in the size of the US market, the results from the Armington elasticities model can be conveniently scaled to match the size of the market in the remedy year.

3.2.1 Is the Panel Engaging in a De Novo Review?

Standing case law suggests that panels cannot engage in a de novo review, that is they must take the factual record as established by the investigating authority. They cannot redo the investigation. But, this is exactly what the Arbitrator has done in US–Washing Machines. The USDOC had calculated W-W margins (without zeroing) during the investigation, but had based the duties it actually imposed using W-T (with zeroing). The Arbitrator resurrected the W-W calculation, and used it as benchmark, as its ‘reasonable’ counterfactual, in order to calculate the level of retaliation.

In this case, data about W-W were readily available. What if this had not been the case though? What if the USDOC had computer code had only reported W-T margins? Would the Arbitrator have redone the calculation from scratch? We will never know, alas.

3.2.2 Why is T-T Not Equally Reasonable?

The Arbitrator makes an assertion, an un-explained affirmation to the effect that W-W is a reasonable counterfactual. The Arbitrator further affirms, citing prior case law, that there is no need to search for the likeliest counterfactual. Thus, through an invented standard of review, the Arbitrator makes life easy for itself. What is the guarantee, though, that a plausible counterfactual observes the quintessential mandate of the Arbitrator–ensuring equivalence between damage and retaliation?

Why, for example, in US–Washing Machines, is W-W more reasonable than T-T? More generally, what are the statutory underpinnings of the ‘reasonableness’ standard? Article 22.4 of DSU speaks of equivalence not of reasonableness.

3.2.3 The Panel's Attitude Kills Two Instances of Adjudication

Korea might (or might not) have challenged the W-W methodology. We will never know. What we do know, though, is that it cannot do so. The case is over, as the Arbitrator, by using W-W as counterfactual, has immunized itself from challenges.

3.2.4 No Guarantee that Due Process Is Served

On the same wavelength, were this approach to be followed in other casesl, due process could be disserved. We explain. In this case, because the US authorities did calculate the dumping margin under all three methodologies (W-W; T-T; W-T), Korea had uninhibited access to the files. But, it could be the case that another investigating authority proceeds to calculation under W-T straight away. In this case, an Arbitrator, who assumes that a W-W dumping margin is the appropriate counterfactual, has, ipso facto, deprived the investigated entities from their due process rights to question the consistency of the determination with the Antidumping Agreement, had the W-W methodology been privileged..

3.2.5 Are Panels Equipped to Choose the Reasonable Benchmark?

Panels are ill-equipped to perform the kind of review the Arbitrator has in mind. It works in US–Washing Machines because the calculated W-W margin was part of the record. But, what if it had not not? What is the guarantee that panels are knowledgeable enough to calculate reasonable dumping margins?Footnote ²⁹ Even if we assume knowledge, what is the guarantee that panels have the information available to calculate reasonable dumping margins?

Or, would the Arbitrator have come up with a different counterfactual, in case W-W had not been available? But which counterfactual margin would emerge given that the Arbitrator itself asserted that Korea could not reasonably expect a ‘no AD duties’ scenario? By its own words, the Arbitrator had invited some calculation of the dumping margin, an exercise that we can seriously doubt they could complete without violating all of the points we have made so far.Footnote ³⁰

4.2.1 Should the Original Panel Act as Arbitrator?

It does not make much sense to have the original panel act as Arbitrator. The original panel is too immersed in the dispute, and possibly subconsciously influenced by the process. The Arbitrator in US–Washing Machines was well immersed in the intricacies of the investigation before the USDOC, and did not hesitate to employ information from the files (the computer code output), without inquiring into the legitimacy of this approach.

A pair of fresh eyes, insulated from the original dispute, is needed to ensure that it will not use and, alas, abuse the factual record.

4.2.2 Appeals against Arbitrators’ Reports

The evaluation of retaliation is probably the single most important aspect of the process. Enforcement, absent moral persuasion, largely hinges upon credibility of threat. Yes, the major stumbling block here is the statutory threshold in Article 22.4 of DSU, which amounts to cheap (temporary) exit from the contract. While we have sympathy for re-thinking the statutory threshold, a comprehensive discussion of this point escapes the ambit of this paper.

We do think, nevertheless, that the Arbitrator's decision should be appealable. Extending the process by a few months might be worth it, if this is the way to avoid tinkering with the counterfactual, and thus also reducing the potential for the errors we have discussed above.

4.2.3 Return to Suggestions

A more daring amendment would be to ask panels to issue binding suggestions, and thus provide interested parties with a ready-made counterfactual.

4.2.4 Rethink and Rewrite Article 22.6

Retaliation kicks in from the end of the reasonable period of time. But it is calculated based on damage inflicted years before. And here is the paradox. The WTO wants retaliation limited to the damage suffered, but not based on the damage suffered. For if that were the case, retaliation would have to retroactive, and not prospective.

By making retaliation prospective, we ask from Arbitrators to make generous assumptions. Think of it this way. Assume the total market size of the US washers’ market between 2011 and 2014 (when Korea suffered damage) was $1 billion, and Korea's market share was 40%. Korea's loss was $400,000,000. The end of the reasonable period of time, let us assume, was 2017. And by that time the washers’ market might be worth $0, because of a new invention, or $2 billion, because of a change in consumer preference. In either case, Korea will still be entitled to $400,000,000 no matter whether the market is booming or has gone bust.

What is then the purpose of retaliation? If it is to make sure that WTO members will be incentivized to perform their contractual obligations, the current regime achieves the exact opposite in case of booming markets. US has strong incentives to keep Korean washers out of the expanding US market, and would not mind paying the $400,000,000 to this effect.