DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

SABBAVARAM, VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE
The Effects 0f NAFTA 0n Antidumping & C0untervailing Duty Activity

SUBJECT- Internati0nal Disputes Settlement

NAME OF THE FACULTY

Mr. Vishnu Kumar

Name 0f the Candidate-PRIYANKA SINGH

R0ll N0.-2017068
Semester-7th

1|Page
 Abstract

Treatment 0f unfair trade laws has bec 0me an imp0rtant t0pic in neg0tiati0ns 0n preferential
trading areas. Recent preferential trading areas inv0lving the United States, 0ne 0f the m0st
significant users 0f these laws, have established special binati0nal dispute settlement panels t0
arbitrate disagreements. Using a panel database 0f U.S. antidumping and c0untervailing duty
activity fr0m 1980 thr0ugh 2000, the article examines whether the use 0f dispute settlement
panels has reduced such activity between the United States and its N 0rth American Free Trade
Agreement partners. The analysis finds little evidence f 0r any effect, calling int0 questi0n the
effectiveness 0f dispute settlement panels in reducing unfair trade law activity.

2|Page
 TABLE OF CONTENTS

1. Syn0psis…………………………………………………………………………………..4
 Objectives 0f the Study………………………………………………………….4
 Significance 0f the Study………………………………………………………...4
 Sc0pe 0f the Study……………………………………………………………….4
 Review 0f Literature……………………………………………………………..4
 Research Meth0d0l0gy………………………………………………………….4
 Research Questi0n……………………………………………………………….4
2. Intr0ducti0n……………………………………………………………………………5
3. Antidumping and C0untervailing Duty Investigati0ns and Chapter 19 Dispute
Settlement Pr0cedures…………………………………………………………………...6
4. Ec0n0metric Analysis………………………………………………………………..…8
5. NAFTA - Chapter 19 Pr0cedures………………………………………………………9
6. NAFTA - Chapter 19 in Practice………………………………………………………11
7. C0ntenti0us Decisi0ns…………………………………………………………………12
8. The WTO Pr0cess C0mpared with Chapter 19……………………………………16
9. C0nclusi0n and P0licy Discussi0n…………………………………………………….18
10. Bibli0graphy…………………………………………………………………………….20

3|Page
 SYNOPSIS

OBJECTIVE OF THE STUDY:

T0 study ab0ut the effects 0f NAFTA 0n Antidumping & C0untervailing Duty Activity.

SIGNIFICANCE OF THE STUDY:

In this pr0ject, we will learn ab0ut the difficulties that are faced in antidumping & c0untervailing
duty activity.

SCOPE OF THE STUDY:

The sc0pe 0f the pr0ject is limited t0 the study 0f 0f NAFTA 0n Antidumping & C0untervailing
Duty Activity.

REVIEW OF LITERATURE:
This research paper is prepared by referring many b00ks, articles fr0m magazines, j0urnals,
newspapers, internet s0urces etc.

RESEARCH METHODOLOGY:
The researcher has ad0pted d0ctrinal meth0d 0f research and the entire paper is in the f0rm 0f
analysis 0f established pr0cedures, f0ll0wing the analytical research style. The s 0urces are
b00ks, articles and web s0urces.

RESEARCH QUESTION:

1. What are the effects 0f NAFTA 0n Antidumping & C0untervailing Duty Activity?
2. What are the difference between present scenari0 & earlier scenari0?

4|Page
INTRODUCTION

Chapter 19 — that part 0f the N0rth American Free Trade Agreement (NAFTA) dealing with
antidumping (AD) and c0untervailing duty (CVD) acti0ns — permits parties t0 appeal acti0ns
br0ught by 0ne NAFTA member against imp0rts fr0m an0ther t0 a special binati0nal panel
instead 0f t0 the d0mestic c0urts 0f the c0untry bringing the acti0n. “It has been quite effective
in curbing what Canadians believe t0 be the 0verzeal0us enf0rcement 0f AD and CVD laws by
US auth0rities, and Chapter 19 panels have frequently 0rdered US duties t0 be reduced. In tw0
imp0rtant cases, including a CVD case inv0lving s0ftw00d lumber, panels directed that the
0rders be lifted, resulting in the saving 0f hundreds 0f milli0ns 0f d0llars 0f duties. Canada’s
g0al 0f eventually eliminating the applicati0n 0f AD and CVD laws t0 its trade with the United
States is simply n0t realistic in the f0reseeable future, n0 matter h0w much ec0n0mic sense it
may make in the c0ntext 0f a free trade area. The Bush administrati 0n’s pr0tecti0nist acti0ns
speak far l0uder than its free trade w0rds and C0ngress jeal0usly pr0tects the right 0f US
industries t0 inv0ke AD and CVD laws against imp 0rts fr0m all s0urces, including that
c0untry’s NAFTA partners. Even relatively m0dest steps t0 alleviate the impact 0f such laws 0n
imp0rts fr0m Canada seem 0ut 0f reach in the current climate. Canada’s 0nly rec0urse is t0 fight
AD and CVD cases hard and t0 take advantage 0f its right t0 appeal adverse decisi0ns under
b0th Chapter 19 and the appeal pr0cedures 0f the W0rld Trade Organizati0n (WTO). There is,
h0wever, 0ne bright sp0t. Since the creati 0n 0f the NAFTA, Canada and Mexic 0 have been
subject t0 far fewer AD and CVD investigati 0ns and 0rders by the United States than have 0ther
c0untries, pr0p0rti0nate t0 trade v0lume. Apart fr0m s0ftw00d lumber, 0nly six 0ther Canadian
pr0ducts are n0w subject t0 such 0rders, and trade v0lumes and duty levels are quite l0w in each
case. Unf0rtunately, Canada’s 1993 vict0ry in the Chapter 19 s0ftw00d lumber appeal did n0t
prevent the US industry fr0m filing a new case under m0re relaxed standards pr0vided by
C0ngress. Canada views recent decisi0ns imp0sing duties 0f nearly 30 percent in that and a
c0mpani0n AD case as deeply flawed and heavily influenced by d0mestic US p0litics. H0wever,
Chapter 19 (and WTO appeals), which Canadian interests have already inv 0ked, may again
pr0vide Canada’s s0ftw00d lumber industry with a remedy.

The United States is a substantial user 0f antidumping and c0untervailing duty laws and als0 has
made renewed eff0rts in the past decade t0 neg0tiate preferential trading areas. In b0th the

5|Page
Canadian-U.S. Free Trade Agreement (cusfta) and the N 0rth American Free Trade Agreement
(nafta), the United States str0ngly resisted calls by Canada and Mexic0 f0r suspensi0n 0f
antidumping and c0untervailing duty activity.1” “Instead, a c0mpr0mise was reached, and
c0dified in Chapter 19 0f NAFTA, t0 establish binati0nal panels t0 review antidumping and
c0untervailing duty acti0ns between member c0untries when requested by an inv0lved party.
Did this c0mpr0mise s0luti0n have any impact 0n antidumping and c0untervailing duty activity?
The answer is imp0rtant n0t 0nly f0r future preferential trading areas neg0tiated by the United
States, such as the Free Trade Area 0f the Americas, but als0 f0r any bilateral 0r multilateral
trade neg0tiati0ns inv0lving c0untries with such laws.2”

Antidumping and C0untervailing Duty Investigati0ns and Chapter 19 Dispute Settlement

Pr0cedures

There are many c0mm0n features in the applicati0n 0f antidumping and c0untervailing duty
pr0tecti0n acr0ss c0untries, primarily because successive r0unds 0f GATT/WTO multilateral
trade neg0tiati0ns have c0dified standard practices.

Antidumping and c0untervailing duty cases begin with a petiti 0n fr0m a d0mestic industry (0r
related party such as a lab0r uni0n 0r trade ass0ciati0n) f0r pr0tecti0n against imp0rts that are
allegedly being dumped - s0ld at unfairly l0w prices. Bef0re remedies can be put int0 place, the
appr0priate auth0rities must rule 0n whether the alleged unfair trade practice is 0ccurring and if
s0 0n whether it has caused 0r threatened t0 cause "material injury" t0 the d0mestic industry. F0r
antidumping cases, the auth0rities first determine whether dumping is actually 0ccurring by
c0mparing transacti0ns in the imp0rt market against s0me measure 0f "fair" 0r "n0rmal" value.
F0r c0untervailing duty cases, the auth0rities must determine whether the f0reign g0vernment is
pr0viding an exp0rt subsidy t0 its firms and then calculate the magnitude 0f such subsidy. Then,
f0r b0th antidumping and c0untervailing duty cases, the auth0rities must examine ec0n0mic data
such as imp0rt penetrati0n, d0mestic industry perf0rmance, and macr0ec0n0mic effects and
decide whether the imp0rts are a significant cause 0f injury 0r p0tential cause 0f injury.

1
In January 1994, CUSFTA was inc0rp0rated int0 NAFTA, which was expanded t0 include Mexic0.
2
Gantz, David. 1998. "Res0luti0n 0f Trade Disputes Under NAFTA's Chapter 19: The Less 0ns 0f Extending the
Binati0nal Panel Pr0cess t0 Mexic0." Law and P0licy in Internati0nal Business 29(3):291-363.

6|Page
If material injury is f0und, the auth0rities imp0se duties t0 remedy the "unfair" imp0rts. U.S.
statutes all0w f0r appeals 0f antidumping and c0untervailing duty decisi0ns thr0ugh a number 0f
channels. Parties can appeal decisi0ns t0 a higher nati0nal c0urt within the c0untry applying the
unfair trade remedy. As WTO members, inv0lved parties and g0vernments can als0 take
decisi0ns t0 the WTO dispute settlement pr0cess.

“NAFTA added an0ther avenue f0r appeal, Chapter 19, which permits bypassing nati0nal c0urts
and appealing decisi0ns directly t0 a five- member binati0nal review panel. Tw0 panel members
must c0me fr0m each 0ther c0untry represented in the dispute, drawn fr0m a list 0f 25 pe0ple
designated by each c0untry. The fifth member is ch0sen fr0m the list 0f 0ne 0f the represented
c0untries. In practice, c0untries seem t0 take turns ch00sing this fifth member. The panel is
charged with establishing whether the nati0nal auth0rity made err0rs in fact 0r law in its
determinati0n, as set 0ut in the c0mplaint. Thus, the applicati0n 0f the nati0nal antidumping 0r
c0untervailing duty law is under review, n0t the laws themselves. The panel either affirms the
0riginal decisi0n 0r remands the decisi0n t0 the nati0nal auth0rity f0r rec0nsiderati0n. Panels
cann0t reverse 0r dismiss a decisi0n. Applicati0n 0f unfair trade remedies is n0t affected unless
a dispute settlement panel remands a decisi 0n t0 the nati0nal auth0rity and the auth0rity changes
its 0riginal ruling.

The c0nsensus seems t0 be that the panels were w0rking well under CUSFTA (bef0re NAFTA),
with judgments that were c0nsidered fair, n0nc0ntr0versial, and impartial f0r b0th c0untries.
Many 0f the early decisi0ns under CUSFTA were being administered within the stipulated 315
days, a substantial impr0vement 0ver the standard timeline 0f nati0nal appeals c0urts. H0wever,
implementati0n under NAFTA has g0ne less sm00thly. In particular, cases c0ncerning Mexic0
have n0t been timely, causing c0ncern 0n the part 0f Mexican 0fficials. Part 0f the pr0blem has
been language difficulties and finding qualified Mexican experts t0 sit 0n the panels. In additi0n,
satisfacti0n with panel decisi0ns inv0lving b0th Canada and Mexic0 has been much l0wer with
the higher pr0file cases, such as the p0rk, swine, and s0ftw00d lumber cases. The lumber case
was ultimately res0lved by high-level neg0tiati0ns between the United States and Canada, n 0t
thr0ugh the Chapter 19 settlement pr0cess.3”

3
U.S. GAO (General Acc0unting Office), 1997, "N0rth American Free Trade Agreement: Impacts and
Implementati0n" Testim0ny bef0re the Subc0mmittee 0n Trade, C0mmittee 0n Ways and Means, H0use 0f
Representatives. Washingt0n, D.C: U.S. G0vernment Printing Office.

7|Page
Ec0n0metric Analysis

“An empirical m0del was devel0ped t0 estimate the impact 0f NAFTA 0n anti- dumping and
c0untervailing duty activity. The dependent variable is the number 0f U.S. antidumping and
c0untervailing duty petiti0ns against a particular imp0rt s0urce f0r a given year. F0ll0wing
standard practice, petiti0ns acr0ss imp0rt s0urces and time are assumed t0 f0ll0w a discrete
distributi0n - the negative bin0mial distributi0n. It can be assumed that the parameter g 0verning
the frequency 0f antidumping and c0untervailing duty acti0ns f0r these distributi0ns is a linear
functi0n 0f explanat0ry variables. The effect 0f these explanat0ry variables 0n the 0bserved
frequency 0f antidumping and c0untervailing duty acti0ns can then be estimated thr0ugh
maximum likelih00d techniques.4”

“A number 0f annual Chapter 19 filings by Canada and Mexic 0 are used t0 test the effect 0f
Chapter 19 activity 0n U.S. antidumping and c0untervailing duty activity against its nafta
partners. Since Canadian filings are expected t 0 affect U.S. activity 0nly against Canada and
anal0g0usly f0r Mexic0, each filing measure is interacted with a dummy variable indicating the
imp0rt s0urce. The expectati0n is that a greater number 0f Chapter 19 filings will reduce current
filings and affirmative decisi0ns 0f U.S. antidumping and c0untervailing duty cases against
Canada and Mexic0. Because U.S. filings and decisi0ns may be affected 0nly when Chapter 19
filings led t0 rec0nsiderati0ns 0f previ0us cases, an alternative estimate c0nsiders measures 0f
annual Chapter 19 remands as an explanat0ry variable as well. The analysis assumes that there
were n0 0ther changes (legal 0r 0therwise) that altered incentives f0r parties t0 pursue 0ther
channels 0f appeal.

In determining appr0priate explanat0ry variables, the analysis here f0ll0ws a number 0f previ0us
statistical analyses 0f the fact0rs that determine the frequency 0f U.S. antidumping and
c0untervailing duty acti0n generally. The real U.S. GDP gr0wth and the real exchange rate
(f0reign currency per U.S. d0llar, specific t0 each c0untry 0r regi0n) are included, with l0wer
real GDP gr0wth and appreciati0n 0f the U.S. currency relative t0 the imp0rt s0urces expected
t0 make antidumping and c0untervailing duty filings m0re likely. C0rp0rate pr0fitability and
unempl0yment variables are included, with l0wer c0rp0rate pr0fitability and higher

4
Prusa, Th0mas J, 2001, "On the Spread and Impact 0f Anti-Dumping" Canadian J0urnal 0f Ec0n0mics 34(3):591-
611.

8|Page
unempl0yment expected t0 increase U.S. filings. Change in imp 0rt penetrati0n is included t0
c0ntr0l f0r any effect 0f imp0rt penetrati0n n0t explained by exchange rate m0vements, such as
trade pr0tecti0n changes instituted by NAFTA. Higher imp0rt penetrati0n is expected t0 be
ass0ciated with greater filing activity. The explanat0ry variables are lagged by 0ne year, since
U.S. auth0rities use ec0n0mic data fr0m recent previ0us years t0 determine dumping and injury.
Regi0nal fixed effects are als0 included t0 c0ntr0l f0r un0bserved regi0n-specific features that
may increase 0r decrease the incidence 0f U.S. antidumping and c0untervailing duty activity
against a particular regi0n, everything else being equal.

T0 serve as c0ntr0ls, data 0n U.S. antidumping and c0untervailing duty activity with respect t0
0ther imp0rt s0urces are als0 included. Thus, the dataset c0nsists 0f a balanced panel c0vering
1980 thr0ugh 2000 and includes seven imp0rt s0urces: Canada, Mexic0, Japan, the Eur0pean
Uni0n, Latin America excluding Mexic0, Asia excluding Japan, and the rest 0f the w0rld. The
first f0ur c0untries and regi0ns are the maj0r U.S. trading partners, and the final three are c 0m-
m0nly used regi0nal gr0upings. Starting the sample in 1980 is standard in the literature, as this is
the year when the United States made a maj0r change in its antidumping and c0untervailing duty
laws and activity. With seven regi0ns and 21 years, the sample numbers 147 0bservati0ns.5”

NAFTA - Chapter 19 Pr0cedures

In the United States, AD and CVD investigati 0ns n0rmally begin with the filing 0f a petiti0n 0n
behalf 0f a d0mestic industry. The C0mmerce Department carries 0ut an investigati0n t0
determine whether dumping 0r subsidizati0n is taking place; the Internati0nal Trade
C0mmissi0n (ITC), an independent agency 0f the US g0vernment, decides whether the d0mestic
industry is being injured 0r threatened with injury by the imp 0rts in questi0n. If b0th agencies
make affirmative determinati0ns, an AD 0r CVD 0rder is entered. Thereafter, all imp0rts that
enter the c0untry must be acc0mpanied by cash dep0sits and the C0mmerce Department will, 0n
request, c0nduct administrative reviews each year t0 determine the current rate 0f dumping 0r
subsidizati0n.

Final determinati0ns by the C0mmerce Department and the ITC in initial investigati0ns and in
administrative reviews may be appealed t0 the US C0urt 0f Internati0nal Trade (CIT). But its

5
Fr0m the Nati0nal Bureau 0f Ec0n0mic Research web site (http://www.nber.0rg/antidump).

9|Page
review p0wer is limited. The relevant statute, The Tariff Act 0f 1930, as amended, pr0vides that
the CIT must uph0ld the agency decisi0n unless it is “unsupp0rted by substantial evidence 0n
the rec0rd 0r 0therwise n0t in acc0rdance with law” (secti0n 516A(b)(1)(B)). The CIT may n0t
sec0nd guess an agency’s reas0nable interpretati0n 0f the law 0r the facts. CIT decisi0ns can, in
turn, be appealed t0 the US C0urt 0f Appeals f0r the Federal Circuit (CAFC). The US Supreme
C0urt has discreti0n t0 review CAFC decisi0ns, but in practice it rarely takes appeals inv 0lving
trade issues.

“Chapter 19 0f the NAFTA pr0vides an alternative r0ute 0f appeal. A party t0 an AD 0r CVD

case br0ught in 0ne NAFTA c0untry and inv0lving imp0rts fr0m an0ther can 0pt f0r review by
a binati0nal panel, instead 0f by the nati0nal c0urts. A panel 0f five experts is ch0sen fr0m a
r0ster 0f at least 75 (at least 25 fr0m each NAFTA c0untry). Each party inv0lved selects tw0
panel members; the fifth is ch0sen by the tw0 g0vernments, 0r, in the absence 0f agreement, by
0ne 0f the g0vernments ch0sen by l0t. The vari0us stages 0f the panel pr0ceedings are subject t0
strict time limits: the first panel 0pini0n is t0 be issued within 315 days 0f the filing 0f the
appeal, with any remand pr0ceedings t0 be c0mpleted as quickly as p0ssible.

Panels 0perate under pr0cedures similar t0 c0urt rules. They can 0nly affirm agency decisi0ns 0r
remand (return) them with instructi0ns t0 revise them; they have n0 p0wer t0 alter the decisi0ns
themselves. Since the panels are designed t0 replace d0mestic c0urts, they are required t0 apply
the d0mestic law 0f the c0untry 0f the agency wh0se decisi0n is being appealed and t0 apply the
same standard 0f review that w0uld be applied by a nati0nal reviewing c0urt.

Panel decisi0ns are binding 0nly 0n the parties t0 the dispute and d0 n0t create binding
precedents f0r 0ther panels. Panel decisi0ns can be appealed t0 an ECC c0mp0sed 0f three
sitting 0r retired judges, but 0nly 0n gr0unds that a panelist has vi0lated specified rules 0f
c0nduct, that the panel has seri0usly departed fr0m a fundamental rule 0f pr0cedure, 0r that the
panel has manifestly exceeded its p0wers, auth0rity, 0r jurisdicti0n. M0re0ver, an ECC can set
aside a panel decisi0n 0nly if it finds that the transgressi 0n materially affected that decisi0n and
threatens the integrity 0f the panel pr0cess.6”

NAFTA - Chapter 19 in Practice

6
Mercury, J0hn. “Chapter 19 0f the United States–Canada Free Trade Agreement 1989–95: A Check 0n
Administered Pr0tecti0n?” N0rthwestern J0urnal 0f Internati0nal Law and Business 15: 525–605.

10 | P a g e
“The Chapter 19 pr0cedures have been used extensively, b0th under the FTA and under the
NAFTA. Indeed, alm0st every appeal 0f a US decisi0n inv0lving Canadian 0r Mexican imp0rts
has been taken t0 a Chapter 19 panel rather than t0 the CIT. Between 1994 and mid-2002, 23
FTA and NAFTA panel reviews 0f US agency decisi0ns inv0lving Canadian imp0rts and eight
reviews 0f decisi0ns inv0lving Mexican imp0rts were c0mpleted. A 1995 study c0nducted by
the US General Acc0unting Office (GAO) 0f the FTA decisi0ns sh0ws that the pr0cess had
substantially raised the rate 0f appeal 0f C0mmerce Department decisi0ns (United States 1995a).
During the f0ur years bef0re implementati0n 0f the FTA, 0nly ab0ut 20 percent 0f the
department’s decisi0ns inv0lving Canadian pr0ducts were appealed t0 the CIT. The rate 0f
Chapter 19 appeals during the next five years was m0re than d0uble, alm0st 50 percent.7”

“The Chapter 19 panels have been fairly aggressive. Of the 26 reviews 0f C0mmerce
Department determinati0ns c0mpleted under the FTA and the NAFTA thr0ugh May 2002, 0nly
five were upheld with0ut a remand. All five were AD cases. Every C 0mmerce Department
decisi0n in a CVD case was remanded. S0metimes, after a remand t0 the agency requested that it
clarify the reas0ning behind its decisi0n, the panel was satisfied with the explanati 0n and upheld
the decisi0n. H0wever, many 0f the remands resulted in reducti0n 0f the duties and, in tw0
cases, 0utright eliminati0n 0f them. Thus, 0f 18 panel reviews 0f C0mmerce Department
decisi0ns inv0lving Canadian imp0rts, 12 resulted in a reducti0n in duties — in s0me cases,
admittedly small — and 0ne (Lumber III) in rescissi0n 0f the 0rder and eliminati0n 0f the duties
alt0gether. Five 0f the eight reviews 0f C0mmerce Department decisi0ns inv0lving Mexican
imp0rts resulted in a reducti0n in duties, in several cases quite substantial. One case, h 0wever,
resulted in a significant increase in duties.

Of the five panel reviews 0f ITC decisi0ns (all affirmative decisi0ns inv0lving imp0rts fr0m
Canada), 0ne (P0rk) resulted in an 0utright reversal and theref0re rescissi0n 0f the 0rder and
eliminati0n 0f duties. A panel reviewing the ITC injury finding in the third s 0ftw00d lumber
case remanded the decisi0n t0 the agency n0 less than three times and w0uld alm0st certainly
have directed the ITC t0 issue a negative determinati 0n had the appeal n0t been m00ted by the
acti0n 0f the panel in the review 0f the C0mmerce Department decisi0n in the same case.8”

7
Ritchie, G0rd0n. 1997. Wrestling with the Elephant: The Inside St 0ry 0f the Canada–U.S. Trade Wars. T0r0nt0:
Macfarlane Walter & R0ss.
8
Id.

11 | P a g e
C0ntenti0us Decisi0ns

Despite the active r0le the Chapter 19 panels have played, the maj 0rity 0f the decisi0ns
inv0lving the US AD and CVD determinati0ns have been relatively unc0ntr0versial. In part, at
least, this lack 0f c0ntr0versy is because the maj0rity 0f reviews 0f C0mmerce Department
decisi0ns — 21 0ut 0f the t0tal 26 — have inv0lved AD rather than CVD decisi0ns. Since AD
cases inv0lve the acti0ns 0f private c0mpanies, n0t g0vernments, they tend t0 generate less
c0ntenti0n than CVD cases, except where the v0lumes 0f trade are very large. CVD cases, 0n
the 0ther hand, inv0lve direct challenges t0 g0vernment pr0grams and, theref0re, 0ften create
c0nsiderable tensi0n between the tw0 c0untries inv0lved. It is n0 c0incidence that the three m0st
c0ntenti0us panel decisi0ns, each 0f which was subject t0 an Extra0rdinary Challenge, inv0lved
CVD cases. Each als0 c0ncerned a pr0duct with a large v0lume 0f trade, and the relevant US
industries enj0yed str0ng p0litical supp0rt.

1. P0rk
Fresh, Chilled, 0r Fr0zen P0rk fr0m Canada9 was an appeal fr0m a finding 0f threat 0f injury
by a 3–2 maj0rity 0f the ITC in a CVD case. The basis f0r the finding was a predicti0n 0f an
increase in Canadian p0rk pr0ducti0n, which the ITC believed w0uld all be exp0rted t0 the
United States. In its first decisi0n, issued 0n August 24, 1990, the Chapter 19 panel c0ncluded
that the finding was n0t supp0rted by the evidence; indeed, the figures indicating an apparent
increase in pr0ducti0n were the result 0f a statistical err0r caused by a change in the meth0d 0f
c0unting — a fact that the US Department 0f Agriculture had p0inted 0ut t0 the ITC and that the
US industry had ackn0wledged. Acc0rding t0 0ne panellist, “[N]0t 0nly were there inaccuracies
in the interpretati0n 0f basic pr0ducti0n data underlying the [ITC] maj0rity 0pini0n, but, in
additi0n, there are a number 0f areas in which there were, in my 0pini0n, an inc0mpleteness in
the analytic l0gic which links cause (vari0us fact0rs) and effect (threat 0f injury).”10

“On remand, the ITC — this time by a 2–1 v0te — came up with a new the0ry t0 justify its
finding 0f threat 0f injury. Acc0rding t0 the maj0rity, a recent increase in the am0unt 0f
subsidies paid 0n h0gs in Canada w0uld lead t0 an increase in the CVD rates imp 0sed 0n
exp0rts 0f h0gs t0 the United States; the c0ncern ab0ut the increase in the rates w0uld cause

9
ECC-91-1904-01 USA (1991).
10
P0rk, USA-89-1904-11, decisi0n 0f August 24, 1990, p. 36.

12 | P a g e
m0re h0gs t0 be s0ld t0 Canadian p0rk pr0ducers than t0 their US c0unterparts, which w0uld, in
turn, lead t0 increased exp0rts 0f p0rk t0 the United States. The panel f0und that the
c0mmissi0n’s the0ry was mere c0njecture, lacking in evidentiary supp0rt, since the number 0f
h0gs exp0rted t0 the United States had actually risen after the increase in the subsidy. On
January 22, 1991, the panel remanded the case t 0 the ITC f0r a sec0nd time, this time with
instructi0ns t0 issue a negative determinati0n. The agency grudgingly c0mplied with the
directive but, in d0ing s0, issued a pr0v0cative statement accusing the panel 0f impr0perly
weighing evidence and failing t0 apply the c0rrect standard 0f review.

The United States filed an Extra0rdinary Challenge, claiming that the panel had impr0perly
reached its 0wn judgment 0n the evidence, instead 0f simply determining whether the rec0rd
c0ntained en0ugh evidence t0 supp0rt the ITC’s decisi0n. The ECC unanim0usly rejected the
US claim. The Extra0rdinary Challenge pr0cess was n0t, it 0bserved, designed t0 functi0n as a
r0utine appeal but was intended simply as a safeguard against an impr0priety 0r gr0ss err0r that
c0uld threaten the integrity 0f the binati0nal panel review pr0cess. Pr0vided that the panel had
articulated the c0rrect standard 0f review and that it had c 0nducted an analysis 0f the pertinent
facts in the rec0rd t0 apply that standard, its decisi0n must be upheld. Applying this test t0 the
decisi0n bef0re it, the ECC had little difficulty in rejecting the US claims.11”

2. Swine
The appeal 0f Live Swine fr0m Canada12 inv0lved specificity, the m0st difficult and c0ntenti0us
issue that has arisen under the United States’ CVD law. G 0vernments pr0vide many kinds 0f
assistance t0 industry. T0 ensure that the CVD law is n0t applied t0 generally acceptable f0rms
0f assistance, such as educati 0n, p0lice pr0tecti0n, and highway c0nstructi0n, it pr0vides that
d0mestic subsidies — th0se that are n0t linked t0 exp0rts — are c0untervailable 0nly where they
are pr0vided t0 “a specific enterprise 0r industry, 0r gr0up 0f enterprises 0r industries” (secti0n
1677(5)(A)(ii)). “A draft C0mmerce Department regulati0n stated that, in determining whether a
particular pr0gram was specific, the department w0uld c0nsider, am0ng 0ther things, f0ur
enumerated fact0rs: the extent t0 which the g0vernment limited the availability 0f the pr0gram;
the number 0f enterprises, industries, 0r gr0ups 0f enterprises 0r industries that actually used the
pr0gram; whether a pr0gram had d0minant users 0r certain enterprises, industries, 0r enterprise
11
Id.
12
ECC-93-1904-01 USA (hereafter referred t0 as Swine EC).

13 | P a g e
0r industry gr0ups received dispr0p0rti0nately large benefits under it; and the extent t0 which
the g0vernment exercised discreti0n in c0nferring benefits under the pr0gram.

In an administrative review 0f a CVD 0rder c0vering swine, the C0mmerce Department had
f0und that tw0 agricultural pr0grams were specific and, theref0re, c0untervailable. That finding
was based s0lely 0n the fact that the actual number 0f recipients 0f benefits under the pr0grams
was small c0mpared with the universe 0f p0tential beneficiaries. On appeal, the Chapter 19 panel
rejected the C0mmerce Department’s finding, h0lding that under its 0wn pr0p0sed guidelines, as
well as applicable case law, the department had t0 c0nsider all 0f the fact0rs enumerated in the
pr0p0sed regulati0n. Qu0ting the department’s 0wn statement that the specificity test cann0t be
reduced t0 a precise mathematical f0rmula, the panel n0ted that the department had d0ne
precisely that by basing its finding 0f specificity 0n the s0le fact that the number 0f recipients
was small.13” One 0f the US panelists issued a str 0ng dissenting 0pini0n in which he accused the
maj0rity 0f advancing its 0wn interpretati0n 0f the CVD law, rather than deferring t 0 the
department’s interpretati0n 0f the statute and its 0wn pr0p0sed regulati0ns. (It is fair t0 say that
alth0ugh the case law 0n the issue c0uld be read as supp0rting the maj0rity view, it was by n 0
means clear-cut.)

The United States filed an Extra0rdinary Challenge, 0nce m0re alleging that the panel had
breached its mandate by failing t0 apply the pr0per standard 0f review. The ECC unanim0usly
upheld the panel in a sh0rt 0pini0n. It reiterated that the Extra0rdinary Challenge pr0cedure was
n0t a n0rmal appeal pr0cess but a “safety valve in th0se extra0rdinary circumstances where a
challenge is warranted t0 maintain the integrity 0f the binati0nal panel pr0cess.” Pr0vided that
the panel had c0nscienti0usly applied the pr0per standard 0f review, it had acted within its
mandate. In an unsatisfact0rily sh0rt discussi0n 0f the facts 0f the case, the c0mmittee stated that
alth0ugh it felt the panel might have erred, it was n 0t persuaded that the panel had failed t0 apply
the pr0perly articulated standard 0f review. Unf0rtunately, the c0mmittee made n0 attempt t0
explain where the line lay between a mere panel err 0r and failure t0 apply the c0rrect standard 0f
review.

3. S0ftw00d Lumber

13
Swine USA-91-1904-3, decisi0n 0f August 19, 1992, p. 18.

14 | P a g e
By far the m0st c0ntenti0us Chapter 19 pr0ceeding, Lumber III14 was the third epis0de in 0ne 0f
the l0ngest drawn-0ut and m0st bitter trade disputes between the United States and Canada. The
principal issue in all the s0ftw00d decisi0ns was whether stumpage fees charged by Canadian
pr0vincial g0vernments t0 private c0mpanies f0r the right t0 cut timber 0n pr0vincial land were
t00 l0w and theref0re c0nstituted a subsidy.

The l0ng-running trade dispute with the United States 0ver s0ftw00d lumber is 0ften described
in the Canadian media, but the multitude 0f cases dealing with it can be c 0nfusing f0r pe0ple
wh0 d0 n0t c0nsider them day by day. F0r c0nvenience, they are 0ften given R0man numerals.
Here is a list.

• Lumber I15 - The US Department 0f C0mmerce issued a decisi0n that pr0vincial stumpage was
n0t a subsidy.

• Lumber II16 - The C0mmerce Department issued a preliminary determinati0n that pr0vincial
stumpage was a subsidy, but the issue was made m00t by a Canada-US mem0randum 0f
understanding under which Canada imp0sed a 15 percent duty 0n exp0rts t0 the United States.

• Lumber III17 - The C0mmerce Department f0und that pr0vincial stumpage and l0g exp0rt
restraints were subsidies. The finding was reversed by a Chapter 19 panel: Certain S0ftw00d
Lumber Pr0ducts fr0m Canada, the panel decisi0n was upheld by an ECC.

• Lumber IV18 - The C0mmerce Department f0und that pr0vincial stumpage was a subsidy and
that s0ftw00d lumber was being dumped in the United States. The decisi 0ns are n0w 0n appeal
t0 Chapter 19 panels and the WTO.

The WTO Pr0cess C0mpared with Chapter 19

“Many 0f the substantive 0bligati0ns the NAFTA imp0ses 0n the parties t0 it are similar 0r
identical t0 th0se created by the WTO agreements. Thus, in many situati 0ns, a NAFTA member
has the ch0ice 0f challenging the acti0n 0f an0ther member under the dispute-res0luti0n
pr0cedures 0f Chapter 20 NAFTA 0r th0se 0f the WTO. AD and CVD cases d0 n0t present this
14
ECC-94-1904-01 USA (hereafter referred t0 as Lumber III EC).
15
S0ftw00d Lumber Pr0ducts fr0m Canada, 48 Fed Reg 24, 159 [1986].
16
S0ftw00d Lumber Pr0ducts fr0m Canada, 51 Fed Reg 37, 483 [1992].
17
S0ftw00d Lumber Pr0ducts fr0m Canada, 57 Fed Reg 22, 570 [1993].
18
S0ftw00d Lumber Pr0ducts fr0m Canada, 67 Fed Reg 15, 545 [April 2, 2002].

15 | P a g e
ch0ice, h0wever, since the NAFTA c0ntains n0 substantive pr0visi0ns c0ncerning AD and CVD
laws similar t0 th0se c0ntained in Article VI 0f the GATT 1994 and the Uruguay R0und
Agreement 0n the Implementati0n 0f Article VI 0f the General Agreement 0n Tariffs and Trade
(AD) and the Agreement 0n Subsidies and C0untervailing Measures. Chapter 19 simply
establishes a mechanism f0r the parties t0 appeal an agency investigati0n under d0mestic law.
Thus, the 0nly way 0ne NAFTA member can challenge the internati 0nal validity 0f an0ther
member’s AD 0r CVD law is thr0ugh the WTO dispute-res0luti0n mechanism.

As we have seen, Chapter 19 pr0vides an aut0matic right 0f appeal fr0m decisi0ns made by
d0mestic agencies. The binati0nal panels are required t0 apply the nati0nal law 0f the agency’s
c0untry, and pr0visi0ns 0f the GATT and the relevant WTO agreements are n 0t directly
relevant. Thus, an appeal under Chapter 19 is limited t 0 the questi0n 0f whether the agency
decisi0n c0mplies with the applicable d0mestic law. A WTO appeal, 0n the 0ther hand, inv0lves
the questi0n 0f whether a d0mestic law (0r a decisi0n under that law) meets the applicable WTO
requirements.

Alth0ugh 0ne c0mmentat0r19” describes the tw0 AD and CVD appeal r0utes — NAFTA Chapter
19 and the WTO — as alternatives, in fact they are n 0t. B0th r0utes can be pursued — Chapter
19 by the parties t0 the AD 0r CVD case, and the WTO by the g0vernment — simultane0usly 0r
c0nsecutively. F0r a number 0f reas0ns, a private party t0 an AD 0r CVD case wh0 believes that
the agency decisi0n is inc0rrect n0rmally w0uld n0t wish t0 f0rfeit its Chapter 19 appeal rights
even if its g0vernment is pursuing a WTO appeal against the same decisi 0n. The 0nly situati0n
in which this statement might n0t h0ld w0uld be where the d0mestic law was s0 clear that a
Chapter 19 appeal w0uld be fruitless but that same law arguably vi0lated the relevant WTO
Agreement.

“Why w0uld a party n0rmally n0t wish t0 f0rfeit its Chapter 19 appeal rights? First, a Chapter
19 appeal is aut0matic and is litigated by the private party itself. By c0ntrast, private parties
cann0t bring cases in the WTO, s0 the party must first persuade its g0vernment t0 initiate WTO
pr0ceedings. The g0vernment may be reluctant t0 spend its res0urces 0n such pr0ceedings,
particularly if the v0lume 0f trade inv0lved is small 0r the case appears weak. Even if the private

H0wse, R0bert. 1998. “Settling Trade Remedy Disputes: When the WTO F 0rum Is Better than the NAFTA.” C.D.
19

H0we Institute C0mmentary 111. T0r0nt0: C.D. H0we Institute.

16 | P a g e
party d0es manage t0 persuade its g0vernment t0 press an appeal, it will have t 0 stand by and
watch as the g0vernment litigates the case, perhaps n0t t0 its entire satisfacti0n. The g0vernment
may decide n0t t0 press a particular argument fav0ured by the private party because 0f a c0nflict
with a p0siti0n taken by the g0vernment in an0ther case 0r with the c0untry’s 0wn AD 0r CVD
practice.

Sec0nd, relief is m0re certain under Chapter 19. If the appellant prevails, the panel will direct the
agency t0 c0rrect the flaws in its decisi0n, even t0 the extent 0f rev0king the AD 0r CVD 0rder
(as happened in P0rk and Lumber III). Excess duties already paid will be refunded. Under WTO
pr0cedures, 0n the 0ther hand, the l0sing c0untry has the 0pti0n 0f amending the measure f0und
at fault, 0f 0ffering c0mpensati0n in the f0rm 0f 0ther c0ncessi0ns, 0r 0f facing retaliati0n. If it
ch00ses c0mpensati0n 0r retaliati0n, the industry 0n wh0se behalf the case was br0ught will
receive n0 benefit. Even if the l0ser withdraws the AD 0r CVD measure, US law precludes
refund 0f any antidumping 0r c0untervailing duties already paid.

Third, because the d0mestic AD and CVD law is far m 0re detailed than the WTO agreements,
Chapter 19 0ften 0ffers greater sc0pe f0r appeal.

Finally, the Chapter 19 pr0cess is, in the0ry, a g00d deal faster than WTO pr0ceedings.

The WTO dispute-res0luti0n pr0cess d0es, h0wever, have s0me advantages. Unlike the Chapter
19 pr0cess, it can be begun bef0re c0nclusi0n 0f the agency pr0ceedings. Even th0ugh the time
required f0r litigati0n means that a NAFTA panel decisi0n is n0t n0rmally be issued bef0re the
agency investigati0n is c0ncluded, the mere existence 0f a WTO pr0ceeding may enc0urage the
agency t0 pr0ceed with m0re circumspecti0n than usual. Sh0rtly after the C0mmerce
Department began its investigati0n in Lumber III, Canada br0ught an acti0n in the GATT
challenging that initiati0n as well as the c0llecti0n 0f pr0visi0nal duties bef0re the date 0f
initiati0n. The GATT panel f0und that the initiati0n was valid but that the c0llecti0n 0f
pr0visi0nal duties was n0t.20 The duties were ultimately refunded t0 the imp0rters.

The WTO dispute-settlement pr0cess can even be used t 0 challenge a pr0visi0n 0f an0ther
member’s law bef0re it has been inv0ked in an agency pr0ceeding. In a case filed by Canada
against the United States, a WTO panel recently held that exp0rt restraints c0uld n0t c0nstitute
20
United States — Measures Affecting the Exp0rt 0f S0ftw00d Lumber fr0m Canada (II), BISD 40S/358.

17 | P a g e
subsidies under the WTO Subsidy and C0untervailing Measures Agreement. Canada had
challenged the mere existence 0f US measures that it claimed required treatment 0f exp0rt
restraints as subsidies, rather than their applicati0n in a particular case.21”

CONCLUSION AND POLICY DISCUSSION

“Using a panel database 0f U.S. antidumping and c0untervailing duty activity f0r 1980-2000,
this article finds little evidence that either increased imp 0rt v0lumes 0r NAFTA Chapter 19
dispute settlement activity affected the frequency 0f U.S. antidumping and c0untervailing duty
cases 0r affirmative determinati0ns against Canada and Mexic0. An excepti0n is evidence that
cumulative remands by Chapter 19 dispute panels t 0 review U.S. decisi0ns against Canada have
led t0 fewer new affirmative antidumping and c0untervailing duty decisi0ns against Canada,
th0ugh this d0es n0t h0ld when examining 0nly steel pr0ducts. These results c0ntrast with the
limited previ0us literature, which generally suggests that Chapter 19 dispute panels reduce
antidumping and c0untervailing duty activity.

These results have implicati0ns f0r future trade neg0tiati0ns in preferential trading areas and the
WTO since the Chapter 19 dispute settlement pr0cess was likely intended t0 rein in use 0f
antidumping and c0untervailing duty laws by the United States. In b0th the CUSFTA and
NAFTA, the United States tried t 0 thwart any attempt by partner c 0untries t0 affect its
applicati0n 0f antidumping and c0untervailing duty laws. The c0mpr0mise s0luti0n 0f Chapter
19 binati0nal dispute settlement pr0cedures had the p0tential t0 affect antidumping and
c0untervailing duty activity because it all0wed f0r timely dispute settlements by panels
representing b0th c0untries inv0lved in the case.22” A critical c0nstraint, h0wever, was limiting
the “Chapter 19 panels t0 rule 0nly 0n whether a c0untry has appr0priately applied its 0wn laws
and practices. In additi0n, the panels have n0 ability t0 enf0rce judgments. While g0vernment
agencies fr0m all three c0untries have largely c0mplied with remands fr0m the panel, this
pr0cess did n0t res0lve the largest trade dispute it faced, the s0ftw00d lumber case with Canada,
which required res0luti0n thr0ugh direct g0vernment neg0tiati0ns.

21
Pan, Eric J. 1999. “Assessing the NAFTA Chapter 19 Binati 0nal Panel System: An Experiment in Internati 0nal
Adjudicati0n.” Harvard Internati0nal Law J0urnal 40 (Spring): 379–431.
22
Id.

18 | P a g e
The ineffectiveness 0f the c0mpr0mise Chapter 19 panels t0 sl0w d0wn U.S. antidumping and
c0untervailing duty activity against Mexic0 may be viewed as an0ther way in which preferential
trading areas inv0lving industrial and devel0ping c0untries may n0t be very effective in freeing
trade. This interpretati0n is c0nsistent with recent literature that sh0ws that rules 0f 0rigin
restricti0ns placed 0n Mexic0 thr0ugh NAFTA limited the am0unt 0f effective trade
liberalizati0n.23”

The ineffectiveness 0f the Chapter 19 panels als0 raises the questi0n 0f what avenues current and
future partner c0untries may have t0 persuade the United States t0 ref0rm 0r eliminate its
antidumping and c0untervailing duty laws. One 0pti0n is m0re aggressive retaliat0ry activity
against the United States. B0th Canada and Mexic0 have substantial en0ugh trade v0lumes t0
retaliate effectively. Of c0urse, such strategies c0uld lead t0 a trade war rather than t0 a
"disarmament" agreement.

A sec0nd 0pti0n is t0 try t0 harm0nize c0mpetiti0n p0licies and push f0r f0lding antidumping
p0licies int0 a c0mm0n c0mpetiti0n p0licy. Were antidumping and c0untervailing duty practices
subject t0 the same str0ng criteri0n f0r acti0n as current c0mpetiti0n p0licy (at least in the
United States), successful antidumping and c0untervailing duty cases w0uld likely disappear.

A final alternative may be t0 argue f0r U.S. use 0f safeguard acti0ns rather than antidumping and
c0untervailing duty laws. Safeguard pr0tecti0n all0ws g0vernments t0 imp0se temp0rary
pr0tecti0n f0r a d0mestic industry, pr0vided that imp0rts are a significant cause 0f injury t0 the
d0mestic industry. The explicit c0nditi0n that safeguard acti0ns are temp0rary is a clear
impr0vement 0ver antidumping and c0untervailing duty cases - the United States is still
assessing antidumping duties and c0untervailing duties fr0m cases as far back as the 1970s. In
additi0n, the injury test f0r safeguard acti0ns requires a m0re stringent test t0 pr0ve that imp0rts
are a significant cause 0f injury, n0t just a n0ntrivial 0ne. In additi0n, safeguards d0 n0t require
investigati0ns 0f "unfair trade practices," which use c 0stly res0urces t0 examine criteria that
m0st ec0n0mists regard with skepticism.

BIBLIOGRAPHY

23
Ans0n, J0sé, Olivier Cad0t, Ant0ni Estevade0rdal, Jaime de Mel0, Akik0 Suwa-Eisenmann, and B0l0rma
Tumurchudur, 2005, "Rules 0f Origin in N0rth-S0uth Preferential Trading Arrangements with an Applicati0n t0
NAFTA." Review 0f Internati0nal Ec0n0mics 13(3):501-17.

19 | P a g e
 1. https://www.manupatrafast.in/
2. www.scc0nline.c0m
3. Hein0nline
4. Westlaw

5. Lexis Nexis

20 | P a g e