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Presentation on: Regulating Import Competition & Unfair Trade

Presented By Swati Verma Roll No: 2GB1-18 T.Srikanth Roll No:2GB1-15

Safeguard against injury

A country takes legal action to protect a domestic country by granting import relief. Safeguards include temporarily increasing tariffs, importing quotas or other lawful methods.

The GATT Escape Clause

Authorizes a Country to take temporary corrective action to adjust import levels of a certain product and thus safeguard domestic industry.

The WTO 1994 Agreement on Safeguards

Provides that a member may apply a temporary safeguard measure to a product only if that product is being imported in such increased quantities and under such condition as to cause threat to the domestic industry. To apply a safeguard a country must first undertake an administrative investigation which includeA public hearing-importer, exporter . Other interested parties .

Global Safeguards:

Safeguards applicable to WTO member countries. Safeguards are imposed on import of specific products regardless of the country of origin.

Limits on the use of Safeguards

Used only until the problem is resolved May not exceed 4 yrs. Imposing safeguard on a product can only be done without discrimination Preferred safeguard- Tariffs Safeguard can only be applied to imports from developing countries if a particular country is supplying more than 3 % of the total imports of that products

Safeguards against injury under U.S Law

Standard for import relief- under U.S law import relief can be granted when an article is being imported into the U.S in such increased quantities as to be a substantial cause of serious injury thereof to the domestic country producing an article directly competitive with the imported article ITC Safeguard Investigation-factors the commission should consider are a significant idling of productive facilities in the industry The inability of firm to operate at a reasonable profit Unemployment in the industry Growing inventories A decline in sales, market share, production, wages A firm inability to generate capital for plant & equipment for R&D An actual increase in market share held by imports

Available remedies under U.S Law

Tariff increases, subject to a maximum increase of 50% Tariff-rate quotas, which allows a certain no. of articles to be imported Absolute quotas Quotas administered through the auctioning of import licenses Negotiated agreement with foreign countries that limit their exports to the U.S Trade adjustment assistance for the domestic industry

Trade adjustment assistance

Workers who become unemployed as a result of increased imports of foreign goods may be entitled to federal Trade adjustment assistance (TAA). Petition for TTA are filled with U.S Dept. of Labor

Unfair Import Laws: Dumping & Antidumping Duties

Dumping is the unfair trade practice of selling goods in a foreign country for less than the price charged for the same goods in the producers home market. The original GATT agreement has prohibited dumping since 1947 It has been illegal in U.S since 1916

Antidumping duties
Antidumping laws are designed to correct an unfair trade practice and not to protect domestic companies

The WTO Antidumping agreement

The GATT provision on dumping are found in GATT 1994 Article VI & in 1994 WTO Antidumping agreement The agreement requires that an importing country resort to antidumping duties only after conducting a formal investigation to determine both the amount of the dumping & the extent of material injury

Federal agencies for investigation in U.S

1.International trade administration: The ITA of U.S Dept. of Commerce determines whether the merchandise has been sold in the U.S at a price less than its normal value. 2.International trade commission: Determines whether this has caused a material injury to U.S producers of like products.

Unfair import laws:subsidies & countervailing duties

Subsidies are financial contribution conferred by govt. to a domestic firm to achieve some economic or social objective. Also encourage private industries to embark on commercial ventures. Countervailing duty (CVD) is a special tariff, in addition to the normal tariff, imposed on import of subsidized goods in an amount equal to the amount of the countervail-able subsidy.

WTO Agreement on subsidies & countervailing measures

A WTO member country may appeal to the WTO for dispute resolution. An importing country may initiate its own administrative proceedings, similar to antidumping proceedings, to impose a countervailing duty on the subsidized goods in order to eliminate unfair price advantages.

GATT 1994 provides for three types of subsidies:

1. Prohibited subsidies It includes import substitution or export subsidy Both of these are completely prohibited under WTO rules. Countervailing duties may be imposed on export subsidies through administrative or legal proceedings in the importing country.

2. Domestic subsidies:
These are generally permissiable as a part of the legitimate responsibility of govt. to direct its industrial growth & fund social programmes. But some domestic subsidies give adverse effect to domestic firms.

Remedies for adverse effect of domestic subsidies

Adverse effect subsidies are actionable at the WTO only if they: Cause injury to a domestic industry of another WTO member country. Cause nullification & impairment of rights to a member country under GATT agreement. Cause serious prejudice to another member.

3. Nonactionable or socially beneficial subsidies: Socially beneficial subsidies are not actionable under WTO rules & are not counterviable if they meet the requirement of the WTO agreement They include: Certain subsidies granted to industry for expanding knowledge through R&D, provided they do not directly give an unfair competitive advantage to exported products. Certain subsidies to poor, depressed, or unemployed geographic region. Certain subsidies granted on a one time basis to help companies meet costly environmental or antipollution regulations.

Thank You!