I promised a litte while ago that I would offer a bit of substance on the issue of concurrent AD/CVD investigations and "double remedies." It's a complicated issue, so anyone working on these cases who knows more than I do should feel free to point out any flaws in my analysis. Let me start with some general background.
For the most part, AD and CVD cases are completely separate. Generally speaking, a case is brought against imports under either domestic AD law (targeting dumping) or domestic CVD law (targeting subsidies), but not both. However, on occasion there are cases brought against alleged subsidies and dumping in relation to the same imported product. Where this happens, the issue arises as to whether "double remedies" -- one for dumping and one for subsidies -- are being applied in relation to what is, in essence, the same concern. The subsidies and the dumping may be completely unrelated, in which case there is no problem with imposing a remedy for each. However, it may also be that the subsidies at issue have led to the dumping. If this is the case, imposing two remedies could be said to "double count" the trade harm.
To illustrate this, let me use a simplified example. Imagine there is a dumping calculation where export prices are being compared to home market prices (the way it is often done). Let's say that, as a result of the subsidy, the recipient has lowered the export price (the subsidy allows it to do so by compensating for the lost revenues arising from the lower price). This lower price can lead to a finding of dumping (because the export price is now lower in relation to the home market price). Arguably, in this situation, if remedies are applied in response to both the subsidy and the dumping, a single activity is being targeted.
In practice, avoiding such double counting can be difficut. The relationship between subsidies and dumping may be complex and varied, such that determining whether subsidies lead to dumping, and thus whether the problem of double-counting arises, is complicated. Subsidies can be used in various ways by the recipients. Certainly one use is to lower the price of the product. However, other uses are possible as well. For example, it may be that a producer keeps the price the same and uses the subsidy to invest in new equipment so as to improve quality.
The type of subsidy involved is also an important consideration. Export subsidies are designed to help exports, so it may be more likely they will lead to a lower export price than would domestic subsidies. However, it is not clear that export and domestic subsidies have such different effects that they should be treated as completely separate categories. It may be that export subsidies are more likely than domestic subsidies to lower the export price. But it is possible that export subsidies would not be used for this purpose, and it's also possible that domestic subsidies would. Thus, presuming that export subsidies always lead to dumping, whereas domestic subsidies never do, may not make sense. Instead, it may be better to require trade remedy authorities to examine the link between subsidies and dumping in each specific case. Where the subsidies are found to result in the dumping, no double-counting would be permitted. By contrast, if the dumping exists separate from the subsidies, remedies could be imposed on each.
With this general background in mind, I now turn to the relevant WTO law (well, one part of it, anyway). As noted in an earlier post, GATT Article VI:5 provides: "No product of the territory of any Member imported into the territory of any other Member shall be subject to both anti-dumping and countervailing duties to compensate for the same situation of dumping or export subsidization." Thus, under this provision, double remedies cannot be applied to the "same situation" of dumping and export subsidies, perhaps indicating an assumption by the drafters that export subsidies lead to dumping. There is no similar provision excluding double remedies for domestic subsidies and dumping.
However, given the earlier discussion of how domestic subsidies could lead to dumping, the question arises as to whether there is some general principle that might prohibit double counting in the domestic subsidy context. It certainly seems unfair, in some general sense, to allow authorities to impose remedies on both subsidies and dumping where the subsidies have led to the dumping. But it is difficult to fit this concern within a specific WTO obligation, and the explicit prohibition in relation to export subsidies makes the argument difficult. It may be that GATT Article X:3(a) could play a role here. This provision states: "Each Member shall administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions and rulings of the kind described in paragraph 1 of this Article." This obligation to administer domestic laws in a uniform, impartial and reasonable way may require Members to take some actions to avoid double counting in situations involving domestic subsidies.
With regard to export subsidies, the earlier discussion suggests that they may not always lead to dumping. In this regard, perhaps the "same situation" language in Article VI:5 could be interpreted to mean that authorities must determine, in each case, whether the subsidies have actually led to lower export prices. That is, it is only where it has been shown that the export subsidies have led to the dumping that the "same situation" of subsidies and dumping exists.
Bringing this general discussion back to the cases at hand (the WTO case and the CIT decision), it is worth mentioning that in the proceedings at issue, all of these issues arise in the context of the treatment of non-market economies (NMEs) under U.S. CVD law. Until recently, CVD law was not applied to NMEs. However, this situation changed in 2007 when the Department of Commerce reversed its prior policy. There may be special considerations that apply to all of these issues due to the fact that the economy in question is an NME. This issue raises a number of considerations, one of which is that it can be particularly difficult to relate subsidies to dumping in an NME, as the market distortions make it hard to be precise about the dumping calculations.
As a final point, it will be interesting to watch the overlap between the WTO decisions and the U.S. court decisions. They are likely to reference each other, and it will be worth watching how each body discusses the other, and also the substantive path each takes.
