He doesn't like it. Here's one part of why:
The following is a fair summary of the AB decision.
Domestic subsidies when used to reduce export price will, unless they also produce a lower normal value calculation, increase the recipient’s dumping margin and be offset by higher antidumping duties. It would be improper to separately offset such domestic subsidies through countervailing duties imposed on top of the (higher) antidumping duties. In NME cases, where domestic subsidies cannot affect normal value, it is therefore essential to know whether domestic subsidies have been used to reduce export price. Accordingly, when conducting simultaneous AD/NME and CVD investigations, administering authorities are obliged to do two things they are not normally accustomed to doing:
- Ascertain not only whether/to what extent dumping occurred during the POI, but also why it occurred (what role domestic subsidies played in the pricing of exports); and
- Ascertain how domestic subsidies were used, at least to the extent of understanding whether the recipient company reduced its export prices in a way that would not have happened in the absence of domestic subsidization.
Every step of this finding is problematic.
First, there is no logical reason why the principle announced by the AB would be limited to the NME setting. Insofar as it even makes sense to speak of “using domestic subsidies to reduce export price,” a ME producer is every bit as likely to engage in the tactic. And the regular (ME) antidumping methodology does not yield a normal value that is lower in the presence of domestic subsidies – certainly not in a systematic or dollar-for-dollar sense.[FN 2] So, if it is improper in the simultaneous AD/CVD scenario to offset through countervailing duties domestic subsidies which have been used to reduce export price, it is always improper. And if it is therefore necessary to understand the role of domestic subsidies in generating dumping margins, it is always necessary.
Second, there is a reason why administering authorities do not ask, and why the multilateral rules have never required them to ask, how domestic subsidies were used or why dumping occurred. These things are – at least for practical purposes, and within the tight timelines imposed on AD/CVD proceedings – unknowable. If a single person (say a grocery store clerk) got a raise, an extra $50 per paycheck over the course of a full year, would it be possible to say later how she used the extra money? Most likely every category of her spending (and saving if she is a saver) would have increased in some small proportion. It is no different when a producer receives domestic subsidies. Is there new machinery? It might have been purchased anyway. Did export prices change? A million other things (one obvious candidate being market conditions in the importing country) might have prompted that. The problems of investigation, and of proof, when it comes to connecting subsidies to later corporate behavior, would be insurmountable in any sort of investigation, let alone the time-constrained setting of an AD/CVD investigation.
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[FN 2] The AB apparently disagrees (see fn. 519, citing Panel Report at fn. 972), but does not explain why; it simply asserts: “in the context of domestic subsidies granted within market economies …, both the normal value and the export price will be lowered as a result of the domestic subsidy ….” The assumptions underlying this statement are not just debatable; they are almost certainly wrong. That the Panel had indulged the same wrong assumptions is no excuse for the AB doing so in such a momentous decision.
What implications do the Appellate Body's double remedies findings have for investigations involving market economy (ME) respondents? Is John right that the reasoning of this case applies to all cases, including those where there is no NME issue? Are we likely to see future WTO complaints that address this issue? How would the Appellate Body apply the reasoning of the DS379 case in the ME situation?
