In an article entitled The Offsetting Duty Norm and the Simultaneous Application of Countervailing and Antidumping Duties, economist Brian Kelly writes about the economics of overlapping AD/CVD measures. From the abstract:
World Trade Organization (WTO) members have long expressed a norm concerning the trade “remedies” of countervailing (anti-subsidy) duties and antidumping duties: that these measures offset the behavior that gives rise to them, restoring trade to a “level playing field.” The WTO agreements provide that the duties imposed should be calculated accordingly, that countervailing duties are measured against subsidies and anti-dumping duties are measured against the excess of a benchmark “normal” value over export price. This paper makes two principle contributions in light of this norm. First, it develops formal models of antidumping and countervailing duty actions conforming to the offsetting duty norm. Economists have often shown little patience with the rationale for these duties, leading to a dearth of formal analysis that takes into account the social welfare function—the offsetting duty norm—incorporated in the WTO agreements; the formal models here provide that analysis. Second, the paper extends this analysis to the simultaneous prosecution of countervailing and antidumping cases. Once rare, simultaneous countervailing and antidumping duty proceedings have become perhaps the most prominent expression of trade protection permitted under WTO rules. The analysis establishes the conditions to identify any overlap in the application of countervailing and antidumping measures and demonstrates that recent practice of WTO members has created excessive application of duties. The analysis also provides the methods for preventing this double-count in simultaneous cases. These results have direct application to current policy debates.
From the conclusion:
The modeling exercise demonstrates that the simultaneous prosecution of CVD and AD cases requires care to prevent an excess assessment of duties. The excess assessment is not an artifact of the full pass-through assumption of the offsetting duty norm. Rather, to the extent that the border price effect of the subsidy is addressed by the countervailing duty, the antidumping duty will lead to an excess assessment if the subsidy’s impact on export price, or on normal value, is ignored. Strikingly, correctly done, simultaneous CVD and AD proceedings can lead to duties that offset the level of trade transgression exactly when either the CVD or AD, taken alone, does not do so.
