Question

What is a countervail case? What is an anti-dumping case? Discuss the

circumstances under with each can be initiated by a government. How were

these implemented in the United States before and after the negotiation of the

Canada-US Free Trade Agreement and the NAFTA?

Answer 1

In cases where foreign producers seek to subsidize the products they sell and cause domestic production to suffer as a result of a change in domestic demand to cheaper imported goods, the government makes payment of a countervailing duty on the importation of such goods into the domestic economy compulsory. It raises the price of these goods contributing to the quality and profitability of domestic goods again. Domestic businesses are therefore cushioned. Such duties may be levied under the WTO (World Trade Organization) guidelines after the investigation finds exporters involved in dumping. These are also referred to as anti-dumping duties.

An anti-dumping duty is a protective tariff levied on foreign imports by a domestic government which it claims is sold below fair market value. Dumping is a mechanism in which a business sells a commodity at a lower price than the price usually paid on its own home market. Some countries impose strict duties on goods that they claim are dumped on their domestic market to cover, weakening local businesses and markets.

In the United States, the International Trade Commission (ITC), an independent government agency, imposes anti-dumping duties based upon investigations and recommendations from the Department of Commerce. Duties often exceed 100% of the value of the goods. They come into play when a foreign company is selling an item significantly below the price at which it is being produced. Part of the logic behind anti-dumping duties is to save domestic jobs, but they can also lead to higher prices for domestic consumers and reduce the international competition of domestic companies producing similar goods.

Canada, Mexico and the United States retain the right under NAFTA to apply their anti-dumping and countervailing duty laws to goods imported from another NAFTA nation. The Agreement also sets up a framework for separate binational commissions to review regulatory authorities in each country's final anti-dumping and countervailing duty determinations. Private parties wishing to contest an administrative decision affecting a NAFTA country's products may demand the establishment of a tribunal. In such cases, in the country where the administrative decision was made, the committee process would replace domestic judicial review.

A binational panel will decide whether the antidumping or countervailing determination was made in accordance with the domestic law of the importing country. If a binational panel finds that an error was committed in the antidumping or countervailing determination, it may send the decision back to the appropriate government agency for correction. Decisions by a panel are binding and cannot be appealed to a domestic court. In addition, the Agreement establishes safeguard mechanisms designed to guarantee the integrity of the panel process.