Zeroing's Zombies, ctd.

When the United States first announced that it had settled WTO disputes with the EU and Japan about the Commerce Department's use of "zeroing" in anti-dumping administrative reviews, I noted that, while the policy might be "dead," its zombies would be roaming the earth for quite a while:

[I]t looks like (i) all of the pending WTO disputes unrelated to the EU/Japan agreements will continue unabated; and (ii) foreign exporters, US importers and/or foreign governments will have to bring additional WTO challenges in order to force USTR to recalculate all the duties that were illegally calculated and collected pursuant to the zeroing methodology. And, even though WTO rules (or at least the Appellate Body's interpretation of them) are abundantly clear on the illegality of zeroing, point (ii) could, of course, cost plenty of time and money before it actually produces results. (Sorry, poor developing countries with tiny trade budgets, but you're gonna have to pay a lot and threaten us before we correct our errors!)

Since that time, DOC issued its Final Rule on zeroing.  It has confirmed my initial concerns... and raised a few more, as noted in a recent Law360[$] article on the subject:

Despite a recent announcement by the U.S. Department of Commerce that it will stop using zeroing in administrative reviews of anti-dumping duties, the years-long battle over the controversial methodology is far from over, attorneys say....

[T]he notice by Commerce leaves several issues unresolved and does not completely foreclose the use of zeroing in all future cases, meaning that litigation and acrimony over the practice will continue for the foreseeable future, attorneys said.

So what are those "unresolved issues"?  Well, first, the new Commerce zeroing rule only applies on a prospective basis:

[T]he announcement by Commerce to exclude zeroing in administrative cases applied only on a prospective basis, meaning it would have no effect on duties that have already been collected based on the zeroing methodology.

“There's no possibility via the Department of Commerce for a recalculation or a refund of those duties, despite the fact that this is an admission by Commerce that what they've been doing for years and years is inconsistent with [WTO] Appellate Body decisions”....

Second, the rule doesn't actually kill off zeroing entirely because it leaves open the possibility Commerce applying the methodology in an investigation where "targeted dumping" is alleged:

Despite what the announcement says, it's also quite possible that Commerce will continue to use zeroing in some cases, attorneys said, because the U.S. has taken the position that the use of zeroing is acceptable in cases of so-called “targeted dumping.”

Targeted dumping is when a company is not dumping its products in the U.S. overall, but is instead dumping its products in a specific region or during specific time periods. For instance, if a company were selling its products at less than fair value in the southwest U.S., but at more than fair value in the northeast, it would be engaged in targeted dumping....

I first discussed Commerce's newfound love of targeted dumping back in 2010, and attorneys surveyed by Law360 earlier this week (including me) noted that, because this little loophole still exists (and because zeroing leads to higher anti-dumping duties), it's extremely likely that domestic petitioners will allege targeted dumping in most future AD cases.  It's also extremely likely that new domestic and WTO litigation will emerge as US importers and foreign exporters/countries challenge the zeroing methodology in targeted dumping cases (neither a WTO panel nor the Appellate Body has ruled on zeroing and targeted dumping... yet).  The outcome of such challenges isn't clear, but if past WTO rulings on zeroing in other contexts are any indication, the US will likely lose here too.  Eventually.

Third, and as I noted a couple weeks ago, Commerce's Final Rule doesn't end several WTO disputes and US court cases on zeroing that are already in progress, and it also doesn't foreclose additional disputes for anti-dumping reviews not covered by the rule (e.g., reviews just recently concluded or still in progress):

The new rule applies to all future dumping cases, but other countries that have challenged the use of zeroing could still impose retaliatory measures on the U.S. if they prevail at the WTO. While the U.S. has said it hopes the new rule will assuage the concerns those countries have about zeroing, it remains to be seen how they will respond, attorneys said....

The new rule also has no effect on the numerous cases pending in U.S. courts over the use of zeroing in past reviews, [attorney Lew] Leibowitz said.

“There are a lot of cases over duties that are tied up in litigation, and the rule doesn't speak to those,” he said. “It's up to the courts to decide if the U.S. violated U.S. laws.”

Last year, the Federal Circuit ruled in two cases that Commerce had failed to adequately explain its rationale for using zeroing in administrative reviews, but not in original investigations.

Those cases, which are still pending, and others at the U.S. Court of International Trade each apply only to the individual investigation at issue, so litigation over the past use of zeroing is likely to go on for some time.

Well, it no longer "remains to be seen" how countries will respond to the new zeroing rule, as well as the US-Japan and US-EU Agreements.  They are going to fight, despite USTR's "hopes" that they'll just pipe down, accept the fact their companies paid millions of dollars in additional (illegal) anti-dumping duties in "old" reviews where zeroing was used, and be happy about Commerce's much-delayed (and coerced!) change of heart.  (Shocking, I know.)  Two very recent examples make this fact very clear.

First, the WTO announced on Tuesday that its Dispute Settlement Body established a panel to address Korea's January 2012 complaint against the United States' use of zeroing in anti-dumping reviews of certain Korean steel products.  The announcement shows that Commerce's Final Rule was insufficient to address Korea's concerns (emphasis mine):

Korea explained that consultations with the US, requested on 31 January 2011, allowed for a better understanding of the parties’ positions but failed to resolve the dispute. Korea noted that the US announced it would no longer use zeroing in annual reviews and welcomed the US efforts (see also disputes DS322, DS350 and DS294 below). Korea regretted that the US plans did not go far enough to fully address its concerns. Korea noted that zeroing in administrative reviews had repeatedly been found inconsistent with the WTO Anti-dumping Agreement and that the US was expected to amend the methodology accordingly.

The US said that its Department of Commerce published on 14 February 2012 a modification to its procedure regarding the use of zeroing in anti-dumping reviews. The US said that this modification would address the matter covered in Korea’s panel request. The US added that the process of modifying its methodologies to respond to DSB rulings on zeroing had been completed and, therefore, moving forward with this dispute served no purpose.

Right, "no purpose"... other than to push the United States into recalculating "zeroed" anti-dumping duties on Korean imports that would not otherwise be recalculated pursuant to Commerce's new rule.  And if you're a Korean exporter or US importer who paid those extra duties, that's a pretty big purpose, I'd say.

(The same WTO announcement also noted that Brazil is still weighing its options with respect to its complaint against the US for zeroing in reviews of Brazilian orange juice imports.  Wanna bet on what they decide to do?)

Second, the WTO separately announced that Vietnam has filed a brand new complaint against the United States related to US anti-dumping reviews of Vietnamese shrimp.  The text of the complaint isn't out yet, but reports indicate that it's a follow-up to Vietnam's successful 2010-2011 complaint against - surprise! - the United States' zeroing methodology.  The timing of Vietnam's new complaint - about a week after the publication of Commerce's Final Rule - makes clear that they, like Korea, are not going to stop litigating past US infractions just because the United States has now promised not to commit new ones.

Well, unless targeted dumping's involved, of course.

Zeroing May Be Dead, But Its Zombies Still Roam the Earth (UPDATED)

I've long lamented the United States' almost-decade-old refusal to comply with numerous WTO Appellate Body rulings (and a US appeals court decision) against the Commerce Department's "zeroing" methodology in anti-dumping investigations and reviews.  (Plenty of background here.)  DOC terminated the practice - which artifically inflates dumping margins (and thus anti-dumping duties) - in original investigations in 2007 and announced in December 2010 a "preliminary rule" intended to cease zeroing in annual reviews and 5-year "sunset" reviews.  But since 2010, there's been nary a peep from DOC with respect to the Final Rule needed to actually stop the practice and get the United States into compliance with all those adverse WTO decisions.  Thus, US exports remained vulnerable to potential retaliation from aggrieved WTO Members who had brought and won challenges to DOC's use of zeroing in reviews involving their imports, and the United States zeroing delinquency sullied its good name (stop laughing) in international trade negotiations and undermined its incessant fingerwagging about "enforcing global trade rules." 

Well, it appears that the retaliation threats (not the policy embarrassment or good will) have finally forced the US government to act:

The US has reached deals with the European Union and Japan to drop a contentious practice in its anti-dumping calculations known as “zeroing”, ending a longstanding international trade dispute in order to prevent retaliation against American products.

The agreements, signed in Geneva, will close the books on a fight that began in 2003 when the EU first filed a case against the US at the World Trade Organisation. The WTO eventually found that the “zeroing” applied by the US was in violation of global trade laws, authorising the EU and Japan, which had joined the case, to punish the US with higher tariffs on certain goods.

“We have finally put these burdensome and potentially damaging trade disputes behind us,” said Ron Kirk, US trade representative. “American farmers and businesses can invest in job-creating export markets without the uncertainty of possible trade retaliation.”

Anti-dumping measures are imposed in the event that a product is being exported at a lower price than it costs in the domestic market. But in the case of “zeroing”, a country would ignore instances in which that product was being sold at a higher price internationally than at home, which critics see as unfair and protectionist.

The full USTR press release and more background on the settlement are available here.  What caught my attention are the following passages:

Under the agreements signed today, the United States will complete the process – which began in December 2010 – of ending the zeroing practices found in these disputes to be inconsistent with WTO rules. In return, the EU and Japan will drop their claims for trade retaliation....

The United States will continue to press in ongoing WTO negotiations for affirmation that zeroing is consistent with WTO rules. Nonetheless, in these circumstances and at this time, the compliance actions announced today are important in confirming U.S. support for the rules-based system that the WTO provides. Moreover, as Ambassador Kirk explained, “the Administration is committed to vigorous enforcement of U.S. antidumping and other trade remedy laws. I am confident that we will continue to enforce these laws effectively, as was shown, for example, in our successful defense of the President’s imposition of duties on tires from China.”

The EU first requested WTO consultations with respect to zeroing in June 2003, and Japan requested WTO consultations in November 2004.  In October 2006, the EU initiated a second zeroing dispute covering additional proceedings. In each of these disputes, the WTO Dispute Settlement Body (DSB) found that the use of zeroing in certain antidumping proceedings was inconsistent with WTO rules. Detailed information may be found at www.wto.org, under dispute numbers DS294, DS322, and DS350....

After the DSB found that the United States had not come into compliance with the DSB findings, the EU and Japan made separate requests for authorizations to impose trade retaliation against the United States. These requests were referred to WTO arbitrators. The parties subsequently agreed to suspend the arbitrations to allow additional time for discussions.

Under the terms of today’s agreements, the U.S.-Japan and U.S.-EU trade arbitrations will remain suspended and will be terminated – without the issuance of awards – after the United States completes its implementation of the agreements.

The text of the bilateral agreements is not publicly available, but it would appear that USTR is signaling not only the end of zeroing in the reviews at issue in the Japan and EU disputes (via a recalculation of anti-dumping duties) but also the end of zeroing altogether.  And, indeed, word on the street is that DOC will announce in the next week or so a Final Rule terminating the practice on a prospective basis.  If so, that's good - albeit very long overdue - news. 

However (you just knew that was coming, didn't you?), beyond the seemingly interminable delay and USTR Kirk's bizarre praise for the China tires case, today's news is far from ideal.  Most notably, it appears that DOC will not recalculate duties in the hundreds of reviews in which the agency has illegally used zeroing over the last several years.  (Indeed, DOC is still vigorously defending the practice in US courts.) 

So, admittedly without seeing the bilateral agreements or DOC's Final Rule, it looks like (i) all of the pending WTO disputes unrelated to the EU/Japan agreements will continue unabated; and (ii) foreign exporters, US importers and/or foreign governments will have to bring additional WTO challenges in order to force USTR to recalculate all the duties that were illegally calculated and collected pursuant to the zeroing methodology.  And, even though WTO rules (or at least the Appellate Body's interpretation of them) are abundantly clear on the illegality of zeroing, point (ii) could, of course, cost plenty of time and money before it actually produces results.  (Sorry, poor developing countries with tiny trade budgets, but you're gonna have to pay a lot and threaten us before we correct our errors!)

Did I mention that this decision had nothing with good will and everything to do with avoiding direct retaliation against US exports?

UPDATE: A friendly commenter directed me to the text of the US-EU Agreement.  As expected, it calls for the recalculation (via a "Section 129" determination) of duties only for EU imports, as specified in the Annex.  I understand that the US-Japan Agreement takes the same approach.  Not much more in there about DOC's Final Rule, so I guess we'll have to wait until next week for that.

Tuesday Quick Hits

Work's been pretty rough these last few days, but here are some quick hits to get you through the slower blogtimes:

• "Zeroing" took yet another hit last week: this time by the Court of Appeals for the Federal Circuit, which ruled last Thursday that the Department of Commerce needs to revisit its use of the WTO-illegal methodology in antidumping annual reviews because (i) DOC had abandoned the practice in investigations; and (ii) the US government had failed to offer a good (well, any) reason for the different approach in reviews.  WorldTradeLaw.net's Simon Lester offers some good commentary on the CAFC decision, and the WSJ rightfully applauds it: "thanks to statistical sleight-of-hand, American consumers have paid billions of dollars more over the years in higher prices either because antidumping duties raised prices on imports or because those duties sheltered domestic companies from downward price competition. This was bad economics, and now it turns out it was bad law, too. The World Trade Organization has dinged Washington repeatedly for zeroing. Commerce and Congress have done their best to avoid complying, at considerable expense to American credibility abroad. Most recently, Commerce attempted to stop zeroing for new antidumping investigations while keeping the practice for existing duties, to placate both the WTO and domestic protectionists. Last week's appellate court ruling puts an end to that charade by finding that under existing U.S. law Commerce has to either zero in all cases or zero in none. Since the department has abandoned zeroing for new investigations, there's reason to hope the Obama Administration will disavow zeroing entirely instead of searching for some way around a carefully reasoned and forceful appellate ruling."  Indeed.  I'd only add that the US courts have been the last refuge of America's zeroing proponents (i.e., protectionists) and their buddies in Congress, so the CAFC's latest decision must have them squirming something fierce this week.  And that thought makes me smile.

• Politicians of both parties are lining up in support of the US-Colombia FTA - a strong signal that the Obama administration could finally send the Agreement to Congress sometime soon (everybody likes a winner!).  Dem Senators Baucus and Kerry gave the FTA a nice (albeit mercantilist) plug in a recent WSJ op-ed, and the (admittedly dwindling) New Democrat Coalition in the House fired off a letter to the President calling on him to submit all three pending FTAs asap.  Meanwhile the US business community is also upping the pressure, as this US Chamber blogpost and Caterpillar ad make clear.  Eternal optimist Monica Showalter of IBD has gleefully noticed all of this news and notes something important on Facebook: "With Obama and Santos scheduled to meet Thursday, and Santos refusing up until this point to meet Obama unless there's free trade - I think it is going to happen."  A very insightful point, and I hope she's right, but I'll believe it when I see it.  (Although this announcement re: the Canada-Colombia FTA certainly adds more pressure on the USA.) [Update: Monica has more in this new IBD editorial.]

• Speaking of that Kerry-Baucus op-ed, Cafe Hayek's Don Boudreaux gives it "two cheers," and withholds the third because of something that I've been arguing here for a long time: "A third cheer would be in order had not the senators relied upon a wholly mistaken reason to justify this particular move toward freer trade. In their essay, U.S. imports and American consumers are mentioned a total of zero times, while U.S. exports and American producers (such as farmers, firms, and workers) are mentioned 23 times.... The senators’ argument for freer trade in this particular case undermines the larger effort to persuade the public that free trade is to everyone’s long-term advantage – an advantage that is measured by increases in what we’re able to consume and not by increases in what we must sacrifice."  Exactly!!

• Cato's Ted Galen Carptenter explains why China's inevitable rise to superpower status isn't so inevitable, and why the United States has a lot to say about it.

• The Mercatus Center's Veronique de Rugy explains something I already know and have known for a few years now: the Alternative Minimum Tax sucks and should be eliminated asap.  Mind-blowing fact: "Congress created the AMT in 1969 to prevent 155 wealthy taxpayers from using deductions and credits to avoid paying any federal income taxes....  According to the Congressional Budget Office, last tax season 4.5 million taxpayers were affected by the alternative minimum tax, an increase of more than 4 million taxpayers since 1970."  Sonova...

• The WSJ Asia pens an excellent editorial on how the Japan tragedies have clearly revealed just how dependent American businesses and workers are on imports in this modern era of global supply chains.  The whole thing is worth reading, but here's my favorite passage: "Despite the fears of Japanese products a generation ago, in reality those imports have allowed America to keep its place as the world's largest economy by a country mile. We hope someone on President Obama's economic team is taking note. Trade opponents can always point to the jobs they claim trade has "cost" Americans, but it's rarer to see such an obvious example of how Americans are hurt when trade is suddenly interrupted. The point extends to imports from everywhere. American auto-industry fears over car imports from South Korea have so far helped block ratification of a Korea-U.S. free-trade agreement. That bit of politics hurts Americans who would export to Korea under the deal, but it also hurts the Americans who would benefit from Korean imports. Such as, say, small businesses that use pick-up trucks and currently face higher domestic prices and less competition thanks to a 25% tariff on imported trucks."  Amen.

• Last week USTR released its annual national trade estimate (NTE) report on foreign trade barriers.  It's never anything earth-shattering (and involves a lot of cut-and-pasting from previous years), but it's still a good place to find the next US WTO dispute or two.  (If you don't mind wading through the chaff.)

• Paul Ryan: Stud.

Now that should keep you busy until I come up for air...

Is DOC's Zeroing Announcement a Strong Hint That the US Is Getting Serious about Doha?

Last week, while most of us were buying champagnesparkling wine and taking down our Festivus poles, the US Department of Commerce quietly announced in the Federal Register that it was exploring the elimination of "zeroing" in annual reviews of US anti-dumping duty orders.  The announcement is pretty big news for several reasons, but first let's get through the basics, courtesy of the WSJ:

The Commerce Department, hoping to head off retaliation by the European Union, Japan, and other trading partners has proposed ending a controversial method of calculating penalties on trade dumping cases.

The proposal, disclosed quietly last week in the Federal Register, could resolve a long-running fight between the U.S. and several of its largest trading partners. The dispute could spill out into a broader trade battle, with the EU and Japan threatening hundreds of millions of dollars in trade sanctions against U.S. goods in retaliation.

The EU, Japan and other countries have successfully challenged the practice at the World Trade Organization.

The dispute centers on the a method of calculating antidumping duties, a type of penalty in trade cases. This type of calculation, known as "zeroing," doesn't take into account imported goods that are priced higher than domestic goods. Other countries complain the method artificially lowers the average price of the imports.

Since early 2007, the U.S. has stopped the practice in calculating new penalties, now weighing the dumped goods against high-priced imports from the same country.

But the practice of zeroing has continued in reviews of whether to keep existing duties in place, despite several WTO rulings against the U.S.

On Dec. 28, the Commerce Department issued for public comment a plan to extend the ban on zeroing to reviews and a limited number of new investigations that weren't already covered. The comment period runs through Jan. 27, but a final decision will come later, a senior Commerce Department official said....

For those of you interested (or suffering from insomnia), DOC's formal announcement is here.  I've discussed zeroing and why it's been a black mark for US trade policy several times over the last couple years.  In short, the WTO's Appellate Body (and multiple dispute settlement panels) has consistently ruled that all forms of zeroing are inconsistent with WTO rules because zeroing leads to dumping margins (and duties) that are higher than the actual level of dumping; yet DOC continues to zero in administrative reviews and has made no efforts, until now, to change the practice.  Thus, WTO Members continue to bring new WTO cases (which the US continues to fight and lose), and, armed with adverse WTO rulings authorizing retaliatory tariffs against the US, they keep threatening to impose steep tariffs on US exports until DOC stops the WTO-illegal practice.  Moreover, the artificially (and illegally) inflated dumping margins caused by zeroing lead to higher tariffs on subject imports, thus making those goods more expensive for American consumers.  And finally, the United States' consistent refusal to comply with adverse WTO rulings on zeroing undermines its credibility at the WTO and provides other nations with an excuse to shirk their own WTO obligations (including those with respect to US exports).  It's a classic case of what I like to call "bad trade parenting": do as I say, not as I do, WTO Members.

Given all of this, it's obvious why DOC's announcement is pretty big news, and any final DOC rule that ends zeroing would be a very welcome development (although probably not the end of zeroing altogether).  The United States' obduracy on zeroing (i) wastes government resources through pointless and embarrassing WTO litigation that the US always loses; (ii) illegally raises anti-dumping duty rates on subject imports (and thus the prices that American businesses and families must pay for those and other like products); (iii) threatens US exporters with WTO-sanctioned retaliation in important foreign markets; and (iv) undermines US credibility on the global stage.  Thus, US efforts to end zeroing should be applauded, and they should scare the bejeezus out of the domestic industries and unions that have relied on zeroing to unfairly tilt the playing field in their favor (at American consumers' expense, natch).

Yet DOC's zeroing notice is big news for another reason: it could be further proof that the Obama administration is getting serious about concluding the WTO's Doha Round this year.

As I've noted previously, zeroing is one of the most contentious "lesser issues" (i.e., issues other than farm subsidies and industrial tariffs) in the Doha Round.  The debate on zeroing takes place as part of the Round's negotiations on "rules" (i.e., WTO disciplines on anti-dumping, subsidies and countervailing measures, and safeguards), and the United States has been fighting (with almost every other WTO Member) to amend the WTO Anti-Dumping Agreement such that it expressly permits zeroing.  I've wildly speculated that the United States' refusal to end zeroing in annual reviews - and the resulting beatdowns USTR keeps getting at the WTO - is (among other things) part of a sneaky US strategy in the Doha Round rules negotiations.  In short, the United States, as the only country in the world that's still zeroing, has been keeping the issue ripe for future negotiation by refusing to change its policies and admit defeat.  Thus, USTR keeps getting dragged before the WTO to face an inevitable, embarrassing and much-deserved flogging just to keep the zeroing hope alive.  (Great use of taxpayer money, eh?)

And that brings me back to DOC's formal announcement that it might eliminate zeroing in annual reviews and the announcement's potential impact on the Doha Round.  Because the Round is a "single undertaking," all negotiations - not just those on subsidies and market access - must be completed simultaneously.  (Although some Members have suggested that this approach be abandoned for an "early harvest" on low-hanging fruit like trade facilitation and trade in evironmental goods, this idea has thus far been rejected.)  Thus, if you want to finish the Doha Round, you need to complete all negotiations, including those on rules, which, again, are being held up by the contentious debate on zeroing.  If the US is serious about changing DOC's policy on zeroing, then it also could be quietly planning to do the same in the Doha Round, with DOC's announcement as a first sign of "good faith" on the issue.  In the WSJ article quoted above, a US official steadfastly asserts that DOC's notice has absolutely nothing to do with the Doha Round, but of course he has to say that - no sense in tipping your negotiating hand and angering constituents before it's absolutely necessary to do so, right?  Moreover, American reps at the WTO (and USTR's General Counsel) months ago hinted that a change in the United States' position on zeroing was in the works, so this move is certainly not out of the blue.  Thus, DOC's announcement could be a very strong hint that the United States is quietly angling to remove one of the larger impediments to completing the Doha Round and, more broadly, is serious about completing the Round in 2010.

AEI's Phil Levy and I recently laid out a basic roadmap of how the Obama administration could lead the renewed global charge to complete the Doha Round.  We hit on the "big issues" - farm subsidies (including those for cotton) and developing country market access.  A revised US position on zeroing would be a fantastic addition to our suggestions and could be the first signs that the President really is serious about concluding the Round in 2011.  Of course, if American labor unions and other protectionists stymie US efforts on zeroing, or if the administration thinks that its zeroing proposal alone will be sufficient to advance the Doha Round, then DOC's announcement could end up being a big fat nothingburger.

Guess we'll find out over the next few months.

UPDATE: Looks like Simon Lester over at the IELP blog is pondering the same thing (and beat me to the punch by a few hours!).  Great minds...

Changes Afoot for US Trade Remedies

Two recent developments at the United States Department of Commerce (DOC) could have rather significant implications for American manufacturers, importers and consumers.  One move strongly favors domestic manufacturers who might want government protection through US anti-dumping (AD) or anti-subsidy ("countervailing duty" or CVD) laws, while the other benefits the importers and consumers who are typically harmed by these same laws.

First up is news that the DOC has begun "zeroing" again in original AD investigations through a seldom-used form of dumping analysis called "targeted dumping."  As I've discussed many times, zeroing inflates dumping margins (and thus the remedial tariffs imposed on the imports targeted in AD investigations) and is very controversial - despite having been repeatedly ruled illegal by the WTO, zeroing is still used by the United States in annual reviews (much to the consternation of our trading partners).  The US had, however, abandoned zeroing in original investigations several years ago.  Well, DOC's new targeted dumping case - Polyethylene Retail Carrier Bags from Taiwan: Final Determination of Sales at Less than Fair Value, 75 Fed. Reg. 14569 (Mar. 26, 2010) ("Taiwan Bags") - changes that and resurrects the practice, as a good summary article by Bob LaFrankie and Alicia Winston explains:

Commerce has refused on numerous occasions and under different scenarios to fully abide by the WTO's decisions declaring zeroing unlawful. In fact, Commerce has used several legal technicalities to evade compliance with adverse WTO zeroing decisions. One such tactic has been its use of a "targeted dumping" analysis, like that employed in the Taiwan Bags decision. "Targeted dumping" is when an exporter is not dumping to all customers or during all time periods, but is instead limiting (i.e., targeting) its dumping to a specific region, time period, or customer. The theory behind a targeted dumping analysis is that an exporter can use targeted dumping on a few sales to hide or "mask" its overall dumping.

Importantly, if Commerce uses its targeted dumping methodology, it calculates dumping rates with zeroing; this calculation typically increases the dumping margins. Commerce used its targeted dumping methodology in Taiwan Bags, thereby enabling it to use zeroing to increase the exporter's amount of dumping. In Taiwan Bags, however, Commerce went a step further. In that decision, Commerce revised its targeted dumping methodology to use zeroing on virtually every sale, regardless of the extent of any actual targeted dumping. This is in contrast to its past practice of zeroing only the identified targeted sales. Through its expanded zeroing practices, Commerce appears to have essentially resumed its use of zeroing in dumping calculations without regard to WTO decisions declaring the practice unlawful.

While Commerce has used targeted dumping previously, it has never used it as broadly as was done in Taiwan Bags. This is a sharp departure from Commerce's past practice and it remains to be seen whether this new targeted dumping methodology survives any legal challenges....

It is not yet clear whether Commerce will use the Taiwan Bags targeted dumping methodology in other antidumping cases. Nevertheless, this decision provides Commerce with a potential avenue to resume its use of zeroing in virtually all new antidumping investigations in the future.... A concerted effort by Commerce to use the Taiwan Bags methodology in other antidumping cases would greatly increase the chances that Commerce would find that a company had engaged in dumping, and such an effort would likely increase overall antidumping duty rates. U.S. importers and foreign exporters should remain mindful of this possibility in future antidumping cases and be prepared to challenge both the U.S. industry and Commerce when such a methodology is used or considered.

This is something definitely worth watching over the next several months.  As you may recall, the Obama administration has repeatedly hinted that it would soon abandon zeroing in annual AD reviews.  Although they haven't officially done that yet (and thus the WTO-sanctioned retaliation threats keep mounting), it's quite odd that administration officials are proposing to close one zeroing door there, while opening a new one with the targeted dumping case here. Obvious exit question: Is this a case of crossed wires at the White House, or a cynical game of misdirection?

Next up is the "good news" for US importers and consumers.  On April 26 DOC finally completed its remand redetermination resulting from the US Court of International Trade (CIT) case, GPX International Tire Corp. v. United States, which found that DOC had illegally calculated antidumping and countervailing duties for off-road tires from China.  In its final remand results, DOC announced that it was complying with the CIT’s order (under protest) and issuing amended AD and CVD final determinations that would "offset" the CVDs against GPX’s calculated AD duty deposit rate.

This is obviously pretty complicated stuff, but the basic gist is that it's a very good development for US importers and consumers by dramatically shrinking AD/CVD duties on Chinese imports.  For those of you who are masochistic enough to want to know more, keep reading.  After an affirmative AD/CVD ruling in 2008, GPX appealed the determination to the CIT, arguing that the application of both the CVD and AD law using the Department's "non-market economy" (NME) methodology resulted in a double-counting of duties. Essentially, GPX argued that the NME AD methodology already takes subsidies into account, so anti-subsidy duties (CVDs) on subject imports that are also part of a concurrent AD investigation would result hitting those imports twice with some of the same remedial tariffs.

The CIT agreed. On September 18, 2009, CIT Chief Judge Jane Restani sided with GPX and found that DOC must account for the possibility of such double counting against the same imports or ditch the whole CVD NME thing altogether.

DOC in its remand determination reluctantly calculated revised AD and CVD rates for GOX by subtracting the CVD rate from the AD rate. In GPX's case, the AD rate for its Chinese producer (Starbright) was adjusted to include an "offset" for the calculated CVDs (14%). As a result, GPX’s AD rate was reduced from 29.93 percent to 15.93 percent.

The result of DOC's remand is pretty clear: GPX's potential import liability dropped from 44% to 30% - still a big number but a whole lot better than what they previously faced.  If the remand holds up, and if other US importers and Chinese exporters demand similar offsets, the impact could be quite a significant improvement for their bottom lines in any future AD/CVD investigation.  There are still a lot of hurdles to clear before that becomes a reality, but this is certainly a good start for them... and, of course, for US consumers.

Ok, that's it with the arcane trade remedies stuff for now.  I promise to get back to blogging on simpler and more entertaining issues tomorrow.

Friday Quick Hits: Headlines Edition

I have a lot to share, so it's headlines-only today.  Yes, yes, I know: I'm lazy.  But hey, you're still getting your money's worth in this deal.

• Koreans are big drinkers; too bad American wine faces a stupid tariff that exists only because the President is afraid to confront his base re: US-Korea FTA.

• USTR: "The KORUS FTA would be great for the US economy, but we have no timeline because, well, our administration stinks at selling free trade." 

• Japan renews its WTO request to impose almost $250 million in tariffs on US exports because of America's failure to stop zeroing in antidumping reviews.

• The EU fecklessly hid an official document showing that its biofuels policies actually harm the environment.

• AEI's Phil Levy: Europe's stupidity is making a US-China clash over currency more likely.

• WSJ's Sternberg: globalization means that RMB appreciation won't dent the US-China trade balance (via Mark Perry).

• Six reasons to repeal the capital gains tax.

• US Transportation Secretary: "A Mexican Trucking solution is 'very close.'  Yes, I know I said it was 'very near' two months ago, but can you please stop laughing at me?  Oh, come on, stop.  Please?"

• US manufacturing sector grows for the ninth straight month.

• US manufacturing sector added the most jobs in April (44,000) since 1998.

• Could Malaysia join the TPP?

• China preliminarily decides to impose countervailing duties up to 31% on US chicken exports.  No one mentions Section 421.

• The myth that is China's green energy dominance.

Friday Quick Hits

The weekend's calling, so let's get right to it:

• Someone in the administration actually knows that imports exist and aren't evil.  I've given this administration a lot of flak for its blinkered, mercantilist approach to US trade policy (and deservedly so, I might add).  But I've recently discovered evidence that at least one person working in the administration seems to get it.  The US Department of Commerce released a new study this week touting the value of  - big shock - exports to the US economy.  But buried deep in the report are actually two explicit references to the important role that imports play in the future health and prosperity of the US economy (and US manufacturing in particular).  Crazy, I know!  First, there's this on page 4: "The most important contribution of exports (and imports) to the U.S. economy is its role in increasing the industrial efficiency and standard of living of the United States."  And if that weren't exciting enough, check this out on page 8: "The growth in the ratio for goods exports was boosted by the productivity gains posted within the manufacturing sector and by the expanding—and important—role played by imports in manufactured goods."  Nice, huh?  Now, for a normal, economically-literate US administration, these two small references would not be a very big deal.  But for this White House - one whose 2010 Trade Agenda included not a single word about import benefits in almost 20 pages of text - this is a very exciting discovery.  (Now I know how Jane Goodall felt!)  So to Mr. John Tschetter (the report's author), I'd like to deliver my sincerest kudos.  I really hope that this little bit of publicity doesn't get you fired.

• Benevolent USDA agrees to screw American consumers a smidge less.  Russ Roberts over at Cafe Hayek directs our attention to little-noticed news that the USDA will increase US quotas on imported sugar by about 300,000 tons (24%) this year.  Roberts is less-than-thrilled, and rightfully so: "What [the import-quota system] actually does is enrich a handful of families at the expense of the rest of us. It is a very ugly piece of public policy."  He goes on to point out that "the world price of sugar is about 17 cents a pound. Here in the US, we pay almost 31 cents, almost double."  I've noted previously how awful US sugar policy is, and I have little to add to Roberts' astute analysis, except for this one final thought: I love how USDA is trying to spin a small increase in sugar quotas as a "good thing" for US consumers.  Yes, it's better than the current quota amount, but saying it's "good" is like saying that punching me in the groin only 3 times is "good," because you had originally planned to punch me 5 times.  Gee, thanks, USDA.

• Zombie protectionism continues to roam the earth.  Europe announced Thursday that it would resume retaliatory tariffs against the United States' use of the "Byrd Amendment."  The EU tariffs on 19 American exports will be set at 15% and will total about $96 million.  Ouch.  The EU first imposed the duties in April 2005 pursuant to the WTO's ruling that the United States’ distribution of antidumping and countervailing duties to domestic firms (instead of the US Treasury) under the Byrd Amendment (aka the Continued Dumping and Subsidy Offset Act or "CDSOA") violated WTO rules.  As I've noted previously, even though the WTO first ruled against the Byrd Amendment in 2001, and even though the US eliminated the program years ago, the duties are still being (illegally) disbursed;  Thus, countries like the EU and Japan continue to retaliate against American exporters.  The new EU sanctions will apply as of May 1, 2010.  There's been no word yet from the White House as to how exactly this boondoggle helps the President advance his new National Export Initiative (because it doesn't).

• Zeroing violates WTO rules and US law.  Speaking of US non-compliance with global trade rules, Simon Lester over at the International Economic Law and Policy blog reports on a NAFTA panel ruling that the controversial US practice of zeroing, which the WTO repeatedly found inconsistent with global trade rules, also violates US law.  I can't wait to hear how protectionist congressmen and the AFL-CIO spin this one.  Oh, who am I kidding, I know exactly how they'll spin it - by declaring the entire NAFTA panel process illegitimate, of course! 

Have a good weekend, everybody.

Wednesday Quick Hits

I wish I could say I had a lot of good news today, but, well, I'd be lying.  So let's just give today's quick hits the Band-Aid treatment and rip 'em off as fast as possible:

• Mexico, US Still Miles Apart on Trucking Dispute.  Reuters reports on something that I unfortunately forecast months ago: the US-Mexico dispute over America's NAFTA-illegal ban on Mexican trucks won't be resolved for a long, long while.  Just how slow are things moving, you ask?  Well, on Monday, the two sides finally agreed to establish, in the words of Transportation Secretary Ray LaHood a "a working group to consider next steps of the cross-border trucking program."  In other words, after 14 months of Mexican retaliatory sanctions on $2.4 billion worth of US exports, the US and Mexico have finally agreed to form a bilateral group to talk about how to ultimately resolve the problem.  Eureka!  Of course, with 78 teamster-loving, perma-campaigning members of Congress openly demanding the renegotiation of NAFTA's liberalized trucking requirements, the administration's slow-walk of this dispute isn't really surprising.  Frankly, I'm just surprised that we didn't just try to pay the Mexicans off.

• US Promises on "Zeroing" Mean Zilch to Our Trading Partners.  BNA reports (subscription) that Vietnam and South Korea have officially lodged new WTO complaints against the United States' use of zeroing in antidumping investigations and reviews.  Those complaints are available here and here, and it appears that Vietnam is challenging the US practice in both original investigations and annual reviews, while Korea is challenging only original investigations.  As I've noted repeatedly, the US has been under constant fire for its use of zeroing, and it consistently loses on the issue at the WTO.  And while US officials have recently claimed that the administration will end the practice, they haven't done that yet, and America's trading partners obviously won't stop complaining until the practice is truly dead.  Indeed, as BNA notes, "The United States argues it cannot correct investigation results based on the illegal use of zeroing without a WTO case being filed by an aggrieved country.... Several countries, however, believe Washington has shown bad faith on the issue."  The result of US "bad faith," of course, is more WTO challenges like the Vietnamese and South Korean complaints, as well as eventual retaliation when the US loses and ultimately fails to comply with the WTO's rulings.  The EU has recently asked the WTO for permission to impose $311 million in retaliatory sanctions, and Japan might seek another $248.5 million in retaliation.  (Oh goody.)  Closing thought: given that the Korean complaint is only on original investigations, it's quite likely that the United States will "settle" the dispute quickly like it has in past cases.  The Vietnamese complaint, on the other hand, promises to be more interesting: if the US truly intends to end zeroing in both original investigations (which it did in 2007) and annual reviews, USTR would "settle" the Vietnamese case too, right?  Hmm.  Well, I don't know about you, but I'll believe it when I see it.

• New Steel Pipe Duties Could Drill US-China Trade Relations (and Energy Prices!).  I've frequently stated that US trade remedies (antidumping and countervailing duty) actions against Chinese imports shouldn't be considered a good litmus test for US-China trade relations, but the latest Commerce Department ruling against Chinese imports of "oil country tubular goods" (human language: steel pipe used in oil and gas wells) is going to sting a little.  Why?  Well, as Reuters reports, this is the largest US case against Chinese imports ever - OCTG imports topped $1 billion in 2009 and $2.5 billion in 2008 - and anti-dumping duties ranged from about 30% to 100% (on top of countervailing duties of 10% to 15%).  That's a pretty big hit for Chinese exporters and, of course, US businesses and consumers.  Indeed, as Oil & Gas Journal indicates, the new duties will likely have rather painful consequences for American energy producers and drill pipe suppliers/retailers.  Considering that US natural gas producers (who use the targeted drill pipe) are one of the few American industries experiencing really good times right now, a ruling like this could significantly increase costs and thus blunt the impressive economic benefits coming from the booming US sector.  Just what our economy needs right now, eh?  Well, at least energy prices aren't climbing.  Oh, wait.

Monday Quick Hits

A few noteworthy items for those of you whose brains weren't fried by yesterday's WTO analysis:

• Crappy Anniversary!  On the six month anniversary of President Obama's bad decision to impose tariffs on Chinese tires under Section 421 of US trade law, Reps. Kevin Brady (R-TX) and Dan Boren (D-OK) have sent a letter to President Obama asking him to report on the economic impact of the controversial trade measures (hint: it hasn't been pretty).  As you'll recall, Brady and Boren sent USTR a similar letter back in January and apparently were totally ignored (shocking, I know).  Money quote: "This tire tax affects all Americans—workers, distributors, retailers, and consumers.  Fortunately, the law gives the President the opportunity to review the tax after six months to see if it is working or not. In January, Congressman Dan Boren and I wrote to the Administration and asked for confirmation that it has a system to collect the full range of information so that the President can fairly assess the impact of the tax on all Americans. Regrettably, no such system is in place."  I'm sure it was just an oversight, Congressmen!  Surrrrre.  National Journal reports, however, that Ways & Means Democrats remain opposed to such sanity and transparency, calling the tire tariffs "one in a series of actions he has taken to enforce trade laws," and urging Obama to "do more to address the trade gap with China...."  As we all know, both the "421 as enforcement" and "trade deficit" assertions are utter nonsense and should be treated as such.  But they do provide yet another example of the Democrats' reliance on these two classic protectionist myths.  Broken records, these guys.

• China currency sanity exists; you just need to know where to find it.  For those of you who still want more good stuff debunking the absurdity coming from many of our elected officials and pundits on China's currency policies, I recommend the following: Stanford's Ronald McKinnon drops some serious knowledge on a stable yuan-dollar exchange rate and the yuan and the trade balance;  Reuters' John Kemp on global imbalances and the "Triffin dilemma" (a year old but still good); and AEI's Mark Perry on that dastardly currency manipulator that is, err, Hong Kong?

• Is the US really ending "zeroing"?  Washington Trade Daily reports (no link) that "The United States is finally giving up the battle with the World Trade Organization over the continued use of the controversial 'zeroing' methodology in calculating antidumping duties, US Trade Representative General Counsel Tim Reif said on Friday....  Speaking at a meeting of the Society for International Law, Mr. Reif said he still believes that the WTO is going beyond the bounds of Article Two of the [Anti-dumping] agreement, but said USTR now is working interagency to administratively correct the 'zeroing' issue and bring the United States into compliance."  As you may recall, US officials said similar things at an early-March WTO meeting (and were met with skepticism by me and everyone else).  However, this is now the second time that the US has publicly stated, without subsequent retraction, their desire to finally comply with multiple WTO rulings against the controversial practice, so maybe Reif & co. actually mean it.  I've complained loudly for months about US refusal to stop zeroing in administrative reviews, and how that refusal could end up costing US exports billions in WTO-authorized retaliation, so if this turns out to be true, it's a very welcome development and deserves to be praised.  The proof, however, will be in the interagency pudding.  So stay tuned.

Exit question: given that the United States was endlessly litigating (and losing) WTO disputes on its zeroing practices in order to maintain its negotiating position in the WTO's Doha Round that WTO rules should be changed to expressly allow for zeroing, does the change in US position signal that USTR has totally given up on Doha?  Cripes.

Friday Quick Hits

Lots of small things going on today worth noting:

• US promises world that it'll comply with WTO rulings on "zeroing"; world calls bulls**t.  BNA (subscription) reports that, at a March 3-4 WTO negotiating meeting, the United States was telling anyone who would listen that it, like, totally intends to comply with a bundle of WTO rulings against its use of “zeroing” in antidumping investigations.  As you might recall, "zeroing" artificially (and, of course, illegally) inflates dumping margins (duties) on foreign goods, and the US has refused to fully comply with the aforementioned WTO decisions where they involve reviews of existing antidumping orders. (They're complying with decisions involving original investigations.)  Given these facts, WTO Members are rightly skeptical of the US claims: “We are concerned about a usual cosmetic change which would be far from compliance,” said one overly-polite WTO official.  Unofficial translation: "Riiiight. You're totally going to issue some fake 'change' that still ends up screwing our exporters." Meanwhile, both the EU and Japan are proceeding along the long and winding legal road to retaliating against US exports because of American non-compliance on zeroing - to the tune of about $311 and $248.5 million, respectively.  Awesome.

• Schumer makes it official: it's re-election season.  The Wall Street Journal reports that Senator Charles Schumer (D-Campaigning) and three other awesome Democrat Senators (Brown, Casey and Tester) have proposed legislation - the "American Renewable Energy Jobs Act" - that would block the Energy Department from using stimulus funds to subsidize wind-energy projects that use foreign-made turbines. Their main target is a proposed wind-energy project in Texas where the backers plan to use wind turbines made with Chinese components.  Of course, while the Senators chest-thumped about China, they curiously omitted that: (i) the targeted Texas company hasn't even filed for Stimulus* funding yet; (ii) the legislation is vigorously opposed by both Energy Secretary, and fellow Democrat, Steven Chu ("You do not want to stop these projects if two-thirds [of the hardware] is American and one-third is foreign.") and the primary beneficiaries of such legislation - the American Wind Energy Association ("[A]pproximately 40,000 American jobs were saved by [Stimulus*-funded wind] projects.... The Schumer proposal would shut the program down... because no wind developer could meet the strict requirements of the Schumer Buy American amendment--the United States simply does not have the manufacturing capacity yet to produce 100% of the turbine parts."); and (iii) as I noted a while ago, the demonized Chinese products contain lots of US (and German) components.  But hey, Schumer's up for re-election, and China demagoguery is one of his signature campaign moves, so facts be damned!

• There's a new sheriff in town, and he's not a big fan of those pending FTAs.  Due to serious ethical concerns, Congressman Charlie Rangel (D-NY) is now on "temporary leave of absence" from his  chairmanship of the House Ways & Means Committee - the primary House committee that deals with US trade issues and the only House committee that must, by law, review any of the pending FTAs with Colombia, Panama or South Korea before the Houses vote on them.  Rep. Sander Levin (D-UAW) will replace Rangel, and, as Reuters reports, he's not a big fan.  Granted, I didn't think that these FTAs were going anywhere in 2010 anyway, but this change should pretty much seal the deal.

Monday Quick Hits

A few things to note on a slow news day here in the nation's snow-covered capital:

• Vietnam has filed its first ever WTO dispute settlement challenge - against the United States' practice of "zeroing" in anti-dumping administrative reviews of Vietnamese shrimp imports.  The complaint is available on the WTO's website here.  I've discussed the practice of zeroing several times, most notably the United States' new strategy of "settling" certain WTO complaints against US zeroing.  Those cases, however, dealt with original investigations, not reviews, where the US appears to still be fighting tooth-and-nail at the WTO.  Indeed, the EU just asked the WTO to let it impose over $400 million in retaliatory tariffs on US exports due to the United States' refusal to comply with adverse WTO rulings against US zeroing in administrative reviews.  (So much for that grand plan to expand US exports, huh?)  Given the varying US responses to zeroing cases, the new Vietnam complaint - and the new-ish one by South Korea on zeroing in original investigations - will be worth watching.  (Oh, and yes, it's completely absurd that the US still hasn't given in on zeroing.)

• Free traders in Congress (all two of them!) have reintroduced the "Affordable Footwear Act" (H.R. 4316 ) which would mandate the unilateral elimination of abnormally high US tariffs on imports of low-cost shoes that aren't even made in America anymore.  The bill highlights a great example of the idiocy and immorality of US tariffs and is a good first step to remedying such nonsense.  Of course, the fact that legislation scrapping a pointless tax on a basic necessity that disproportionately harms poor Americans can't pass with overwhelming bipartisan support is a sad commentary on the state of US trade policy, wouldn't you say?

• China announced the preliminary results of its anti-dumping investigation against US imports of chicken.  Duties ranged from 43.1% to 105.4%, and a final determination isn't expected for several months.  Preliminary results of China's countervailing duty investigation against the same US product will be out in the next couple months.  And, yes, we all remember how this investigation came about - *cough*tires*cough*.  (Nice WSJ editorial on this whole mess here.)

• Finally, we have some China trade news that all Americans - protectionists and free traders alike - can support: American "shoot-first" point guard, and troubled NBA castoff, Stephon Marbury has been shipped off to China.  He's running point for the Shanxi Brave Dragons, and is already one of the Chinese Basketball Association's biggest stars.  Noted Knicks fan and China antagonist Sen. Chuck Schumer has thus far been unavailable for comment.

That's all for today.  Now if you'll excuse me, I need to go prep for the next blizzard that will be hitting DC tomorrow.

Hide and Seek Protectionism, Ctd.

Last month, I explained how the United States' new legal strategy of "settling" WTO challenges to its "zeroing" methodology appeared to be a sneaky way to maintain a protectionist policy (zeroing has been repeatedly ruled inconsistent with WTO rules) while avoiding lengthy, costly WTO litigation:

[D]omestic manufacturers - particularly the powerful and well-connected US steel industry - believe that the US zeroing practice is still an effective tool to discourage imports, and thus they still intensely lobby their congressional allies to fight for zeroing, despite the long string of adverse WTO rulings. The Obama Administration, as it has with myriad other bouts of congressional protectionism (e.g., Mexican trucks or Buy American), has acquiesced on the issue and not pushed the Department of Commerce to stop zeroing, so the WTO cases keep coming (and coming and coming). And the protectionism continues.

Moreover, the administration might actually side with the congressmen and view the prior adverse WTO decisions as wrong (notice how the US submission doesn't say that the practice itself is WTO-illegal but merely cites the adverse Appellate Body decision - lawyer nuance!). But at this point, the only hope for reviving zeroing is through express validation in a revised WTO Antidumping Agreement. Thus, USTR views the endless WTO cases as perhaps the only way to keep the zeroing issue ripe for negotiation in the WTO's Doha Round negotiations on Rules (which would result in, among other things, a new AD Agreement). But because the Doha negotiations are stalled (at best), and because the outcome of any new WTO challenge to the US zeroing practice is pretty much a slam-dunk against the US, they simply accept their fault, and amend the isolated, challenged instance, rather than actually change the broader zeroing policy. Thus, they keep most of the protectionism in place, placate domestic industries and their political muscle, and live to fight another day at the WTO - all the while avoiding lengthy litigation and WTO-sanctioned retaliation (not to mention those brutal copying costs!).

A WTO decision issued Friday on US anti-dumping measures on Thai plastic bags, first pointed out by the International Economic Law and Policy Blog, makes this "hide and seek" strategy even clearer.  It turns out that the United States and Thailand worked out a settlement deal in advance of the panel decision, which inevitably sided with Thailand (the US admitted fault in its first submission):

3. The United States will not contest Thailand's claim that the measures identified in the attached request for the establishment of a panel are inconsistent with the first sentence of Article 2.4.2 of the Anti-Dumping Agreement on the grounds stated in United States - Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/AB/R (adopted 31 August 2004)....

5. Provided that the panel's finding is limited to a finding that the measures identified in the attached request for the establishment of a panel are inconsistent with the first sentence of Article 2.4.2 of the Anti-Dumping Agreement, the parties agree that, pursuant to Article 21.3(b) of the DSU, the reasonable period of time for bringing each such measure into conformity with the Anti-Dumping Agreement will be six months, beginning on the date on which the DSB adopts the report of the panel.

The IELP blog summarized these paragraphs well: "Thus, the U.S. would not contest the claim, the panel would find a violation, the U.S. would not appeal (presumably), and the implementation period would be six months."  The only thing left out was "...and the United States would continue screwing all other foreign respondents that haven't challenged the illegal US zeroing practice."  (Although they'd probably have been classier about it.)

Korea just recently filed a WTO case against US zeroing in anti-dumping investigations of stainless steel plate in coils, stainless steel sheet and strip in coils, and diamond sawblades.  And it's all but certain that the United States will continue its sneaky zeroing strategy in that case.

The only uncertain thing is what country will be the next to bring a challenge.

US "Zeroing" Strategy: Hide and Seek Protectionism

At first blush, the United States' strategy re: WTO challenges to its use of "zeroing" in antidumping investigations is bizarre.  Upon closer review, however, the policy might just be another case of protectionist politics and WTO maneuvering. Here's Law360 with the necessary background:

Zeroing refers to the system of calculating anti-dumping margins where only transactions at dumped prices are taken into account, and any nondumped transactions are disregarded. The methodology makes for larger dumping margins and has become a major source of contention among trading partners who claim it limits access to U.S. markets.

A string of WTO appellate rulings over the past decade have found the practice to be inconsistent with current anti-dumping agreements, and those rulings have grown progressively broader to encompass zeroing at any stage, from preliminary investigations to sunset reviews and new shipper reviews.

The U.S., which is the only major market economy that clings to the practice, abandoned zeroing in original anti-dumping investigations in 2006 in response to the adverse WTO rulings. But the U.S. Department of Commerce continues to zero in the hundreds of anti-dumping orders reviewed annually, giving nations unhappy with the methodology fodder for new WTO complaints...

For a relatively arcane practice, passions on both sides of the zeroing argument run high.

Domestic manufacturers have aggressively pushed to keep the practice in place, since it tends to discourage foreign imports. Proponents also point out that there is no explicit reference barring the methodology in the current anti-dumping agreement, negotiated in the Uruguay Round.

“There is a vocal constituency in the U.S., led by the U.S. steel industry, who have engaged their congressional representatives over the years on the preservation of U.S. trade laws,” said Duane Layton, head of Mayer Brown LLP’s government and global trade group.

In other words, the United States is the only country in the world to keep using a protectionist practice - zeroing - that has been consistently ruled illegal under global trade rules. And WTO Members harmed by the practice keep bringing the US to the WTO, and the US keeps losing. Yet the United States (through the Department of Commerce) has not jettisoned the practice of zeroing and instead only amends certain antidumping decisions that have been ruled illegal by the WTO. Weird, huh?

Well, if that little dance weren't bizarre enough, it now appears that the United States isn't even trying at the WTO anymore. For example, according to WorldTradeLaw.net's International Economic Law and Policy Blog, the US has just filed the "Shortest WTO Dispute Written Submission Ever" in a new WTO dispute between the US and Thailand over zeroing in an antidumping review of Thai plastic bags. The submission is five whole paragraphs, and in the final paragraph, the US basically admits that it's at fault:

5. The United States acknowledges the accuracy of Thailand’s description of the Department of Commerce’s use of “zeroing” in calculating the dumping margins for the individually investigated exporters whose margins of dumping were not based on total facts available. The United States recognizes that in US – Softwood Lumber Dumping the Appellate Body found that the use of “zeroing” with respect to the average-to-average comparison methodology in investigations was inconsistent with Article 2.4.2, by interpreting the terms “margins of dumping” and “all comparable export transactions” as used in the first sentence of Article 2.4.2, in an integrated manner.7 The United States acknowledges that this reasoning is equally applicable with respect to Thailand’s claim regarding the individually investigated exporters whose margins of dumping were not based on total facts available in the investigation at issue.

Translation: Thailand's 100% right - our bad, dude. (On the bright side, I guess they're not wasting many of my tax dollars on photocopies!)

Seriously, what's going on here? Why is the United States still zeroing, and still getting brought to the WTO, when it's now even admitting at the WTO that the practice has been deemed illegal under WTO rules?

My guess is that it's a combination of protectionist politics and WTO strategy. Allow me to explain (and wildly hypothesize):

As the Law360 article makes clear, domestic manufacturers - particularly the powerful and well-connected US steel industry - believe that the US zeroing practice is still an effective tool to discourage imports, and thus they still intensely lobby their congressional allies to fight for zeroing, despite the long string of adverse WTO rulings. The Obama Administration, as it has with myriad other bouts of congressional protectionism (e.g., Mexican trucks or Buy American), has acquiesced on the issue and not pushed the Department of Commerce to stop zeroing, so the WTO cases keep coming (and coming and coming). And the protectionism continues.

Moreover, the administration might actually side with the congressmen and view the prior adverse WTO decisions as wrong (notice how the US submission doesn't say that the practice itself is WTO-illegal but merely cites the adverse Appellate Body decision - lawyer nuance!). But at this point, the only hope for reviving zeroing is through express validation in a revised WTO Antidumping Agreement. Thus, USTR views the endless WTO cases as perhaps the only way to keep the zeroing issue ripe for negotiation in the WTO's Doha Round negotiations on Rules (which would result in, among other things, a new AD Agreement). But because the Doha negotiations are stalled (at best), and because the outcome of any new WTO challenge to the US zeroing practice is pretty much a slam-dunk against the US, they simply accept their fault, and amend the isolated, challenged instance, rather than actually change the broader zeroing policy. Thus, they keep most of the protectionism in place, placate domestic industries and their political muscle, and live to fight another day at the WTO - all the while avoiding lengthy litigation and WTO-sanctioned retaliation (not to mention those brutal copying costs!).

Cynical? Yes. Highly possible? Yes. Pathetic? Undoubtedly.

[Final note: the Bush administration engaged in similar zeroing acquiescence and also supported zeroing in the Doha Round, so this isn't a partisan shot at Obama. Trade remedies shenanigans are a bipartisan epidemic.]