Proof Delivery Form World Trade Review Date of delivery: Journal and vol/article ref:

wtr

8_1/413

Number of pages (not including this page): 3

This proof is sent to you on behalf of Cambridge University Press. Please print out the file and check the proofs carefully. Make any corrections necessary on a hardcopy and answer queries on each page of the proofs. Please return the marked proof within

3

days of receipt to:

Anne Rix 8 Heritage Close High Street St. Albans, Herts, AL3 4EB, UK To avoid delay from overseas, please send the proof by airmail or courier. If you have no corrections to make, please email [email protected] to save having to return your paper proof. If corrections are light, you can also send them by email, quoting both page and line number.

 You are responsible for correcting your proofs. Errors not found may appear in the published journal.  The proof is sent to you for correction of typographical errors only. Revision of the substance of the text is not permitted, unless discussed with the editor of the journal.  Please answer carefully any queries listed overleaf.  A new copy of a figure must be provided if correction of anything other than a typographical error introduced by the typesetter is required.

 If you have problems with the file please contact

[email protected]

Please note that this pdf is for proof checking purposes only. It should not be distributed to third parties and may not represent the final published version. Important: you must return any forms included with your proof.

Please do not reply to this email

Author queries:

AQ1: Please check all three references not cited in text.

Abcdefghi

Offprint order form PLEASE COMPLETE AND RETURN THIS FORM. WE WILL BE UNABLE TO SEND OFFPRINTS (INCLUDING FREE OFFPRINTS) UNLESS A RETURN ADDRESS AND ARTICLE DETAILS ARE PROVIDED.

World Trade Review (WTR)

VAT REG NO. GB 823 8476 09

Volume:

no:

Offprints 25 offprints of each article will be supplied free to each first named author and sent to a single address. Please complete this form and send it to the publisher (address below). Please give the address to which your offprints should be sent. They will be despatched by surface mail within one month of publication. For an article by more than one author this form is sent to you as the first named. All extra offprints should be ordered by you in consultation with your co-authors.

Number of offprints required in addition to the 25 free copies: Email: Offprints to be sent to (print in BLOCK CAPITALS):

Post/Zip Code: Telephone:

/

Date (dd/mm/yy):

/

Author(s):

Article Title: All enquiries about offprints should be addressed to the publisher: Journals Production Department, Cambridge University Press, The Edinburgh Building, Shaftesbury Road, Cambridge CB2 8RU, UK. Charges for extra offprints (excluding VAT) Please circle the appropriate charge: Number of copies 1-4 pages 5-8 pages 9-16 pages 17-24 pages Each Additional 1-8 pages

25 £41 £73 £77 £83 £14

50 £73 £105 £115 £129 £18

100 £111 £154 £183 £211 £31

150 £153 £206 £245 £294 £53

200 £197 £254 £314 £385 £64

per 50 extra £41 £73 £77 £83 £14

Methods of payment If you live in Belgium, France, Germany, Ireland, Italy, Portugal, Spain or Sweden and are not registered for VAT we are required to charge VAT at the rate applicable in your country of residence. If you live in any other country in the EU and are not registered for VAT you will be charged VAT at the UK rate. If registered, please quote your VAT number, or the VAT VAT Number: number of any agency paying on your behalf if it is registered.

Payment must be included with your order, please tick which method you are using:

… … …

Cheques should be made out to Cambridge University Press. Payment by someone else. Please enclose the official order when returning this form and ensure that when the order is sent it mentions the name of the journal and the article title. Payment may be made by any credit card bearing the Interbank Symbol. Card Number: Expiry Date (mm/yy):

/

Card Verification Number:

The card verification number is a 3 digit number printed on the back of your Visa or Master card, it appears after and to the right of your card number. For American Express the verification number is 4 digits, and printed on the front of your card, after and to the right of your card number.

Signature of card holder: Please advise if address registered with card company is different from above

Amount (Including VAT if appropriate):

£

World Trade Review (2009), 8 : 1, 1–3 Printed in the United Kingdom f Hylke Vandenbussche doi:10.1017/S1474745608004138

Comment United States – Laws, Regulations and Methodology for Calculating Dumping Margins (Zeroing) (DS294) Prepared for the ALI Project on the Case Law of the WTO HYLKE VANDENBUSSCHE Universite´ Catholique de Louvain, KULeuven, CORE, and CEPR

1. What was the Case about? This dispute-settlement case involved a complaint from the EC against the practice of ‘ zeroing’ by the US Department of Commerce (DOC). The US used ‘zeroing ’ in an earlier antidumping review case where the EC had been accused of dumping into the US market. In this dispute case, the Panel judged that ‘ zeroing ’, which involves throwing out a series of price observations to calculate the dumping margin, is inconsistent with the current Antidumping Law under Article 2.4.2 dealing with the determination of the dumping margin. This decision was consistent with earlier Panel rulings involving previous zeroing cases. However, the Panel also ruled that the US legislation, as such, was not WTO-inconsistent since the practice of ‘ zeroing ’ is not a mandatory practice of the US DOC. Prusa and Vermulst, in their discussion of this dispute case, argue that while they approve of the Appellate Body’s decision, they doubt the grounds on which the decision was based. More precisely, they point out that Article 2.4.2 of the Antidumping Law does not explicitly prohibit the use of ‘ zeroing ’. Therefore, for the Appellate Body to dismiss the practice of zeroing on Article 2.4.2, in their view, is not correct. Prusa and Vermulst are of the opinion that while the Appellate Body made the right decision, they should have based their decision on another Article of the Antidumping Law, notably Article 9.3, which deals with transaction-specific duty liabilities. In principle, under US Antidumping Law, duties imposed should not exceed the dumping margin. The practice of zeroing therefore not only affects the dumping margin but also has an effect on the duties imposed. 1

2

HYLKE VANDENBUSSCHE

2. Lifting the ‘zeroing ’ mystery The analysis by which Prusa and Vermulst come to the above conclusion is a very exhaustive one. It has a strong legal component with plenty of references to previous zeroing cases. There is also an elaborate numerical treatment of the ‘ zeroing ’ issue in the paper. Using simple numerical examples, the paper explains the differences between ‘simple zeroing’ and ‘model zeroing ’ and between ‘Average-totransaction zeroing ’ and ‘ Transaction-to-transaction zeroing’. Thanks to these efforts, the paper really lifts the ‘ zeroing ’ mystery in the sense that it makes this highly technical matter accessible to the more nontechnical reader and makes the economic implications of ‘ zeroing ’ very clear. Because of the exhaustive nature of the authors’ analysis, it is difficult for any discussant to add many things. My contribution will therefore be limited to additional clarification. One downside of the exhaustiveness in the Prusa and Vermulst text is that it is lengthy and at times tedious. Therefore, in the discussion below, I summarize some of the main elements involved, offering a quick insight into the debate. Simply put, ‘ zeroing ’ is a correction applied to the calculation of the dumping margin performed by the importing country. This correction involves the elimination of transactions where prices show negative dumping. Dropping observations when calculating the dumping margin tends to inflate overall positive dumping. Since the WTO only sanctions positive dumping, it is easy to verify that dropping the negative ones will inflate the dumping margin and ultimately result in higher import duties. When I started to read about this dispute-settlement case, I was inclined to think that it should be easy for an exporting country to win such a case. It should be straightforward to show that zeroing tends to inflate dumping margins, which makes exporters more vulnerable to high duties. But reading the discussion by Prusa and Vermulst, I soon realized that while for most economists it seems quite obvious that zeroing is unfair, from a legal point of view it is not so easy to show !

3. Zeroing : why is it still there ? Throughout the paper by Prusa and Vermulst, as I read it, the legal grounds for prohibiting zeroing are shaky. Or put differently, there is nothing in the current Antidumping Law that explicitly rules out the practice of zeroing. The current Antidumping Agreement refers to dumping margins of ‘ products ’, not of ‘models ’ or types. The complainant in this dispute case, the EC, argued that given these definitions, the US should have involved all models or types in the calculations of dumping and not just the ones with positive dumping margins but also those with negative ones. From an economic point of view, this makes sense. Throwing away data is not done unless in very exceptional circumstances with obvious ‘ outliers ’. The paper draws a useful analogy to illustrate this point.

Comment 3

When an academic researcher is faced with outliers, there are several alternatives that are much preferred to eliminating observations. Inspired by the practices of economists, Prusa and Vermulst towards the end of their paper formulate an alternative to ‘ zeroing ’ that would seem to be preferable in the case of exceptional circumstances, when there are transactions that show unusually low prices resulting in negative dumping margins. The paper concludes that the challenge for WTO members in the future will be how to deal with outliers in a way that is WTO-consistent.

4. Alternative suggestion Personally, I would be inclined to think that there is another alternative route that the WTO could take to resolve the high number of dispute cases involving zeroing, and that is to change the current Antidumping Law to explicitly ban the practice of zeroing. Such a change of the law could be complemented with a clause where only in exceptional circumstances would an importing country be allowed to disregard particular transactions in their calculation of the dumping margin. Important in such a clause would be that the burden of proof of the ‘ exceptional character of the excluded transactions ’ would be put on the side of the importing country. A change in the law involving a ban of zeroing would most definitely reduce the number of disputes surrounding it.

References Bown, Chad P. and Alan O. Sykes (2008), ‘The Zeroing Issue: a critical analysis of Softwood V’, in Henrik Horn and Petros C. Mavroidis (eds.), The American Law Institute – The WTO Case Law of 2004–2005 : Legal and Economic Analysis, Cambridge: Cambridge University Press, pp. 121–142. Janow, Merit E. and Robert W. Staiger (2003), ‘European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India’, in Henrik Horn and Petros C. Mavroidis (eds.), The WTO Case Law of 2001 – The American Law Institute Reporters’ Studies, Cambridge: Cambridge University Press, pp. 115–139. Prusa, Thomas J. and Edwin Vermulst (2008), ‘A One-Two Punch on Zeroing: US – Zeroing (EC) and US – Zeroing ( Japan) ’, paper presented at the ALI 2008 meetings in Geneva at the WTO, and forthcoming in World Trade Review 2009 : 1, and in Henrik Horn and Petros C. Mavroidis (eds.), The American Law Institute – The WTO Case Law of 2006–2007: Legal and Economic Analysis, Cambridge: Cambridge University Press.

AQ1