Trade Remedies
Trade plays the essential part in the country’s economy. Every State concentrate half of the budget on establishing international relations with trade partners all over the world. In order to protect the economic integrity and not to lose individuality, every Government elaborates a number of strategies and techniques. One of them is Trade Remedies, trade policy tools that allow governments to take remedial action against imports which are causing material injury to a domestic industry. Such remedies are divided into three categories:
1) anti-dumping action;
2) countervailing duty measures;
3) safeguard action.
These remedies are triggered in response to different situations and circumstances which may be causing material injury to a domestic industry. Recourse to these tools is initiated by the domestic industry.
ANTI-DUMPING ACTION
Dumping represents a situation of international price discrimination, where the price of the sold product in the importing country is less than the price of that product in the market of the exporting country. In such a way, one identifies dumping simply by comparing prices in two markets.
An anti-dumping duty is a protectionist that a domestic government imposes on foreign imports that it believes are priced below fair market tariff value. To protect local businesses and markets, many countries impose stiff duties on products they believe are being dumped in their national market.
One of the most complicated questions in anti-dumping investigations is the determination whether sales in the exporting country market are made in the “ordinary course of trade” or not. One of the bases on which countries may determine that sales are not made in the ordinary course of trade is if sales in the domestic market of the exporter are made below cost. There is a specific Dumping Agreement which defines the specific circumstances when home market sales at prices below the cost of production may be considered as not made in theordinary course of trade, and thus may be disregarded in the determination of normal value. Those sales must be made at prices that are below per unit fixed and variable costs plus administrative, selling and general costs, they must be made within an extended period of time (normally one year, but in no case less than six months), and they must be made in substantial quantities.
COUNTERVAILING DUTY MEASURES
These measures are also known as anti-subsidy duties. They represent trade import duties, which are imposed under World Trade Organization (WTO) rules to neutralize the negative effects of subsidies. The countervailing duty measures are imposed after an investigation finds that a foreign country subsidizes its exports, injuring domestic producers in the importing country. According to WTO rules, a country can launch its own investigation and decide to charge extra duties, provided such additional duties are in accordance with the GATT Article VI and the GATT Agreement on Subsidies and Countervailing Measures. Since countries can rule domestically whether domestic industries are in danger and whether foreign countries subsidize the products, the institutional process surrounding the investigation and determinations has significant impacts beyond the countervailing duties.
SAFEGUARD MEASURES
A WTO member may restrict imports of a product temporarily (take “safeguard” actions) if its domestic industry is injured or threatened with injury caused by a surge in imports. Here, the injury has to be serious. Safeguard measures were always available under GATT (Article 19). However, they were infrequently used, some governments preferring to protect their domestic industries through “Grey area” measures — using bilateral negotiations outside GATT’s auspices, they persuaded exporting countries to restrain exports “voluntarily” or to agree to other means of sharing markets. Agreements of this kind were reached for a wide range of products: automobiles, steel, and semiconductors and many others.
