2013

Trade with Korea and Canada: 6. Importers and Exporters, Beware of Trade Remedies

To be clear, I have been simple about Korea-Canada trade relationships. This is not to say that I have been incorrect. But knowing the crowd to whom I am speaking and the purpose of this blog, it would be fair to say that positive aspects of the relationship has been emphasized relatively more than the negatives. Even in the topic of trade dispute settlement, this blog focussed on civility of the process built in the WTO agreements.

One of the hallmarks of the WTO dispute settlement process, whose role is to ensure civility, is a participation of parties involved. It encourages discussions, open debates, and communication. In addition, in my opinion, any dispute settlement “process” forces the parties to let off steam and prevent the parties from unilateral knee-jerk reactions.

That said, not all trade disputes benefit from the WTO dispute settlement process. “Trade remedies” are examples of such disputes. Unlike state-to-state dispute settlement system under WTO, these are unilateral in nature. In other words, rules of one country are applied without consultation or compromise with another. There are three such “trade remedies” dealing with trade disputes related to dumping, countervailable subsidies, and seriously injurious increase of imports.

The most frequently used trade remedy is an anti-dumping measure. Dumping is a practice where a company exports its products at less than its normal value in the company’s domestic market. For various reasons, the practice of dumping has been agreed by the WTO member states to be “unfair” (the fairness or unfairness of dumping is an area of lively debate to this date).

The member states also agreed that certain government subsidies are “unfair” as well. These “unfair” subsidies are subsidies that are provided for exports or import substitution (think “buy domestic” rules), or subsidies that are injurious (or threatens to be injurious) and specific. The WTO agreements allow states to unilaterally counter these (dumping and subsidies) “unfair” trade practices by imposing duties.

In addition, WTO allows state members to impose duties to the products that have been fairly traded as well. Known as the “safeguard” measures, the duties are allowed to be imposed on increased imports that are seriously injuring the domestic industry for a certain period, in order to provide a little breathing room to the domestic industry.

And how are these apparently glaring gaps allowed in the background of highly sophisticated system of trade dispute settlement under WTO? The answer is simple – WTO explicitly provides for these unilateral measures (I do not criticize these measures, for the supporters are quite reasonable to point out that WTO must provide sufficient policy-room to the sovereign nations; nor do I necessarily support them because it is possible that these measures have been misused or abused).

Also, note that the relevant WTO agreements delineate a boundary for the states’ unilateral actions. In other words, WTO allows these unilateral measures, but continues to regulate them. Indeed, a state’s unilateral act may be disputed before the WTO dispute settlement system, although these cases are only brought after that unilateral act has been done.

Currently, Canada is imposing four anti-dumping orders against Korean imports of certain transformers, copper pipe fittings, structural tubing, and carbon steel welded pipe (find details here). Korea, on the other hand, has imposed total of four anti-dumping orders against Canadian imports of certain paper and chemical products (find details here; unfortunately, the current status of the orders are unknown from my research).

Traders of Korea and Canada, beware of these investigations on both sides of the border, as these could seriously undermine your competitiveness.

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