March, 2002

1
Trading Remedies To Remedy Trade - The NAFTA
Experience
Beatriz Leycegui and Mario Ruiz Cornejo
March, 2002
2
Content and Purpose

• Overview of Trade Remedy Measures- A look at the
  objective, origin, evolution, legal framework and
  use or abuse of antidumping (AD), countervailing
  duties (CVD) and safeguard measures.
• Trade Remedy Laws in North America- A look at how
  much have NAFTA parties traded remedies to remedy
  trade vis a vis themselves and third countries.
• Trading remedies to remedy trade under NAFTA- A
  look at the negotiation history, the description
  and objectives of the most relevant commitments,
  and experience during the first 8 years of the
  Agreements implementation.

3
AD/CVD Cases (1987 - 1999) Total number of
initiations
Total number of initiations and measures
Success ratio 0.47
598
228
Success ratio 0.52
225
Success ratio 0.70
4
AD/CVD cases (1987 - 1999) Success ratio

• Of the cases initiated by each country, those
  against NAFTA partners had lower success ratios
  than against other countries.

Success ratio by country
This ratio does not consider the cases
concluded because of price undertakings.
5
AD/CVD Cases (1987 - 1999) Initiations by type
of investigation
United States
Mexico
Canada
6
Safeguards

• The only country active in the use of safeguards
  is the United States from 1995 to 2001 it has
  initiated 10 cases.
• Canada and Mexico have not initiated a safeguard
  investigation since 1995.
• From the initiated cases, 9 have concluded. In
  five cases measures were imposed.
• Canada and Mexico have been excluded from 4 of
  the 5 measures, since it was determined that they
  didnt contribute to the injury.

7
AD/CVD cases (1987 - 1999) Initiations by country
United States
Mexico
Canada
8
AD/CVD cases (1987 - 1999) Initiations by Sector
United States
Mexico
Canada
9
Intensity in the use of AD/CVD measures

• One way to infer the intensity with which each
  country uses its AD/CVD tools, is simply
  calculating the number of cases for each
  percentual point in the imports/GDP ratio.
• The numbers suggest that the most intensive user
  against NAFTA partners is the United States,
  followed by Mexico and finally Canada.
• It is interesting to note that for the three
  countries the intensity ratio with respect to
  other countries is higher, suggesting that they
  use AD/CVD measures less against NAFTA partners.

Intensity in the use of AD/CVD
10
AD/CVD Initiations affecting intra-NAFTA Trade
by partner 1987-1999
Average intra-NAFTA initiations by year 18
Average intra-NAFTA initiations by year 8
11
Chapter 19 Binational Panels - Investigated
Authority (January 1994- January 2002)
vs. SEDECO
vs. DMNR o
1
3
(Mexico)
CITT (Canada)
11
19
15
25
Total 75 cases
vs. DOC and ITC
(United
1 Secretaría de Economía (Ministry of Economy) 2
Department of Commerce and International Trade
Commission 3 Deputy Minister of National Revenue
or Canadian International Trade Tribunal
2
States)
45
60
Source Elaborated with data from the Ministry
of Economy and the Mexican Section of the
Secretariat of Free Trade Agreements.
12
Chapter 19 Binational Panels Affected Sectors
(January 1994- January 2002)
Manufacture 15
Chemical 5
20
Mineral and
Metals
7
34
45
Food and
Agricultural
Products 11
15
Construction
10
13
Total 75 cases
Source Elaborated with data from the Ministry
of Economy and the Mexican Section of the
Secretariat of Free Trade Agreements.
13
Status of Chapter 19 Cases (January 2002)
Source Elaborated with data from the Ministry
of Economy and the Mexican Section of the
Secretariat of Free Trade Agreements.
14
Panels decisions (January 2002)

• Of the 27 cases in which the panels have issued a
  decision, in 14 (52 percent) they confirmed the
  determinations. Of those reviewing U.S. decisions
  they confirmed 42 percent of Canada, 80 percent
  and Mexico only 20 percent.

Source Elaborated with data from the Ministry
of Economy and the Mexican Section of the
Secretariat of Free Trade Agreements.
15
Panels vote (January 2002)

• Of the 27 decisions rendered by binational
  panels, 24 of them were adopted unanimously (89
  percent) and 3 with a majority vote. In these
  latter cases, in neither of them the vote
  splitted according to nationality.

Source Elaborated with data from the Ministry
of Economy and the Mexican Section of the
Secretariat of Free Trade Agreements.
16
Average total time of Chapter 19 cases (January
2002)
Source Elaborated with data from the Ministry
of Economy and the Mexican Section of the
Secretariat of Free Trade Agreements.
17
Chapter 19-Assessment

• Time- Since the average time of binational panel
  proceedings is 603 days, it is not clear that
  they are more expeditious than national judicial
  reviews. Delays are associated with panels
  integration process (average time, 245 days).
• Cost- Their cost is equal or higher that U.S. and
  Canadas national review procedures and nearly
  six times higher than those of Mexico.
• Expertise- Since panels comprise five experts in
  international trade law, in general they are
  considered more specialized than internal review
  bodies.

18
Chapter 19-Assessment

• Fairness and objectivity- Since in 85 percent of
  the cases the panels vote was unanimous only one
  of the 26 decisions rendered has been challenged
  and the investigating authorities of the NAFTA
  Parties have complied in all cases with the
  panels decisions these have proven to be fair
  and objective.
• Main contribution- Chapter 19 panels have
  contributed to discipline the use of AD/CVD
  measures within the North American region. In
  recent years there has been a decrease of
  initiation of cases between NAFTA Parties
  (despite important increases in trade), since
  administrative authorities have been more careful
  when initiating and imposing duties against their
  trading partners.

19
Final comments and prospective thoughts

• Under a scenario in which NAFTA partners will
  continue to use trade remedies to remedy their
  trade because of market imperfections, they
  shall observe the principles and obligations of
  the WTO Agreements and NAFTA.
• NAFTA Parties shall continue negotiating
  multilaterally on pending issues in order to
  further discipline the application of trade
  remedies, reducing the discretionality that is
  still present in trade remedy investigations.

20
Final comments and prospective thoughts

• Considering the serious problems associated with
  the integration of NAFTAs Chapter 19 binational
  panels, it is urgent that parties agree on a
  roster of panelists on improving the benefits
  and payments offered to them and if necessary on
  substituting the present ad hoc panels by a
  permanent tribunal.
• Since the elimination of AD and CVD laws within
  NAFTA seems unfeasible in the short and middle
  term, Parties should work towards negotiating
  less trade-restrictive AD and CVD rules to be
  applied between them and in strenghtening the use
  of safeguards when required.

21
Final comments and prospective thoughts

• Finally, a diminishment in the trading of
  remedies to remedy trade among NAFTA partners
  will occur when
• A higher degree of specialization in the
  production processes is reached within the North
  American region.
• Consumers and domestic producers (users of
  intermediate goods usually investigated), become
  better organized to counter the political
  pressure exerted by very specific domestic
  industries.
• The North American market becomes further
  integrated with the implementation of the agreed
  trade liberalization.
• The domestic industry of Canada, Mexico and the
  U.S. have better adapted to competition and thus
  the reallocation of the production factors has
  taken place to improve the regions
  competitiveness.
• The losers of the liberalization are
  substantially reduced or have disappeared.