The World Trade Organization dealt a new blow to a US method for dealing with unfairly priced imports on Wednesday, ruling the US anti-dumping measure broke international trade rules.
In the latest ruling over the “zeroing” method favored by the United States, which has now been the target of a dozen trade disputes, a WTO panel backed a European Union complaint the US Commerce Department had acted illegally. “We welcome the judgement of the panel, and are pleased that the panel has condemned the continued use of zeroing by the US in a large number of measures taken against EU exporters,” said Peter Power, a spokesman for EU trade chief Peter Mandelson. “We now expect the US to comply with the ruling and put an end to all remaining illegal practices of zeroing,” he said in a statement.
US officials criticized the decision, but said they had not decided yet whether to appeal. The ruling is "”another example of poorly reasoned dispute settlement reports that have incorrectly found zeroing to be prohibited under the WTO agreements,” said Gretchen Hamel, a spokeswoman for the US Trade Representative’s office.
The United States will continue pushing in the Doha round of world trade talks for an agreement that reaffirms the right of countries to use zeroing “in all contexts,” Hamel said. Washington has stopped using the practice in certain circumstances as a result of previous WTO rulings, she said.
International trade rules allow countries to impose extra duties on goods that are “dumped” -- imported at prices below what is paid in their home market -- if the dumping injures businesses in the importing country. These duties are based on the difference between prices in the two countries, usually examining several cases. Zeroing ignores cases where the imported product actually costs more than at home, when calculating the anti-dumping duties. Critics say this wrongly inflates the duties. Under WTO rules the United States can appeal against Monday’s panel findings.
But the WTO’s top court, the Appellate Body, has rejected zeroing three times, most recently in May in a case brought by Mexico against the United States. The present case, launched by the EU two years ago, involves US anti-dumping measures against imports of European ball bearings, steel products, pasta and chemicals.
The European Union argued that the US Commerce Department should have removed or lowered duties on these products after an earlier successful challenge by Brussels. That case is still the subject of litigation, in which the European Union is complaining that the United States has not implemented the earlier ruling. Zeroing is controversial even within the United States, where importers argue that it pushes up the price of components needed by US industry.
The US administration insists zeroing is acceptable and is pushing in the WTO’s Doha round to have trade rules reformed to recognize the method explicitly. All 153 other WTO members oppose this, and many want it formally banned. The ruling was not a total EU victory as the panel declined to rule on some EU claims and one of the three-member panel, while upholding the overall findings, disagreed with the other members’ legal reasoning over EU claims on some zeroing. (Reuters)