The World Trade Organization's top court rejected a US appeal in a long-running case on anti-dumping measures, clearing the way for Japan to threaten trade sanctions against Washington.
The final ruling by the WTO's Appellate Body in the case -- launched by Japan in 2004 over US measures dating back to 1999 -- dealt another setback to a controversial US method of tackling unfairly priced imports.
But it also highlighted sensitivity in general about “anti-dumping” measures, which impose extra duties on imports that are dumped, or sold for less than they cost at home, but which can be abused for protectionist purposes.
“The Appellate Body has upheld our position,” said a Japanese diplomat, who asked not to be identified. “Basically, I think we won.”
The US Trade Representative is “deeply disappointed” in the ruling and will consult with Congress and the public about what to do next, USTR spokeswoman Nefeterius McPherson said.
“The findings appear to take a sweeping approach to compliance proceedings that is beyond anything agreed by (WTO) members,” McPherson said.
“For example, the Appellate Body found that Japan could challenge the results of an administrative review which did not even exist at the time Japan initiated the compliance proceeding against the United States,” she said.
Japan had previously sought permission to impose up to $248.5 million in annual trade sanctions against the United States in the case, which originally turned on US duties on imports of Japanese ball-bearings.
The United States objected to that amount, and the question went to arbitration. The two sides then asked for arbitration to be suspended while the WTO examined whether or not the United States had complied with the original ruling.
Tuesday's 114-page decision by the Appellate Body, ruling against the United States on every count, upheld a ruling in April that the United States had failed to comply.
Once the WTO adopts the Appellate Body findings and April's ruling, which it is likely to do at the next meeting of its Dispute Settlement Body on August 31, the arbitration process on the size of Japan's retaliation can resume.
The case turned on a controversial method known as “zeroing” used by the United States to calculate duties on goods that have been imported for less than they cost at home.
The way the United States handles its anti-dumping measures was also an issue. Washington argued it could continue to levy duties on goods imported before a WTO ruling finding such duties illegal -- a stance rejected by the court.
The United States is the only one of the WTO's 153 members to back zeroing. Altogether, various WTO bodies have condemned zeroing about 20 times.
Japan is spearheading resistance to zeroing in the WTO's current Doha round negotiations on a new global trade pact.
WTO members besides the United States say that zeroing can lead to higher anti-dumping duties than are justified.
But there is growing concern that countries are increasing their use of anti-dumping to keep out competitive imports to protect industries amid the financial crisis.
In a report on protectionism last month, WTO Director-General Pascal Lamy said the number of anti-dumping investigations by WTO members had risen in 2008 to 209, an increase of 28% over the previous year, and forecast a bigger increase in future than in previous economic downturns.
The then US ambassador to the WTO, Peter Allgeier, disagreed with the warning, telling a meeting of WTO members that it would not be surprising if there was an increase in anti-dumping cases in the current crisis, but they were running below the levels of previous recessions. (Reuters)