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CHAPTER 11
REGULATING IMPORT COMPETITION AND UNFAIR TRADE
CASES IN THIS CHAPTER
Argentina—Safeguard Measures on Imports of Footwear
Heavyweight Motorcycles, & Engines & Power-Train Subassemblies
Pesquera Mares Australes Ltda. v. United States (Chilean Salmon)
Bulk Aspirin from the People’s Republic of China
United States—Countervailing Measures Concerning Certain Products from the European
Communities (European Steel)
TEACHING SUMMARY
As the previous chapter shows, the principles of non-discrimination, MFN, and quota elimination
seek to liberalize trade throughout the globe. Nevertheless, sometimes trade, be it deemed fair
or unfair, may have negative effects on an importing country’s market. For example, producers
in one country that sell excess products in a foreign country at below market level prices may
face duties to counteract their dumping. Some government subsidies of products sold in export
markets may be unfair to foreign producers whose injuries can lead to countervailing duties.
Thus, where trade materially injures a domestic market, the rules of GATT allow countries to
protect their domestic markets through narrowly tailored safeguards, escape clauses, and
antidumping duties.
Additional Background: Material Injury Test. Under GATT (Art. VI, par. 6), before
antidumping or countervailing duties may be imposed, the importing nation must determine that:
(1) the dumped or subsidized imports caused a material injury (or threatened a material injury)
to the domestic industry producing the like product or that (2) the imports have materially
retarded the development of the domestic industry. While the injury test long existed under U.S.
antidumping law, it had not existed under countervailing duty law. It has since been added.
Although injury is considered in various contexts, the investigation of injury does not proceed
along the same lines in every context. Injury investigation in a dumping or countervailing duty
case is simpler than the injury analysis in an escape clause proceeding. The former does not
require that various causes of injury be compared to see which is the most important. Instead, it
simply asks whether the unfairly traded imports cause or threaten a material injury or retard the
industry. In other words, concurrent causes do not foreclose the remedy of countermeasures.
This assessment is made using one of two tests. Under the bifurcated version of the injury test,
one need only determine the relevant domestic industry, assess it for material injury, and, if
injury is seen, determine the cause. By contrast, the unitary approach first identifies the harm
caused by unfair imports and then decides whether that harm is material. The ITC has
traditionally followed the unitary approach. Question for Discussion: All things being equal,
which approach to injury analysis is more likely to favor the complaining domestic industry?
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Chapter 11: Regulating Import Competition and Unfair Trade
1. What is the role of a WTO panel in reviewing the safeguard investigations conducted by
a national administrative agency?
2. What kind of “increased quantities” of imports must be found by the investigating
authority in order to impose safeguard measures?
3. Locate the Agreement on Safeguards and read Article 2.Why did Argentina’s exemption
for footwear imported from MERCOSUR countries violate the WTO Agreements?
Answer : Argentina did not evaluate two of the factors listed in Article 2, namely capacity
utilization and productivity for the affected industry. Other factors to be evaluated
include: the share of the domestic market taken by increased imports, changes in the
level of sales, production, profits and losses and employment.
Heavyweight Motorcycles, & Engines & Power-Train Subassemblies
1. In the early 1980s, Honda entered the U.S. motorcycle market with the slogan “You meet
the nicest people on a Honda.” During the next two decades, the Japanese company not
only made motorcycling acceptable and fun but it also introduced motorcycles known for
quality, dependability, and easy starting. By 1982, Japanese motorcycles had reached
their peak sales in the United States. In the meantime, Harley Davidson was plagued with
quality and image problems. Do you think this should have been considered in the ITC’s
recommendations or considered by President Reagan?
2. Assume that a domestic firm is not competitive in price and quality with foreign firms, but
that it is protected from competition by high tariffs. What are the effects of the protection on
the firm in the short term? How might it affect the firm’s competitiveness in the long term?
3. President Reagan later rejected recommendations to place quotas on footwear because of
estimates it would have cost American consumers $3 billion in increased tariffs, and
because there was no indication it would have helped American manufacturers return to
competitiveness. How important do you think cost is to a president’s decision?
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Chapter 11: Regulating Import Competition and Unfair Trade
4. Although the administrative process is handled through a bipartisan, independent
commission (the ITC), why is the process still very political?
1. What is the purpose of comparing the price of salmon sold in the United States to that
sold in Japan?
2. Why did Mares Australes not want the ITA to compare the price of salmon sold in the
United States to the price of the “super premium” salmon it sold in Japan?
3. Explain the problem confronting the ITA in determining “foreign like product.” How did the
court define that term?
4. What are the function of U.S. antidumping duty laws? Explain.
5. While many U.S. jobs were unfortunately at stake in the proceedings, do you not see
irony in the fact that U.S. laws were used to protect a French multinational (Rhodia)
from low-cost dumping by a Chinese company, all while maintaining higher aspirin
prices for American consumers?
1. What is “privatization” and how might it affect a subsidies case?
© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom
use.
Chapter 11: Regulating Import Competition and Unfair Trade
2. Why did the ITA conclude that the EC steel mills were the “same legal person”?
3. What factors should be considered in determining whether the European mills were still
benefitting from earlier subsidies?
6. Answer This question calls for student opinions and conclusions based upon outside
research.
