Slamming the Door on Trade Policy Discretion? The WTO Appellate Body’s Ruling on Market Distortions and Production Costs in EU–Biodiesel (Argentina)

Abstract

This paper presents a legal–economic analysis of the Appellate Body's decision in EU–Biodiesel (Argentina) that the WTO's Anti-Dumping Agreement (ADA) does not permit countries to take into account government-created price distortions of major inputs when calculating anti-dumping duties. In this case, the EU made adjustments to the price of biodiesel's principal input – soybeans – in determining the cost of production of biodiesel in Argentina. The adjustment was made based on the uncontested finding that the price of soybeans in Argentina was distorted by the existence of an export tax scheme that resulted in artificially low soybean prices. The Appellate Body found that the EU was not permitted to take tax policy-induced price distortions into account in calculating dumping margins. We analyze the economic rationale for Argentina's export tax system, distortions in biodiesel markets in Argentina and the EU, and the remaining trade policy options for addressing distorted international prices. We also assess whether existing subsidies disciplines would be more effective in addressing this problem and conclude that they would not.

Subsidy Determination, Benchmarks, and Adverse Inferences: Assessing ‘Benefit' in US–Coated Paper (Indonesia)

“…Zheng (2010: 40) argues that out-of-country benchmarks do not replicate the price that would prevail in an undistorted market in the country under investigation. This view is supported by Horn and Mavroidis (2005: 240) and Crowley and Hillman (2018). Nevertheless, in this case the USDOC's unadjusted out-of-country benchmark was readily accepted by the Panel with no apparent connection or relation to the country of provision, as was previously done by the Panel in US–Anti-dumping and Countervailing Duties (China).…”

Baptists and Bootleggers in the Biodiesel Trade: EU–Biodiesel (Indonesia)

“…Crowley and Hillman (2018) have already recounted the Appellate Body's central reasoning in EU–Biodiesel (Argentina) , which we briefly summarize below. Indonesia argued that, because the EU had taken the same approach to calculating Indonesian producers’ costs as Argentinian producers’ costs, Indonesia should prevail in its main claims for the same reasons Argentina did.…”

“…By using this higher number, the Commission shifted the dumping margins upward in its final decision to a range of 8.8% to 23.3%. 16 As Crowley and Hillman (2018) have noted, Argentina and Indonesia likely imposed DETs in order to move up the value chain by exporting more of a higher value-added commodity (biodiesel) and less of a less valuable commodity (soybeans or palm oil). They also aided their biodiesel industry by granting a de facto subsidy.…”

“…The latter would require reading Article 2.2.1.1, a provision about the records of the investigation's subjects, as authorizing a broader inquiry into background economic conditions. Crowley and Hillman (2018) are right, of course, to note that a tax-distorted input is trade distorting in the same way as countervailable subsidies can be (indeed, as we explain below, the EU ultimately decided to treat the DET as a subsidy under the SCM Agreement). It is also true that governments have increasingly looked to the flexibility afforded by the Antidumping Agreement as a way of addressing non-market situations.…”

Australia — Anti-Dumping Measures on A4 Copy Paper: Opening a Door to More Anti-Dumping Investigations

“…In addition, and most significantly from a legal perspective, the decision marks the first time a WTO panel has ruled on the meaning of "particular market situation" as per Article 2.2 of the WTO Anti-Dumping Agreement (AD Agreement). 3 The debate on the feasibility and implications of using AD to tackle subsidies is not new to the literature (see, for instance, Crowley and Hillman, 2018;Fischer and Meyer, 2020). In this paper we focus on a novel dimension of this debate and argue that the interpretation of "particular market situation" in Article 2.2 of the AD Agreement offers an avenue for AD to be considered as an (optimal) trade policy tool for a downstream industry to tackle a subsidy issue in a foreign upstream market.…”