The Dispute
Settlement Body (DSB) of the WTO has recently (25 April 2014) instituted three
panels – one at the request of Argentina on European Union’s anti-dumping
measures on biodiesel from Argentina, and two requested by the Dominican
Republic and Cuba, respectively, against Australia’s plain packaging
requirements on tobacco products. We look at a summary of the first of these three
disputes in this post (the anti-dumping measures on bio-fuels). We shall look
at the tobacco packaging requirements in the next post as well as catch up on
the status of another panel established last year, on the request of the US
against India’s Solar Mission.
This was
Argentina’s second request to the DSB to establish a panel on this dispute. In
May 2013, Argentina filed a formal complaint against the EU with the World
Trade Organization, challenging European rules for the importation and
marketing of biodiesel. The complaint concerned EU measures that were designed
to promote renewable energy and reduce greenhouse gas emissions, as well as
European subsidies on domestic biodiesel industry. The EU rejected the first
request for consultation.
On 19 December
2013, Argentina requested consultations with the European Union regarding (a) anti-dumping
measures imposed on biodiesel originating in Argentina; and, (b) a provision in
Council Regulation (EC) 1225/2009 of November 2009, which refers to the
adjustment or establishment of costs associated with the production and sale of
products under investigation in the determination of dumping margins.
Provisions
regulating anti-dumping measures are found in Article VI of the GATT as well as
the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (The
Anti-dumping Agreement).
Dumping (as
defined by the GATT) occurs when “products of one country are introduced into
the commerce of another country at less than the normal value of the products”.
Such dumping is prohibited if it causes or threatens material injury to an
established industry in the territory of a contracting party or materially
retards the establishment of a domestic industry (GATT Article VI).
Article VI also
provides a test for products being introduced at ‘less than its normal value’.
Dumping occurs when the price of the exported product is either less than the comparable price for the like
product in the exporting country, or, in the absence of such domestic
price, is less than either the highest comparable price for the like
product for export to any third country or the cost of production of the product in the country of origin plus a
reasonable addition for selling cost and profit (GATT Article VI.1).
This is echoed
in Council Regulation (EC) 1225/2009, whose provisions have also been disputed
by Argentina. Through the Council Regulation, the EU instituted punitive trade
measures on Argentinian exports on biofuel. In May 2013, the European
Commission set preliminary anti-dumping rates between 6.8 percent and 10.6
percent on Argentinean exporters. According to Argentinian estimates these
import taxes would range from €217 to 246 ($298 to $336) per metric ton. The
anti-dumping measures will apply for the next five years.
These measures were
instigated by a complaint from European biodiesel producers who claim that
foreign exporters in Argentina benefit from a system of differentiated export
taxes on raw material to biofuel. According to subsequent EU investigations,
Argentina imposes high export taxes on the soya beans, soybean oil and palm oil
used in biodiesel production. As a result companies exporting biofuel from
Argentina, have an unfair advantage because they have access to raw materials
at prices that are artificially low compared to world market prices (The EU, in
its report, also took similar issue to Indonesian exports). A statement by the
EU categorized these export taxes as ‘structural raw material distortions’ and
implied that such biofuel distortions are a threat to the EU’s green energy
sector.
The Argentine
view on the issue is of course, different. According to a press release by the
Argentinian Foreign Ministry, Argentina became the main provider of biodiesel
to the EU, with sales of 1.847bn dollars in 2011, which represented 13% of all
Argentine exports to the EU.
According to the
press release, “The biodiesel sector in Argentina outstands for its
sustainability and high level of development, scale and integration along the
whole production chain, and is currently one of the most efficient producers
globally”, while the EU industry is “highly over dimensioned and since 2012 the
EU has been involved in different protectionist measures with the purpose of
excluding from the European market the Argentine bio-diesel”.
As is often the
perception with such North-South altercations, the Argentinians are recognizing
this as “protectionist barriers imposed by the EU” and another effort to harm
developing country interests.
However, whether
this is a protectionist policy or not may be a moot point as the intent behind
the anti-dumping measures, as well as the act perceived as dumping may not be a
factor, as long as the provisions of GATT VI and the anti-dumping Agreement are
met.
In US — 1916 Act the AB held that, the intent
with which action against dumping is taken is not relevant to the determination
of whether such action is ‘specific action against dumping’ of exports.
Similarly, the AB also held that neither the intent of the persons engaging in
‘dumping’ nor the injurious effects that ‘dumping’ may have on a Member’s
domestic industry are constituent elements of ‘dumping’.
The EU has
claimed that its measures are in conformity with the WTO agreements. Australia,
China, Malaysia, Norway, the Russian Federation, Saudi Arabia, Turkey and the
United States reserved their third-party rights to participate in the panel’s
proceedings.