Dumping Fuel

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.

EU —Anti-Dumping Measures on Biodiesel from Argentina

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.