Catfish, shrimp, and the WTO: Vietnam loses its innocence.

• Author: Cong, Do Thanh

ABSTRACT

This Article explores the advantages that WTO membership brings to Vietnam in connection with antidumping disputes. In particular, this Article examines the trade relationship between Vietnam and the United States, including disputes over catfish and shrimp, prior to Vietnam's accession to the WTO. The Article concludes that Vietnam's WTO membership and experience with catfish and shrimp will serve exporters well when new trade disputes arise. Vietnamese exporters will better understand their options and will be better equipped to defend themselves in antidumping disputes.

TABLE OF CONTENTS I. BACKGROUND ON DUMPING A. Definition of Dumping B. Classification of Dumping C. Consequences of Dumping II. THE UNITED STATES-VIETNAM BILATERAL TRADE AGREEMENT (BTA) A. Overview of the United States-Vietnam Trade Relationship and the BTA B. The Regulation of Antidumping in the BTA III. DISPUTES BETWEEN THE UNITED STATES AND VIETNAM INVOLVING DUMPING A. Catfish Case B. Shrimp Case IV. CHALLENGES TO VIETNAMESE EXPORTERS IN ANTIDUMPING CASES A. Reasons Peculiar to Vietnamese Exporters and Producers B. Policy Differences for "Nonmarket Economies". C. The Protectionist Characteristic of U.S. Policy D. The Lack of an International Mechanism to Resolve Dumping Cases V. WTO REGULATIONS ON ANTIDUMPING A. Determination of Whether Dumping Has Occurred B. Determination of Injury C. Initiation of Investigation VI. THE EXTENT TO WHICH VIETNAMESE EXPORTERS MAY BENEFIT FROM THE REGULATIONS AND RULINGS OF THE WTO ON ANTIDUMPING VII. CONCLUSION In 2007, the Socialist Republic of Vietnam became a member of the World Trade Organization (WTO), (1) an event that brought both opportunities and challenges. As a WTO member, Vietnam must ensure that its legal system is consistent with the organization's regulations, (2) and other WTO members may challenge Vietnam if its laws and policies are inconsistent with their own rights and obligations under WTO Agreements. (3) Vietnam must treat goods and services from other WTO members equally and no less favorably than Vietnamese goods and services; in return, Vietnam is entitled to require other WTO members to accord the same treatment to Vietnamese goods and services. (4)

In 2000, Vietnam and the United States signed a Bilateral Trade Agreement (BTA). (5) As a result, the export of Vietnamese aquaculture products to the United States increased significantly, and some of these products began to compete with American aquaculture products, most notably catfish and shrimp. Consequently, the Catfish Farmers Association of America (in 2001) and the Southern Shrimp Alliance (in 2004) filed petitions against Vietnamese exporters. (6) These petitions alleged that Vietnamese catfish and shrimp products were being dumped in the U.S. market. (7) After investigating the allegations, the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) found that dumping had occurred, causing injury to American catfish and shrimp farmers. (8) The DOC imposed heavy antidumping duties on Vietnamese catfish and shrimp companies. (9)

American antidumping laws and the processing of the antidumping cases by the DOC and ITC were widely criticized. However, at that time, Vietnam was not yet a member of the WTO. Therefore, Vietnam could not challenge the antidumping decision under WTO regulations. This is no longer the case, however, because Vietnam has joined the WTO. On February 2, 2010, upon request of the Vietnam Association of Seafood Exporters and Producers (VASEP), the Vietnamese government sent a request to the commercial representative of the United States at the WTO and initiated a WTO adjudication procedure with respect to the U.S. antidumping tariffs on Vietnamese frozen shrimp. (10)

This Article argues that WTO membership advantages Vietnam in antidumping disputes. Part I provides background on dumping. Part II summarizes BTA regulations that relate to dumping and analyzes the catfish cases and the shrimp cases. Part III studies the challenges to Vietnamese exporters and producers in antidumping disputes. Part IV and Part V analyze WTO antidumping regulations and discuss which parts of WTO antidumping regulations Vietnam may rely upon in future antidumping cases.

1. BACKGROUND ON DUMPING

   1. Definition of Dumping

      The term "dumping" refers to price discrimination in international business transactions. (11) A classical analysis defined dumping as "price differentiation in the form of price discrimination." (12) One form of dumping occurs when an exporter sells goods at a lower price in a foreign country than in its domestic market. (13) This type of dumping often occurs when the domestic market and the foreign market are geographically isolated or when there is a difference in the demand between these two markets. (14) A second form of dumping involves the sale of goods below the cost of production. (15) This type of dumping occurs when producers sell goods at a price below production cost and make profits later, when they achieve market dominance. (16)

      Dumping is different from subsidization. Dumping is an activity of the private sector, while subsidies are provided by governments. (17) This difference leads to a distinction between dumping policies and subsidization policies. An exporting company's government may not be directly involved in antidumping cases. On the other hand, measures dealing with subsidies often involve diplomacy. (18)

   2. Classification of Dumping

      Generally, dumping can be classified as sporadic dumping, intermittent dumping, or continuous dumping. Sporadic dumping occurs when exporters sell an overstock in a foreign market at a price below the domestic price in order to maintain a domestic price structure. (19) Sporadic dumping often occurs when an exporter sells perishable goods. (20) Intermittent dumping occurs "steadily and systematically for a period of limited duration," (21) and it may be used when an exporter wants to gain access to a foreign market by setting prices below production costs. (22) Continuous dumping occurs when companies produce a large number of items to reach an economy of scale in order to maintain their domestic price structure. (23) Their underlying strategy is to sell their goods in foreign markets at prices below the domestic price to assure overall profits. (24)

   3. Consequences of Dumping

      Dumping may benefit exporters, but it causes misallocation of resources in the exporter's own country. (25) Dumping may injure the markets of third-party countries as well as those of the importing market. (26) Dumping in the importing market harms competing producers and may cause misallocation of resources. (27) Dumping also can cause the loss of market opportunities for producers in the importing market. (28) The potential harm extends to producers of alternative goods, producers who use dumped products in their own production process, and manufacturers of components for local production. (29) If competing producers from third-party countries export similar products but do not dump, they may suffer injury as well.

      On the other hand, dumping may benefit consumers in the importing countries because consumers can buy goods at a lower price. (30) However, whether the benefit to consumers in the importing country outweighs, at a macro level, the damages suffered by the importing country's industries depends on the type of dumping. In sporadic dumping, the benefit to consumers perhaps outweighs the injury suffered by producers in the importing country. (31) In intermittent dumping, the damages to importing producers are potentially greater and more lasting than the benefits to consumers. (32) In the case of continuous dumping, the effect is controversial. If related industries in importing countries can adjust themselves, continuous dumping may provide beneficial competition. (33) However, continuous dumping can cause unemployment in importing countries, and this negative effect may outweigh other benefits. (34) Generally, dumping is favorable to consumers and importers in the importing country and promotes competition, but dumping can result in predatory discrimination against local producers. (35)

2. THE UNITED STATES-VIETNAM BILATERAL TRADE AGREEMENT (BTA)

   1. Overview of the United States--Vietnam Trade Relationship and the BTA

      From the end of the Vietnam War until 1994, there was virtually no trade between Vietnam and the United States because of the U.S. embargo of Vietnam. (36) In July 1993, international financial organizations, including the International Monetary Fund and the World Bank, resumed activities in Vietnam. (37) In February 1994, as a result of the positive attitude of the Clinton Administration, the U.S. trade embargo was lifted. (38) However, because of the application of the Jackson--Vanik Amendment to Vietnam, the United States did not grant most favored nation status (MFN status) to Vietnam. (39)

      The lack of MFN status was crucial to Vietnam. It created a trade barrier that impaired the competitiveness of Vietnamese goods in the U.S. market. (40) In March 1998, in an effort to further normalize trade relations between the two countries, President Clinton waived the Jackson--Vanik Amendment's application to Vietnam. This waiver was renewed annually until December 2006, when the United States formally granted Vietnam permanent normal trade relations (PNTR), which replaced MFN status in U.S. trade. (41) The BTA was signed on July 13, 2000 and entered into force on December 10, 2001. (42) As a result, Vietnam obtained access to the U.S. market under PNTR, and in exchange, Vietnam agreed to reduce trade barriers to goods, grant access to U.S. service companies, and develop domestic laws and regulations to protect intellectual property rights. (43) The agreement also guaranteed direct investment and transparency. (44) The BTA was intended to promote the well being of Vietnam and strengthen U.S. foreign policy. (45)

   2. The...