Constructivism, embedded liberalism and anti-dumping - Canadian public interest inquiry as case study of embedded liberalism.

Author:Aouri, Wissam

ABSTRACT: The majority of proposals for international anti-dumping reform focus almost entirely on the relevant economic factors--consumer welfare losses and gains. Therefore, almost all proposals come to the exact same conclusion; in light of the enormous welfare losses suffered by domestic consumers, international anti-dumping law should be repealed in its entirety, or at least replaced by some form of international competition law. However, this analysis views the issue of anti-dumping law through the constructivist lens, and more specifically, the embedded liberalism view of international trade law. From this perspective, economics alone does not grasp the constitutive realities at play in anti-dumping law; domestic perspectives of legitimacy and fairness shape the contours of international anti-dumping law and these constitutive norms espouse a view that protectionism, in a variety of different shapes and forms, is as much a part of international trade law as the traditional laissez-faire liberalist approach. This article concludes that public interest inquiries, which form part of a small number of countries' anti-dumping laws, embrace the constitutive realities at play in antidumping law and provide an opportunity for development of legitimate international antidumping reform. This article examines the Canadian approach to public interest inquiry in anti-dumping, including recent developments. This article concludes that the current Canadian experience demonstrates that embracing a public interest inquiry as part of anti-dumping reform may provide true hope for future development based on an embedded liberalism view of international trade relations.

TABLE OF CONTENTS I. Introduction A. The Economics of Anti-dumping B. Specific Issues Surrounding International/Domestic Anti-dumping Law C. The Language of 'Unfairness' II. Constructivism and Embedded Liberalism A. Constructivism B. Embedded Liberalism III. The Constructivist Perspective: Anti-dumping, Embedded Liberalism, and the public Interest IV. Canadian Anti-dumping Law A. The Canadian Perspective: Political-Economic Statistics Regarding Anti-dumping and 'Protectionism' B. The Application of s. 45--'Public Interest' C. The Constitutive Dimension of Canadian Anti-dumping Practice V. Embedded Liberalism and Possibilities for Reform A. Canada and the International Forum B. Canada and the Domestic Forum VI. Conclusions and Possibilities for Future research I. INTRODUCTION

  1. The Economics of Anti-dumping

    The issue of anti-dumping has become one of the most prevalent research topics for international economics and legal scholars today. This should not be surprising given the ubiquitous nature that this trade remedy has developed. Many articles and research papers detail the growing concerns over the pervasive use of anti-dumping across the globe, by developed and developing countries alike. (1) The majority of criticisms are directed towards the poor economic foundation of anti-dumping; while often times referred to as a form of 'international competition law', anti-dumping bears little legal or economic resemblance to domestic competition policies. (2) Competition law focuses on 'predatory pricing', the selling of goods below cost by a firm attempting to monopolize a market. However, selling below cost is a common occurrence in market economies, and cannot be considered predatory without the requisite intent to unduly lessen competition. Indeed, economists have paid scant attention to predatory pricing given the numerous other more effective and efficient methods of monopolizing markets. (3)

    However, anti-dumping treats all goods imported at a price lower than the common selling price in the exporting country as being 'dumped', (4) and if 'injury' (5) to the importing market is proven, the margin between the two prices is accommodated for by an imposed dumping duty. (6) In many instances, it is consumers and down-stream users who bear the burden of welfare losses by paying higher prices for the goods in question. This also creates dead weight costs to consumers who are required to subsidize the procedural mechanisms to prevent anti-dumping while accumulating no welfare benefits in instances where no anti-competitive behaviour is present. (7) At least one study estimates that the net losses in consumer welfare caused by the imposition of anti-dumping duties in the United States and the E.U. may be as high as two to four billion dollars USD annually. (8)

    The economic statistics regarding the international proliferation of antidumping paint a harrowing picture; what was once a meagre tool for a handful of 'traditional users' (9) has become a widespread phenomenon embraced by developed and developing countries alike. However, as Prusa indicates, "the sharp increase in new users may understate how concentrated the use of [antidumping] was until recently." (10) Not only has anti-dumping use become dominated by the 'new users', the proliferation of the worldwide use of antidumping actions has been driven almost entirely by 'new users'." Traditional users may now account for less than half of global anti-dumping activity. (12) New users file anti-dumping cases approximately 15-20 times more frequently than traditional users, (13) and countries such as India and Argentina display a filing intensity in excess of 1000 times that of traditional users. (14) Undoubtedly, global anti-dumping activity is skewed between developed and developing countries, with poorer countries such as India, China, Argentina, and Mexico dominating anti-dumping use. (15)

    Behind the simple statistics regarding use and proliferation rests a plethora of political and macroeconomic factors intertwined in the global anti-dumping activity. At least one study indicates that in Mexico, the number of anti-dumping complaints and the likelihood of an injury determination increase in proportion with the appreciation of real exchange rates, widening of current account deficits, or domestic manufacturing output slow down. (16) Aggarwal states that for both developed and developing countries, a variety of macroeconomic factors lead to increases in anti-dumping activities. Pressures caused by adverse trade balance increase the number of anti-dumping initiations in low and lower middle income countries. (17) Furthermore, 1% decline in tariff rates lead to an 8% increase in antidumping initiations in developing countries. (18) Finally, in all Organisation for Economic Co-operation Development countries, a 1% decline in industrial growth rate results in a 6-7% increase in number of anti-dumping initiations. (19)

    Furthermore, there is substantial statistical evidence that 'retaliation' plays a considerable role in anti-dumping activity. (20) Research indicates that every one percent point increase in anti-dumping cases reported against low and lower middle-income results in a fourteen to sixteen percent increase in anti-dumping initiations. (21) While at least one study seems to indicate that there is no 'North-South' divide in retaliation measures, (22) motivations for retaliation may differ between the two groups. While traditional users are more likely to file against new users in order to protect themselves from deflected trade, (23) new users are more likely to file against traditional users in order to protect themselves from trade surges resulting from increased anti-dumping activity. (24)

  2. Specific Issues Surrounding International/Domestic Anti-dumping Law

    Prusa enumerates the problematic factors involved in the application of antidumping law. (25) In addition to the 'bad economics' of anti-dumping, he addresses certain contentious procedural factors as well. Primarily, the World Trade Organization ("WTO") Anti-Dumping Agreement ("ADA") leaves tremendous discretion to domestic authorities in implementing anti-dumping laws. (26) This has led to international inconsistencies in the methods used to determine dumping, domestic injury, and the imposition of duties. (27) This discretion appears particularly egregious when viewed in light of the seemingly unreasonable dumping duties imposed by countries with lax and non-transparent administrative authorities. (28) Furthermore, anti-dumping is the best option for industries seeking protection from foreign competition. Unlike the safeguard methods allowed under WTO law, anti-dumping petitions can be filed by a single interested party rather than the country as a whole, and duties are imposed against a single exporting country rather than the erga omnes application of safeguards. (29) Moreover, while safeguards require the implementing country to offer concessions to affected states, anti-dumping imposes no such obligation. (30)

  3. The Language of 'Unfairness '

    Perhaps the central tenet of anti-dumping, which lays the foundation for its perceived legitimacy despite the plethora of criticisms, is what Finger and Zlate refer to as "the inflammatory rhetoric of foreign unfairness". (31) The Doha Round reform proposals to the previously enumerated procedural infirmities of antidumping laws are what Finger and Zlate label as "thinking within the box." (32) Rule shuffling, which favours one country or another while still allowing the foundation of the problem to remain intact, effectively stifles any possibility of qualitative or quantitative progress towards reducing the spread of anti-dumping usage. (33)

    Claims of (un)fairness in international trade may provide the only legitimacy for maintaining international anti-dumping laws. Ironically, in contemporary international law, legitimacy is typically used as justification for acting outside of the law, a 'teleological suspension of the ethical,' (34) in circumstances such as humanitarian intervention. However, the perception of illegitimate or 'unfair' trade practices is used to warrant the imposition of anti-dumping laws and duties in instances where it appears there is no economic justification for...

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