The NAFTA alternative: saving KORUS FTA dumping appeals from the dumps.

Author:Powell, Czarina
Position:Free Trade Agreement, 2003, United States-South Korea
 
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ABSTRACT: Antidumping duties are a trade remedy often utilized against producers in the United States' own bilateral trading partners. Because of Chevron deference, foreign companies are at greater risk of being branded "dumpers" simply upon the onset of a petition. On March 15, 2013, the United States celebrated the one-year anniversary of the signing into force of the Korea-US (KORUS) Free Trade Agreement and its promise to eliminate barriers and tariffs. This article acknowledges the importance of the Republic of Korea as a U.S. trading partner, and proposes an alternative appeals system for dumping disputes between the two countries; one that embodies the spirit of the WTO Agreement, while still protecting American industries against harm. This article argues that the system created in the NAFTA binational panel is the fairest and more effective method of resolving dumping disputes. This article calls for the extension and implementation of NAFTA binational panels for all KORUS FTA dumping disputes.

TABLE OF CONTENTS I. Introduction II. Background: The United States' Anti-dumping System A. The "interested party" petition process B. A Discretionary Investigation Process C. The Appellate Process: Chevron Deference Solidifies Agency Discretion D. Changed Circumstance and The Sunset Clause III. The Importance of U.S. Free Trade Partners to its Prosperity A. Korea: KORUS FTA B. Canada and Mexico: NAFTA, a Parallel System IV. The NAFTA Binational Panel: An Effective Alternative Appellate Mechanism V. The Binational Panel: Embodiment of the WTO Spirit VI. Feasibility of Implementing a Binational Panel for the KORUS FTA A. Overcoming Differences 1. Language 2. Legal Systems B. Trade Practitioners Versus Judges C. Scrapping the System Entirely: Impractical VII. Conclusion: The Untenable Status Quo I. INTRODUCTION

"The U.S. International Trade Commission (ITC) today unanimously ruled that unlawful pricing by Samsung and LG caused injury to the U.S. clothes washer industry.... Whirlpool Corporation (NYSE: WHR) welcomes today's decision, which is in response to anti-dumping and anti-subsidy petitions filed by the company in December 2011 on behalf of the U.S. appliance industry." (1) LG responded by stating "LG respects the work the ITC staff and commission have put into this determination, but we disagree with the result, which will harm US retailers and consumers." (2)

On January 23, 2013, the Department of Commerce ("Commerce") and the United States International Trade Commission ("ITC") issued an antidumping duty order against the Republic of South Korea, on all large residential washers from LG Electronics, Inc., Samsung Electronics Co., Ltd., and Daewoo Electronics Corporation. (3) Commerce, from its antidumping investigations, determined that the Korean corporations had sold their products at "less-than-fair value" in the United States, while the ITC found that the domestic industry was materially injured. (4) Marc Bitzer, President of Whirlpool Corporation, the American corporation that had initiated the antidumping petition against its Korean competitors, hailed the antidumping duty as "a great victory for the U.S. appliance industry" (5) and stated that Whirlpool's decision to petition for the trade remedy was premised on "defending] the integrity of the global trading system." (6)

At first blush, the issue seems cut and dry: a foreign firm "dumps" its product in the U.S. market for a lower price than it sells at home; U.S. firms struggle to compete with this unfair trade, leading American companies to be injured in their own market. Upon further review, the broad grant of discretion bestowed upon Commerce and the ITC to determine (1) whether the foreign firm has "dumped," its goods in the United States for less than they have sold them at home, (7) and (2) whether a U.S. industry was materially injured by this "dumping," (8) reveals flaws, and because of the high level of Chevron deference (9) granted to these agency decisions by the Court of International Trade and the Court of Appeals for the Federal Circuit, the dumping petition sticks: once a dumper, always a dumper.

This article will argue that the North American Free Trade Agreement ("NAFTA") binational panel process under NAFTA Ch. 19, created to resolve antidumping disputes between the United States, Canada, and Mexico, are an effective dispute mechanism that should be instituted and applied to antidumping appeals between the United States and South Korea. The five-person binational panel, as an alternative to the current U.S. domestic judicial review system, is more in-tune with World Trade Organization ("WTO") priorities and would give more effect to the spirit of the Korea-United States Free Trade Agreement ("KORUS FTA") and free trade at large, fostering stronger relations with the Republic of Korea, one of the largest U.S. trading partners, while still protecting domestic markets against harm. The focus of this article is on the special binational panel appeals process the United States has carved out for Canada and Mexico, and the argument that these procedures should be extended to antidumping disputes between the U.S. and South Korea.

Part II of this article will assess the background of the United States' current antidumping dispute system. Part III will analyze the importance of United States' trade relations with South Korea and parallel it with the relations the U.S. has with Canada and Mexico. Part IV will analyze the NAFTA binational panels as an effective alternative antidumping appeals system. Part V will discuss the spirit of the WTO Agreement and how binational panels work better to uphold the ideas of free trade. Part VI will argue for the feasibility of implementing a binational panel for the United States and South Korea, and Part VII will conclude with why the antidumping binational panel is needed in lieu of the status quo.

  1. BACKGROUND: THE UNITED STATES' ANTI-DUMPING SYSTEM

    The United States assesses dumping remedies according to Title VII of the Tariff Act. (10) Dumping is defined as the sale of foreign merchandise in the United States "at less than its fair value" that causes material injury to or retardation of a U.S. industry. (11) If the administrative agencies tasked with investigating dumping deem that dumping has taken place, they assess an antidumping duty to offset the difference between the product's "normal value" and the "less than its fair value." (12) The antidumping duty is levied after making "adjustments for differences in the merchandise, quantities purchased, and circumstances of the sale." (13)

    1. The "interested party" petition process

      While Commerce may initiate an antidumping investigation "on its own motion," (14) it "rarely does." (15) Instead, a domestic company may file a petition with Commerce, or simultaneously with the ITC as an "interested party" on behalf of an industry. (16) Private parties initiate more than ninety percent of all the antidumping cases filed. (17) Once a party files a petition, the petition then proceeds through Commerce and the ITC according to the statutory timetable. (18) While the statute allows for interested parties to launch petitions of their own, it is hard to delineate what part of the petition is done for altruistic reasons and what part is done to potentially curb the success of a foreign competitor. (19) There are underlying notions that "antidumping is not about remedying unfair trade practices ... but about protecting the domestic products of the importing country." (20)

      Whirlpool, in the example given at start of this article, signed a petition on March 11, 2011 directed to James R. Holbein, Acting Secretary of the ITC, requesting that Korean and Mexican corporations be investigated for their "Bottom Mount Combination Refrigerator-Freezers" originating in the Republic of Korea and Mexico. (21) While it seems anti-competitive for a domestic U.S. company to petition the U.S. government for relief against a foreign competitor, the Noerr-Pennington doctrine gives private parties immunity "from antitrust scrutiny when they lobby the government for certain benefits, even if the lobbying inhibits competition." (22) Whirlpool Corporation would be shielded from accusations that it initiated the antidumping petition against South Korean corporations due to "trade-restraining behaviors." (23) There is a "sham" exception to this protection. However, the exception has been limited to applying only to the antidumping process, not the outcome. (24) This limitation lends fuel to the argument that those industries that petition against dumping on the basis of "unfair trade" are in fact, seeking [unfair] protection from foreign rivals. (25)

      It is this self-interested petitioning that launches antidumping investigations and because of the deference the federal courts give to administrative agencies, foreign competitors are essentially branded with a scarlet "D" once a U.S. domestic industry views it as a threat.

    2. A Discretionary Investigation Process

      Once a petition has been initiated, Commerce and the ITC decide whether to pursue an investigation by making preliminary determinations as to (1) whether there is dumping, and (2) whether a U.S. industry has been materially injured by it. (26) While the timetable for the preliminary and final determinations is systematic and structured, (27) Commerce and the ITC, as administrative agencies, are granted wide, discretionary berth when determining the application of the antidumping statutes. (28)

      U.S. antidumping duties have been attacked as flawed on multiple fronts, (29) and although the specifics of the issues are beyond the scope of this article, they are numerous and further fuel the argument that foreign companies are not afforded an effective appeals system because these agency decisions are upheld.

    3. The Appellate Process: Chevron Deference Solidifies Agency Discretion

      Once the DOC or the ITC has issued...

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