The Sunset Review is Being Turned on Its Head

With relatively little notice, the United States has begun to implement one of the more important provisions of the Uruguay Round global trade agreement -- a provision calling for sunset reviews of anti-dumping cases.

Anti-dumping laws seek to block sales of imports in the U.S. market at below the price in their home market or below the cost of production. Sunset reviews seek to weed out anti-dumping orders that are no longer necessary.

Unfortunately, the approach taken thus far to implementing these reviews threatens to create a far different outcome.

In essence, the World Trade Organization sunset measure requires the administrative authorities responsible for implementing anti-dumping laws -- in the United States, the Commerce Department and the U.S. International Trade Commission -- to review all outstanding anti-dumping orders after five years. The WTO instructs authorities to determine whether dumping and injury from dumping would likely recur if the anti-dumping order were terminated.

Obviously, this is not a simple determination. The initial decisions in anti-dumping cases can be based upon verifiable facts like market prices and import levels. In sunset reviews, however, the administering authorities are called upon to look into a crystal ball and imagine a hypothetical world in which the order does not exist. By its very nature, this calls for a certain amount of speculation and supposition.

It is debatable whether sunset reviews were even necessary in the United States. Even before the sunset reviews, it was U.S. practice to look at dumping margins regularly through administrative reviews and consider changes in the order at any time through changed circumstances reviews. If dumping ceased, anti-dumping orders were automatically eliminated.

Despite this, in the Uruguay Round negotiations many countries sought extra assurances on the topic of outdated orders. In truth, many of these countries and some of the domestic supporters of sunset reviews would probably have preferred to eliminate anti-dumping laws entirely.

The specific language adopted in the WTO on sunset reviews and the legislation that the U.S. Congress wrote to implement the provision, however, focus carefully only on the topic of unneeded or outdated orders, while leaving in place those still needed to block dumping.

The U.S. Commerce Department is charged with determining if dumping is occurring in anti-dumping cases and, in sunset reviews, if it is likely to recur. Since the Commerce Department was doing regular administrative reviews of dumping determinations before sunset reviews, its task is not too difficult.

Using much of the data already considered in administrative reviews, the Commerce Department has been moving forward on sunset reviews in much the same way that Congress intended.

The results at the ITC, however, have been quite different. The ITC has found injury likely to recur in about three-quarters of the cases in which the domestic industry sought continuation of the order, 69 of 94. (In 79 other cases, the order was terminated because the domestic industry expressed no interest.)

But these numbers deserve a closer look. In most of the cases that the ITC has found injury likely to recur -- 58 of the 69 affirmatives -- there has been no opposition to extending the order. The affected foreign companies did not bother to appear at the ITC, and the request of the domestic petitioner to continue the order was unopposed.

In cases in which the foreign companies chose to challenge the sunset review, they have prevailed well over half the time in their effort to have the anti-dumping order terminated.

This is exactly the opposite of the intended result of sunset reviews. In many cases in which the foreign company chose not to call for termination of the anti-dumping order, there was little real risk of dumping recurring. In many cases, the foreign dumper had left this industry or abandoned the U.S. market in the intervening years. In at least some of these cases, terminating the order may have made sense.

In those cases where the foreign companies previously found to be dumping chose to contest the order and spend tens or hundreds of thousands of dollars to make their case, there is an obvious intent to aggressively re-enter the U.S. market.

Further, in many sectors in which dumping has been a common problem -- steel, cement and various agricultural products -- dumping is virtually certain to recur.

Here, dumping is the result of a protected home market that keeps home market prices very high -- well above the open market price. In these cases, a foreign company wishing to enter the U.S. market must cut prices far below its protected home market price, the definition of dumping.

Sunset reviews were intended to eliminate unnecessary anti-dumping orders. Unfortunately, as they are now being implemented by the ITC they run a high risk of eliminating badly needed orders while leaving in place orders that are no longer needed.

This is exactly the opposite of the intent of the sunset reviews.