Law and Economics of Contingent Protection in International Trade is the third volume in the series Columbia Studies on WTO Law and Policy. The twenty-five authors invited to contribute provide an overview of the regulatory framework of contingent protection in the World Trade Organization (WTO). The book’s eleven chapters present a legal and economic analysis of subsidies and countervailing duties, antidumping, and safeguards.
The book begins with a basic introduction to the World Trade Organization’s (WTO’s) multilateral disciplines on subsidies related to international trade in goods and the unilateral measures taken to respond to these subsidies, countervailing duties (CVDs). The authors explain the historical and legal context of the Agreement on Subsidies and Countervailing Duties (SCM Agreement), and provide a legal analysis of its main provisions complete with relevant case law.
One author criticizes the WTO decision to eliminate the category of nonactionable subsidies, subsidies against which no action can be taken by affected Members, and argues for the current SCM Agreement to restore this category of protection. Through a case study, the authors highlight the inability of the current legal framework to deal with unusual cases and offer insight from economic theory regarding how to better address these issues.
In examining the WTO rules and decisions concerning nonagricultural export subsidies, the authors attempt to determine why disputes in this area are so common. The authors explain the economic disadvantages of these export subsidies as well as the political economy justifications for their proliferation in current international trade. Although export subsidies are prohibited under the existing WTO framework, enforcement is inconsistent due to disagreements regarding the proper identification and definition of export subsidies and the appropriate level of penalty for their use in violation of WTO policies. The authors present opposing views on whether and to what extent an absolute prohibition on export subsidies should exist.
Next, the authors provide an examination of the WTO dispute resolution process as seen in the high-profile Boeing-Airbus litigation. One author suggests that Boeing, or one of its subsidiaries, might have fared better had it brought its complaint alleging the incompatible granting of state aid by European Community (EC) Member States to Airbus before the EC Commission rather than seeking redress in the WTO system. Conversely, another author exposes some of the inherent difficulties multinational corporations face in suits before the EC, notwithstanding the benefits of the EC’s state aid rules.
In 1994, WTO Member States adopted the WTO Anti-Dumping Agreement. An overview of its provisions is provided as well as the authors’ conclusions regarding the Members’ use of the WTO antidumping laws. Commenting on these measures, one author presents the political and practical rationale for engaging in dumping, exposing the flaws in the WTO’s regulatory framework and implementation process. Another author offers similar support for dumping, criticizing the Anti-Dumping Agreement for lacking economic justification. He notes that certain pricing and sales decisions, although grounded in basic economic theory, would be sanctionable nonetheless under the WTO antidumping laws.
An author explains the role of antitrust statutes, discussing the different treatment of price discrimination (“dumping”) by antitrust law as opposed to trade law. While antitrust law encourages price competition, this author describes the conflicting view of trade law, which condemns dumping and predatory pricing. Other authors then examine the rules of origin in antidumping law, focusing on their use in the system adopted by the European Union. These authors express their agreement that the use of harmonized nonpreferential origin rules in the context of antidumping proceedings remains desirable, but that to realistically achieve this goal, third country anticircumvention legislation must be established as well.
The Uruguay Round of trade negotiations brought a seemingly major step to constrain abuses in antidumping practice. This author explains, however, that the WTO Appellate Body has interpreted the sunset review rules in the WTO contract in such a way that this supposed restriction is more of a flexible test permitting duties to remain in place long after the date set for their termination. Expanding upon this conclusion, another author contends that the sunset review rules, which require antidumping orders to be terminated unless domestic investigative authorities show that injurious dumping would resume without such orders, can be easily manipulated. This author illuminates the discrepancy in these decisions through his discussion of sunset reviews in the United States.
The last section of the volume focuses on safeguards. The author provides an overview of the WTO Agreement on Safeguards, examines the conditions for imposing safeguard measures, and illustrates some specific issues relating to the application of such measures. This author also discusses the interpretation of the Agreement’s provisions by WTO Panels and the Appellate Body, exposing the Agreement’s shortcomings and the failure of these tribunals to cure the imperfections. Another author favors selective safeguards, criticizing the arguments offered in support of a nondiscriminatory application of safeguard measures as not convincing within the framework of the WTO Agreement.
A third author commenting on this topic contends that the structure of the Agreement and its subsequent interpretation by the Appellate Body are lacking an underlying economic rationale. The need for safeguards in a trade agreement is advocated by another author, presenting empirical and theoretical data on the use of safeguards. This author then tests two hypotheses with this data, concluding that the inclusion of a safeguard clause in the WTO Agreement may have facilitated greater tariff reductions. Finally, the book concludes with a discussion of the three rationales advanced by the functionalist scholarship regarding the purpose of safeguards and discourages continued efforts to determine why safeguards are needed in trade agreements.
Because this volume contains very little, if any, explanation of complex foundational concepts, the intended audience is likely comprised of individuals familiar with basic economic principles and who possess an understanding of international trade.
Law and Economics of Contingent Protection in International Trade, edited by Kyle W. Bagwell, George A. Bermann, and Petros C. Mavroidis. New York, New York: Cambridge University Press, 2010. Pp. 424 (hardcover).
Kyle W. Bagwell is the Donald L. Lucas Professor of Economics at Stanford University. Professor Bagwell is also a reporter for the American Law Institute, in its study “Principles of International Trade: The WTO” and a Research Associate at the National Bureau of Economic Research (International Trade Program). George A. Bermann is the Jean Monnet Professor of European Union Law and the Walter Gellhom Professor of Law at Columbia Law School. Professor Bermann is also chief reporter for the American Law Institute’s Restatement (Third) of the U.S. Law of International Commercial Arbitration and the President of the International Academy of Comparative Law. Petros C. Mavroidis is the Edwin B. Parker Professor of Law at Columbia Law School. Professor Mavroidis is also the chief co-reporter for the American Law Institute project “Principles of International Trade: The WTO” and the Legal Advisor to the WTO’s Technical Cooperation Division.
The above review is scheduled to appear in the 2009-2010 edition of The George Washington International Law Review.
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