TRADING REMEDIES TO REMEDY TRADE: THE NAFTA EXPERIENCE

Transcription

1 166 Keeping the Borders Open TRADING REMEDIES TO REMEDY TRADE: THE NAFTA EXPERIENCE Beatriz Leycegui and Mario Ruiz Cornejo INTRODUCTION A f t e r W o r l d W a r I I, m a n y c o u n t r i e s s h a r e d t h e p e r c e p t i o n t h a t a s p a r t o f t h e e f f o r t o f a t t a i n i n g a m o r e p o l i t i c a l l y s t a b l e a n d e c o n o m i c a l l y i n t e g r a t e d i n t e r n a t i o n a l e n v i r o n m e n t ; a c c o m p l i s h i n g t r a d e d i s c i p l i n e a n d liberalization was fundamental. Thus, a new set of multilateral institutions a n d r u l e s w e r e a d o p t e d w i t h t h e p u r p o s e o f r e d u c i n g a n d e v e n t u a l l y eliminating all tariff and non-tariff trade barriers. In addition, this new leg a l f r a m e w o r k a l s o p r o v i d e d f o r t r a d e r e m e d y m e a s u r e s s o t h a t t h e g o v e r n m e n t s c o u l d r e m e d y t h e s i t u a t i o n o f t h e i r d o m e s t i c i n d u s t r y, w h e n m a t e r i a l l y o r s e r i o u s l y i n j u r e d a s a c o n s e q u e n c e o f u n f a i r t r a d e p r a c t i c e s antidumping (AD) or countervailing duty (CV) measures, or simply by the t r a d e l i b e r a l i z a t i o n i t s e l f ( s a f e g u a r d m e a s u r e s ). This paper focuses on the use of unfair trade laws in North America. Therefore it looks at how much have NAFTA parties (Canada, Mexico and t h e U n i t e d S t a t e s ) h a v e r e s o r t e d t o o r t r a d e d A D a n d C V r e m e d i e s t o i n f l u e n c e t h e i r t r a d e w i t h o t h e r c o u n t r i e s, a n d p a r t i c u l a r l y b e t w e e n t h e m s e l v e s, p r i o r t o a n d a f t e r t h e e n t r y i n t o f o r c e o f t h e N o r t h A m e r i c a n F r e e T r a d e A g r e e m e n t ( N A F T A ). T h r e e m e t h o d s a r e u s e d t o d e t e r m i n e w h i c h o f t h e s e t h r e e c o u n t r i e s h a s m o r e i n t e n s i v e l y a p p l i e d u n f a i r t r a d e

2 Leycegui and Cornejo 167 practices measures affecting intra-nafta trade. Particularly interesting is the analysis of whether the initiations by each NAFTA party, affecting intra- NAFT A i m p o r t s, d i m i n i s h e d w i t h t h e i m p l e m e n t a t i o n o f t h e A D a n d C V c o m m i t m e n t s c o n t e m p l a t e d u n d e r C h a p t e r 1 9 o f t h e NAFTA. I n a d d i t i o n, c o m p l e m e n t i n g C h a p t e r 1 9 o b j e c t i v e s, a n a s s e s s m e n t i s o f f e r e d r e l a t i v e t o t h e f u n c t i o n i n g o f C h a p t e r 1 9 s b i n a t i o n a l r e v i e w p a n e l s y s t e m, b a s e d o n t h e e x p e r i e n c e o f 7 5 c a s e s f i l e d d u r i n g t h e f i r s t e i g h t y e a r s o f N A F TA s i m p l e m e n t a t i o n ( J a n u a r y J a n u a r y ). Specific suggestions are included pertaining to the possibility of observing a reduction or elimination of the application of AD and CV laws, or to the negotiation of less trade-restrictive AD and CV rules to be applied between the NAFTA partners. As an introduction to these issues, general reference i s f i r s t m a d e t o t h e n a t u r e, o b j e c t i v e, e v o l u t i o n a n d i n t e r n a t i o n a l l e g a l framework of AD a n d C V m e a s u r e s. OVERVIEW OF AD AND CD MEASURES Antidumping And Countervailing Measures T h e p r a c t i c e o f e x p o r t i n g d u m p e d o r s u b s i d i z e d g o o d s 1 h a s b e e n considered unfair at a national and a multilateral level, since these products c o m p e t e w i t h i d e n t i c a l o r s i m i l a r g o o d s i n t h e e x p o r t m a r k e t, p l a c i n g d o m e s t i c p r o d u c e r s i n a s i t u a t i o n o f d i s a d v a n t a g e. C o n s e q u e n t l y, t h r o u g h the application of AD or CV duties, governments intend to level the playing field so that all producers are able to compete in equal terms. Canada was the first country to pass an antidumping law in 1904, a s a c o n s e q u e n c e o f t h e p r e s s u r e e x e r t e d b y C a n a d i a n s t e e l m a k e r s w h o d e m a n d e d h i g h e r t a r i f f s o n U. S. s t e e l r a i l s. T h e y a l l e g e d t h a t a s r a i l r o a d 1 A dumped good is a good exported at a price lower than the price it is sold in its country of origin, or if the home market price cannot be determined, when the export price is lower than the price of the same or a comparable product in a third market, or alternatively, lower than the exporter s cost of production. A subsidized good is a good in which its producer has received a financial contribution by its government or any public body or a private body acting on its behalf, that confers a benefit to the r e c i p i e n t.

3 168 Keeping the Borders Open b u i l d i n g b e g a n t o s u r g e o n c e C a n a d a s t r a n s c o n t i n e n t a l r a i l r o a d w a s completed in 1885, the U.S. Steel Corporation was unfairly aggressive and was dumping rails into the Canadian market. Since Canada could not limit the tariff increase to steel rails, its government was aware that once it revised t h e t a r i f f f o r s u c h g o o d, o t h e r p r o d u c e r s t o w h i c h i t o w e d p o l i t i c a l d e b t would also demand tariff increases on imported competing products. 2 By , t h e U n i t e d S t a t e s, F r a n c e, G r e a t B r i t a i n a n d m o s t o f t h e B r i t i s h C o m m o n w e a l t h c o u n t r i e s h a d a d o p t e d a n t i d u m p i n g l a w s. A l t h o u g h d u m - p i n g w a s n o t a n e w i s s u e, 3 t h e p a s s ag e o f s u c h A D l aws a t t h at t i m e r e s - p o n d e d t o p a r t i c u l a r c i r c u m s t a n c e s w h i c h h a p p e n e d t o c o n c u r : t h e p e r c e p t i o n t h a t a s W o r l d W a r I n e a r e d i t s e n d t h e G e r m a n g o v e r n m e n t w a s a c c u m u l a t i n g v a s t s t o c k s o f g o o d s i n o r d e r t o dump them on the markets of the world and regain in the field of economic warfare what she was losing on the military battlefield. 4 t h e c o n c e r n a t t h e e n d o f t h e 1 9 t h c e n t u r y a n d t h e b e g i n n i n g o f t h e 2 0 t h, o f t h e n e e d t o r e g u l a t e t h e e v i l s o f p r e d a t o r y t r u s t s, e s p e c i a l l y w h e n p r a c t i c e d b y f o r e i g n e r s. the need to lower high tariffs which provided national firms the o p p o r t u n i t y t o p r i c e m o n o p o l i s t i c a l l y a t h o m e a n d a t t h e s a m e t i m e p r o t e c t e d t h e m f r o m r e - i m p o r t o f g o o d s t h e y s o l d c o m p e t i t i v e l y i n w o r l d m a r k e t s. 5 D e s p i t e t h e a d o p t i o n o f A D l e g i s l a t i o n, c o u n t r i e s f o r m a n y m o r e d e c a d e s c o n t i n u e d t o p r o t e c t t h e i r i n d u s t r i e s, b a s i c a l l y t h r o u g h t a r i f f s a n d quotas. With the progressive elimination of the latter, as well as other nontariff barriers, since the 1970 s countries began to rely more frequently on 2 M i c h a e l F i n g e r, T h e O r i g i n s a n d E v o l u t i o n o f A n t i d u m p i n g R e g u l a t i o n, Antidumping- How it Works and Who Gets Hurt, J. Michael Finger (ed.), Ann Arbor, The University of Michigan Press, 1993, pp Jacob Viner (1923), the first scholar to pull together previous writing on the subject, notes a sixteenth century English writer who charged foreigners with selling paper at a loss to smother the infant paper industry in England. Viner also notes an instance in the seventeenth century in which the Dutch were accused of selling in the Baltic regions at ruinously low prices to drive out French merchants. Ibid., p Ibid, Jacob Viner, cited in p Ibid., p. 17.

4 Leycegui and Cornejo 169 their unfair trade practice laws, especially to those which regulate the AD p r o c e d u r e. 6 S i n c e , m u l t i l a t e r a l l y thr o u g h t h e G e n e r a l Ag r e e m e n t o f Tariffs and Trade (GATT), contracting parties have recognized and regulated the right of parties to impose AD and CV duties if domestic production has b e e n i n j u r e d o r i s t h r e a t e n t o b e i n j u r e d. 7 A d d u t i e s a r e i m p o s e d d e s p i t e c o n c e r n t h a t t h e a b u s e i n t h e a p p l i c a t i o n o f A D l a w s m i g h t h a m p e r t h e t r a d e l i b e r a l i z a t i o n c o m m i t m e n t s o f t h e A g r e e m e n t. I n , n e w p r i n c i p l e s a n d d i s c i p l i n e s w e r e a g r e e d w i t h r e s p e c t t o s u b s i d i e s u n d e r t h e G A T T, y e t i m p o r t a n t a s p e c t s r e m a i n e d u n d e f i n e d. Antidumping did not become a significant GATT issue until the Kennedy R o u n d ( ) o f m u l t i l a t e r a l t r a d e n e g o t i a t i o n s ( M T N ) w h e r e a n Antidumping Code was drafted. However, since the U.S. Congress did not approve it, the Code never came into effect. In the years that followed the u s e o f A D l a w s e x p a n d e d, w h e r e t h e d o m i n a n t q u e s t i o n b e c a m e H o w c a n a n t i d u m p i n g b e a p p l i e d t o t h i s p r o b l e m? i n s t e a d o f a s k i n g Was the p r o b l e m c a u s e d b y d u m p i n g? S p e c i f i c a g r e e m e n t s o n d u m p i n g a n d s u b s i d i e s w e r e a c h i e v e d i n , w i t h t h e c o n c l u s i o n o f t h e M T N o f t h e Tokyo Round ( ). The Antidumping Code and the Subsidies and Countervailing Duties Codes c o n t r i b u t e d t o s t r e n g t h e n i n g t h e p r o t e c t i o n r e g i m e a g a i n s t u n f a i r t r a d e practices. In the view of Michael Finger the agreement helped transform a n t i d u m p i n g f r o m a m i n o r i n s t r u m e n t f o r r e s t r i c t i n g i m p o r t s t o a m a j o r 6 The outnumbering of AD investigations compared to CV investigations basically responds to: i) The difference in nature of dumped and subsidized goods: while the former a r e l i n k e d t o e n t e r p r i s e s b e h a v i o r, t h e l a t t e r t o g o v e r n m e n t a c t i o n s. C o n s e q u e n t l y, t h e d e t e r m i n a t i o n o f C V m e a s u r e s h a s a g r e a t e r i m p a c t i n diplomatic relations, since the government of the importing country determines whether the government policy or policies of another sovereign state are legitimate or not and shall therefore be actionable or not. i i ) The fact that governments tend to subsidize in a lesser degree than private industries to price discriminate. i i i ) The preparation, gathering of proofs, and procedures of antidumping cases are less complicated than subsidies investigations. 7 GATT, Articles VI and XVI.

5 170 Keeping the Borders Open o n e. H e a d d s t h a t a s a n t i d u m p i n g b e c a m e m o r e a n d m o r e d e t a i l e d, i t s m o t i v e b e c a m e m o r e a n d m o r e t o f i n d a w a y t o f i t a n t i d u m p i n g t o e a c h immediate problem. (If your favorite tool is a hammer, your problems will all look like nails). 8 In this respect Lowenfeld notes that the substance of trade disputes is the effect on the importer, not the behavior of the exporter a n d t h e r e f o r e t h e T o k y o R o u n d s m i s t a k e c o n s i s t e d i n f o c u s i n g o n t h e d i f f e r e n c e s b e t w e e n f a i r a n d u n f a i r t r a d e, w h e n t h e r e a l f o c u s i s o n a c c e p t a b l e v s. u n a c c e p t a b l e l e v e l o f t r a d e o r m a r k e t s h a r e o r i m p o r t p e n e t r a t i o n. 9 S o m e y e a r s l a t e r, a s a c o n s e q u e n c e o f t h e M T N o f t h e U r u g u a y Round ( ), where a new GATT was negotiated (GATT 1994) and the World Trade Organization (WTO) established, also new agreements on a n t i d u m p i n g a n d s u b s i d i e s w e r e a d o p t e d b y a l l M e m b e r s o f t h e n e w l y founded WTO. The new Agreement on the Implementation of Article VI of GATT 1994 (the Antidumping Agreement) and the Agreement on Subsidies a n d C o u n t e r v a i l i n g M e a s u r e s ( S C M A g r e e m e n t ) w e r e b u i l t o n t h e A n t i d u m p i n g C o d e a n d S u b s i d i e s a n d C o u n t e r v a i l i n g D u t i e s C o d e n e g o t i a t e d u n d e r t h e Tokyo Round. Departing from the former, these two new Agreements apply to all WTO Members. T h e A n t i d u m p i n g A g r e e m e n t r e q u i r e s g r e a t e r t r a n s p a r e n c y a n d establishes new methodological rules regarding the determination of dumping (e.g. as to the calculation of cost of production to include reasonable a d m i n i s t r a t i v e a n d s e l l i n g c o s t s, a n d p r o f i t ; t h e m a r g i n o f d u m p i n g s h a l l n o r m a l l y b e c a l c u l a t e d e i t h e r f r o m a c o m p a r i s o n o f t h e w e i g h t e d a v e r a g e normal value in the home market with the weighted average of prices of all c o m p a r a b l e e x p o r t s, o r o n a t r a n s a c t i o n - t o - t r a n s a c t i o n b a s i s ; a n d s a l e s b e l o w c o s t ). I t f u r t h e r d i s c i p l i n e s t h e a p p l i c a t i o n o f A D m e a s u r e s b y e s t a b l i s h i n g n e w r u l e s r e l a t e d t o i n j u r y d e t e r m i n a t i o n s, p r o c e d u r e s t o c o n d u c t i n v e s t i g a t i o n s, i m p o s i n g d u t i e s, r e v i e w i n g d e t e r m i n a t i o n s a n d terminating antidumping duties. Furthermore, the Antidumping Agreement i n t r o d u c e s a s p e c i a l s t a n d a r d o f r e v i e w r u l e : If the WTO Member s 8 Michael Finger, op. cit., pp. 59, 63 and Ibid., pp. 59 and 63.

6 Leycegui and Cornejo 171 authority s have established the facts of a case properly, and made and unbiased and objective evaluation of these facts, the evaluation shall not be overturned, even though the panel might have reached a different conclusion. I n a d d i t i o n, a s t o p a n e l s i n t e r p r e t a t i o n r u l e s, t h e A g r e e m e n t e s t a b l i s h e s t h a t i f a p a n e l f i n d s t h a t o n e o f i t s p r o v i s i o n s a d m i t s o f m o r e than one permissible interpretation, it shall find the authorities measure to be in conformity with the Agreement if it rests upon one of those permissible i n t e r p r e t a t i o n s o f t h e A g r e e m e n t. It is also worth highlighting the main accomplishments of the Urug u a y R o u n d S C M A g r e e m e n t : it identifies the three necessary elements for a subsidy to exist i) f i n a n c i a l c o n t r i b u t i o n, ii) made by a government or public body within a territory of a WTO member, and iii) t h e c o n t r i b u t i o n c o n f e r s a b e n e f i t ; a s i d e f r o m d i s c i p l i n i n g t h e u s e o f e x p o r t s u b s i d i e s, i t a l s o d o e s s o f o r p r o d u c t i o n s u b s i d i e s ; it adopts a traffic light approach for identifying three different t y p e o f s u b s i d i e s, i n w h i c h e a c h c a t e g o r y i s s u b j e c t t o d i f f e r e n t c o n s e q u e n c e s d u e t o t h e i r d i v e r s e n a t u r e : - Green subsidies or non actionable subsidies, c o n s i d e r e d t o u n l i k e l y c a u s e h a r m t o t r a d e ( n o n - s p e c i f i c s u b s i d i e s, o r t h o s e w h i c h p r o v i d e a s s i s t a n c e : f o r b a s i c r e s e a r c h, t o d i s a d v a n t a g e d r e g i o n s ; t o a d a p t e x i s t i n g f a c i l i t i e s t o n e w e n v i r o n m e n t a l s t a n d a r d s. - Red subsidies or prohibited subsidies, c o n s i d e r e d c l e a r l y harmful to trade (those contingent to export performance or to t h e u s e o f d o m e s t i c i n p u t s ). - Amber subsidies or actionable subsidies, o n l y c h a l l e n g e a b l e i f t h e y c a u s e a d v e r s e e f f e c t s ( s e r i o u s p r e j u d i c e, i n j u r y, o r n u l l i f i c a t i o n a n d i m p a i r m e n t o f b e n e f i t s ). T h e A g r e e m e n t e s t a b l i s h e s r e b u t t a l p r e s u m p t i o n s o f w h e n s u b s i d i e s g i v e r i s e t o a d v e r s e e f f e c t s. i t p r o v i d e s f o r a m o r e e x p e d i t i o u s d i s p u t e s e t t l e m e n t p r o c e d u r e f o r a c t i o n a b l e s u b s i d i e s.

7 172 Keeping the Borders Open it introduced special provisions in favor of developing countries, p e r h a p s o f g r e a t e r i m p a c t t h a n a l l t h o s e i n t r o d u c e d i n o t h e r Agreements of the WTO. H o w e v e r, d e s p i t e t h e p r o g r e s s m a d e m u l t i l a t e r a l l y i n t h e f i e l d o f trade remedies, achieving full transparency and discipline in the application of AD and CV measures remains to be among the most important challenges f a c i n g t h e i n t e r n a t i o n a l c o m m u n i t y. T h e f o r m e r s i n c e c o u n t r i e s c o n t i n u e to abuse in the application of such laws, mainly the AD ones, constituting t o d a y o n e o f t h e m o s t i m p o r t a n t b a r r i e r s t o l e g i t i m a t e i n t e r n a t i o n a l c o m p e t i t i o n. TRADE REMEDY LAWS IN NORTH AMERICA Mexico 10 F r o m t o , 1 1 M e x i c o i n i t i a t e d a t o t a l o f A D / C V investigations. 1 2 M o s t o f t h e s e i n v e s t i g a t i o n s h a v e b e e n A D c a s e s w i t h a share of 92 percent (210 proceedings), leaving CV cases with the remaining 8 percent (18 proceedings). This number of AD cases places the Mexican system as one of the most active worldwide. From 1987 to 1997, Mexico r a n k e d f o u r t h i n i n i t i a t i o n s o f A D c a s e s, a l o n g w i t h C a n a d a. 1 3 Ta b l e 1 10 The statistical information included in this section was prepared by the authors from the following sources: the 2000 Annual Report of the UPCI, the UPCI s database. In some instances it was necessary to consult the final determinations published in the Federal Official Bulletin (Diario Oficial de la Federación). 11 The data used do not go beyond 1999, even though at the time this paper was written there was information on initiations available until The reason being that through the exclusion of the unconcluded cases initiated in 2000 and 2001, it was possible to determine the rate of cases in which final measures were imposed to the total number of cases. It is also important to note that the final measures reported in this document reflect those imposed and not the measures currently in effect. 12 The cases are measured by product, country and type of procedure (AD or CV). For example, the Mexican AD and CV investigations regarding cold-rolled sheet and hotrolled sheet from Venezuela and Brazil are considered as eight different proceedings, since an AD and CV investigation for each product was initiated against each country. 1 3 S e e J o r g e M i r a n d a, R a ú l T o r r e s, a n d M a r i o R u i z, T h e I n t e r n a t i o n a l U s e o f Antidumping: , Journal of World Trade, Vol. 32, No. 5, October, 1998, pp. 6 7.

8 Leycegui and Cornejo 173 Table 1: Mexican AD/CVD Cases and Measures by Type of Procedure, Number Share in Number of Share in Type of of the total final the total Success Investigation Initiations of initiations measures of measures Ratio (%) (%) Antidumping Countervailing Total Source: Made by the authors with information from UPCI s Annual Report 2000 and case database, and complemented with research by the authors. s h o w s t h e n u m b e r o f c a s e s a n d m e a s u r e s 1 4 by type of procedure. The last c o l u m n, s u c c e s s r a t i o, i s t h e r e s u l t o f d i v i d i n g t h e n u m b e r o f f i n a l A D and CV measures imposed by the number of initiations; and thus represents the probability that an initiation concludes with a final measure. The data below indicate that AD measures were imposed in 53 percent of the initiated c a s e s ; w h e r e a s C V m e a s u r e s w e r e i m p o s e d i n 4 4 p e r c e n t o f t h e m. Consequently, a petitioner has roughly 50 percent of probability of obtaining a f a v o r a b l e o u t c o m e. D u r i n g t h e p e r i o d o f s t u d y, M e x i c o i n i t i a t e d c a s e s a g a i n s t 4 3 countries. The three most affected were the United States followed by China and Brazil. These countries account for 56 percent of the total number o f c a s e s. T a b l e 2 s h o w s t h e 1 1 c o u n t r i e s m o s t a f f e c t e d b y i n i t i a t i o n s, t h e final measures imposed and the success ratio. Whether each subject country is over/under-represented in the total number of investigations or measures goes beyond the scope of this paper. 1 5 In any eve nt, it is inter esting to see c o u n t r i e s l i k e C h i n a, B r a z i l o r Ve n e z u e l a i n t h e f i r s t p l a c e s o f c o u n t r i e s u n d e r i n v e s t i g a t i o n b y M e x i c o, w h e n t h e y a r e f a r f r o m r e p r e s e n t i n g s u c h an important role in terms of the total value of Mexico s imports Final measures include duties as well as price undertakings. 15 Miranda makes a deeper analysis of this matter in An Economic Analysis of Mexico s Use of Trade Remedy Laws from 1987 to 1995 in Beatriz Leycegui et al, Trading Punches: Trade Remedy Law and Disputes Under NAFTA. North American Committee, pp One possible and partial answer to this is that, as we will point out later, the base metal sector is the most active in AD/CV initiations, and countries like Brazil and Venezuela are important exporters of products of such sector.

9 174 Keeping the Borders Open Table 2: Mexican AD/CVD cases and measures by subject country. Rank Subject country Number of Share in the total Final Share in the total Success Initiations of initiations Measures of measures Ratio (%) (%) 1 United States China Brazil Venezuela Korea Germany Russia Spain Chinese Taipei Ukraine Canada Others Total Source: Made by the authors with information from UPCI s Annual Report 2000 and case database, and complemented with research by the authors.

10 Leycegui and Cornejo 175 D i f f e r e n c e s b e t w e e n t h e s u c c e s s r a t i o o f c e r t a i n c o u n t r i e s i s significant. The probability of succeeding in a case involving a Chinese product is the double than a case against a U.S. product. The low success ratio involving investigations against other countries, is explained by the f a c t t h a t n e a r l y 4 0 p e r c e n t o f t h e s e p r o c e e d i n g s i n v o l v e e x - S o v i e t U n i o n s t a t e s ( 1 9 c a s e s ), w h e r e o n l y o n e m e a s u r e w a s a d o p t e d ( s u c c e s s r a t i o ). 1 7 R e m a r k a b l y, t h e U n i t e d S t a t e s a n d C a n a d a, a s w e l l a s Ko r e a s s u c c e s s r a t i o s a r e b e l o w t h e a v e r a g e r a t i o. Table 3 shows the AD/CV initiations and measures by HS Section. 1 8 Three HS Sections account for over 66 percent of the initiations: base metals ( 3 6 p e r c e n t ), c h e m i c a l s ( 2 0 p e r c e n t ), a n d t e x t i l e s ( 1 0 p e r c e n t ). O t h e r i m p o r t a n t p l a y e r s a r e p l a s t i c s ( 7 p e r c e n t ) a n d e l e c t r i c a l e q u i p m e n t ( 6 p e r c e n t ). E x c e p t f o r c h e m i c a l s, t h e o t h e r f o u r S e c t i o n s m e n t i o n e d h a v e success ratios over the average, with ratios from 54 percent in the case of base metals and electrical equipment to 65 percent in the case of plastics. United States F r o m t o t h e U n i t e d S t a t e s w a s t h e c o u n t r y w i t h m o s t AD cases initiated and measures 1 9 imposed worldwide. 2 0 During this period t h e U n i t e d S t a t e s i n i t i a t e d A D / C V i n v e s t i g a t i o n s. E i g h t y - o n e p e r c e n t of the initiations involved dumping allegations (484 cases) and 19 percent s u b s i d i e s ( c a s e s ). T a b l e 4 s h o w s t h e i n i t i a t i o n s, m e a s u r e s a n d s u c c e s s r a t i o b y t y p e o f p r o c e d u r e. T h e o v e r a l l s u c c e s s r a t i o o f t h e U. S. i n v e s t i g a t i o n s i s , which means that the probability for a petitioner to win a case is almost 50 p e r c e n t. Ta b l e 5 s h o w s t h e t o p 1 2 s u b j e c t c o u n t r i e s o f U. S. i nvestigations. Japan appears in the first place with 60 initiations or 10 percent, followed 17 It seems that there have been problems identifying the origin of the dumped products when they are imported from the ex-soviet Union states. 18 Sectors are defined in accordance with the Harmonized System Sections (HS Section). 19 Measures include only duty orders. 20 See Miranda, Torres and Ruiz, op. cit., pp. 6-7.

11 176 Keeping the Borders Open Table 3: Mexican AD/CVD cases and measures by HS Section. HS Section Number of Share in the total Number of Share in the total Success Initiations of initiations final measures of measures ratio (%) (%) XV Base metals VI Chemicals XI Textiles VII Plastics XVI Electrical equipment XX Other manufactures I Animal products X Pulp and paper XII Footwear V Minerals IV Prepared foodstuffs XVIII Instruments II Vegetables XIII Glass and ceramics XVII Vehicles VIII Leather IX Wood Total Source: Made by the authors with information from UPCI s Annual Report 2000 and case database, and complemented with research by the authors.

12 Leycegui and Cornejo 177 Table 4: US AD/CVD cases and measures by type of procedure. Number Share in Number of Share in Type of of the total final the total Success Investigation Initiations of initiations measures of measures Ratio (%) (%) Antidumping Countervailing Total Source: Made by the authors with information from the AD and CVD Case History Tables , ITA, and the Semi Annual reports under Article 16.4 of the United States to the WTO. closely by China with 55 initiations or 9 percent. As to their participation in the total number of adopted measures, Japan s and China s share grow to 14 and 11 percent respectively. Other countries with shares over 5 percent o f i n i t i a t i o n s a r e Korea (7 percent), Ta i w a n a n d C a n a d a ( 6 p e r c e n t e a c h ), and Brazil and Italy (5 percent each). Mexico ranks eighth with 20 procedures and a share of 3 percent. Under the period of review, the US initiated cases involving a total of 63 countries. Something interesting from Table 5 is that the two lowest success r a t i o s c o r r e s p o n d t o t h e U n i t e d S t a t e s NA F T A p a r t n e r s : C a n a d a ( ) and Mexico (0.40). Brazil s measure equals that of Mexico. The countries w i t h t h e h i g h e s t r a t i o s a r e I t a l y, J a p a n, C h i n a, K o r e a a n d G e r m a n y, w i t h ratios of 0.66, 0.65, 0.58, 0.55 and 0.54, respectively. Also worth of noticing is the fact that three of these countries are also the top three in number of i n i t i a t i o n s a n d m e a s u r e s. A s r e g a r d t o U. S. i n v e s t i g a t i o n s w i t h r e s p e c t t o t h e H S S e c t i o n 2 1 ( T a b l e 6 ), o n e i s b y f a r t h e m o s t a c t i v e : 5 2 p e r c e n t o f t h e i n i t i a t i o n s a r e a g a i n s t b a s e m e t a l s. T h i s f i g u r e g r o w s t o 5 8 p e r c e n t, w h e n c o n s i d e r i n g f i n a l m e a s u r e s. T h e t h r e e n e x t H S S e c t i o n s i n i n i t i a t i o n s a r e e l e c t r i c a l e q u i p m e n t ( 1 1 p e r c e n t ), c h e m i c a l s ( 1 0 p e r c e n t ) a n d p l a s t i c s ( 8 p e r c e n t ), l e a v i n g t h e r e s t w i t h s h a r e s u n d e r 5 p e r c e n t. E x c l u d i n g t h e l e a t h e r s H S Section with only one initiation and measure, the highest success ratios are 21 Since the United States sources do not include the tariff position of the products under investigation, the authors classified the cases within the HS sections in accordance to the nature of the products.

13 178 Keeping the Borders Open Table 5: US AD/CVD cases and measures by subject country. Rank Subject country Number of Share in the total Final Share in the total Success Initiations of initiations Measures of measures Ratio (%) (%) 1 Japan China Korea Taiwan Canada Brazil Italy Mexico Germany India United Kingdom Venezuela Others Total Source: Made by the authors with information from the AD and CVD Case History Tables , ITA, and the Semi Annual reports under Article 16.4 of the United States to the WTO.

14 Leycegui and Cornejo 179 Table 6: US AD/CVD cases and measures by HS Section. HS Section Number of Share in the total Number of Share in the total Success Initiations of initiations final measures of measures ratio (%) (%) XV Base metals XVI Electrical equipment VI Chemicals VII Plastics V Minerals IV Prepared foodstuffs XVIII Instruments XI Textiles I Animal products X Pulp and paper XVII Vehicles XX Other manufactures II Vegetables XIII Glass and ceramics IX Wood XII Footwear VIII Leather Total Source: Made by the authors with information from the AD and CVD Case History Tables , ITA, and the Semi Annual reports under Article 16.4 of the United States to the WTO.

15 180 Keeping the Borders Open Table 7: Canadian AD/CVD cases and measures by type of procedure. Number Share in Number of Share in Type of of the total final the total Success Investigation Initiations of initiations measures of measures Ratio (%) (%) Antidumping Countervailing Total Source: Made by the authors with information from the historical listing of SIMA cases, Canada Customs and Revenue Agency. for prepared foodstuffs, textiles, base metals and plastics, with 0.63, 0.62, a n d r e s p e c t i v e l y. Canada 22 A s m e n t i o n e d, f r o m t o C a n a d a a l o n g w i t h M e x i c o o c c u p i e d t h e f o u r t h p l a c e w o r l d w i d e i n t h e u s e o f a n t i d u m p i n g p r o c e d u r e s. 2 3 F r o m t o C a n a d a i n i t i a t e d a t o t a l o f A D / C V i n v e s t i g a t i o n s : A D c a s e s ( 9 5 p e r c e n t ) a n d 1 2 C V c a s e s ( 5 p e r c e n t ). T h e s u c c e s s r a t i o o f A D / C V c a s e s w a s 7 0 p e r c e n t, w h i c h m e a n s t h a t a petitioner filing a case had 70 percent of probability of obtaining a favorable result if the authority decided to initiate its case. Table 7 shows initiations, m e a s u r e s a n d s u c c e s s r a t i o s b y t y p e o f p r o c e d u r e. I n t e r m s o f s u b j e c t c o u n t r i e s, t h e U n i t e d S a t e s i s b y f a r t h e f i r s t target in the Canadian AD/CV system, accounting for 46 initiations and 29 final measures, with shares of 20 and 18 percent respectively. 2 4 The r est of 22 The statistical information included in this section was prepared by the authors with information from the historical listing of the Special Import Measures Act (SIMA) cases of the Canada Customs and Revenue Agency. 23 See Miranda, Torres and Ruiz, op. cit., pp Daniel Schwanen makes a value-oriented analysis for cases from 1989 to 1995 and finds that the share of the investigations involving US exports is much higher in terms of import values than in terms of absolute numbers: 61.5 percent vs. 19.5, according to his data. Daniel Schwanen, When Push Comes to Shove: Quantifying the Continuing Use of Trade Remedy Laws Between Canada and the United States in Beatriz Leycegui, William Robson, S. Dahlia Stein (eds.), Trading Punches: Trade Remedy Law and Disputes under NAFTA, Washington D.C.: National Planning Association, 1995, pp

16 Leycegui and Cornejo 181 t h e s u b j e c t c o u n t r i e s h a v e s h a r e s u n d e r 6 p e r c e n t, b e i n g G e r m a n y ( 1 3 c a s e s ), B r a z i l ( 1 2 c a s e s ) a n d t h e U n i t e d K i n g d o m ( 1 1 c a s e s ) a t t h e t o p. M e x i c o a p p e a r s i n p l a c e 2 1 w i t h o n l y t h r e e c a s e s a n d o n e e s t a b l i s h e d m e a s u r e. F o r t y - f i v e c o u n t r i e s h a v e b e e n i nvolved in A D / C V p r o c e e d i n g s i n C a n a d a. In Table 8, the highest success ratio is for India (0.86), followed by the so-called Others category (0.80) and Brazil in third place. The United States and Mexico have success ratios below the average. Finally, Table 9 s h o w s t h e C a n a d i a n A D / C V c a s e s a n d m e a s u r e s b r o k e n d o w n b y t h e H S Section. Once again base metals is in first place in initiations and measures a c c o u n t i n g f o r 5 0 p e r c e n t o f t h e i n i t i a t i o n s ( c a s e s ) a n d 6 2 p e r c e n t o f the measures (98 cases). Other important HS Sections in terms of initiations a r e e l e c t r i c a l e q u i p m e n t ( 2 3 c a s e s ), p u l p a n d p a p e r ( 2 2 c a s e s ), p r e p a r e d f o o d s t u f f ( 1 4 c a s e s ) a n d f o o t w e a r ( 1 2 c a s e s ). I n t e r m s o f m e a s u r e s, t h e d i s t r i b u t i o n d i f f e r s s i n c e e l e c t r i c a l e q u i p m e n t g o e s f r o m t h e s e c o n d p l a c e in number of initiations to the seventh place in measures. This difference is clear if we see the success ratios. The lowest ratio, excluding minerals and p l a s t i c s t h a t h a v e o n l y o n e i n i t i a t i o n w i t h n o m e a s u r e, i s f o r e l e c t r i c a l e q u i p m e n t : ; t h i s i s o n l y 4 m e a s u r e s f o r 2 3 i n i t i a t i o n s. T h e h i g h e s t ratios excluding other manufactures that have only 2 initiations, are glass and ceramics (1.00) and base metals (0.87). Other HS Sections with ratios o v e r t h e a v e r a g e a r e p u l p a n d p a p e r ( ) a n d v e g e t a b l e s ( ). Intra-NAFTA Use of Antidumping and Countervailing Measures Determination of most intensive user. T a b l e 1 0 s h o w s investigations initiated by NAFTA partners against exports originating within the region. The information contained in the columns corresponds to subject c o u n t r i e s a n d t h e i n f o r m a t i o n c o n t a i n e d i n t h e r o w s, t o t h e i n v e s t i g a t i n g c o u n t r y. F r o m t o , i n i t i a t i o n s o c c u r r e d b e t w e e n N A F TA p a r t n e r s. M e x i c o s t a n d s i n f i r s t p l a c e i n t e r m s o f i n i t i a t i o n s w i t h 7 0 ( 4 1 p e r c e n t ), t h e U n i t e d S t a t e s a p p e a r s i n s e c o n d w i t h 5 3 ( 3 1 p e r c e n t ), a n d finally Canada with 49 (28 percent) ranks third and last. On the other hand, t h e U n i t e d S t a t e s w a s t h e m o s t a f f e c t e d c o u n t r y w i t h i n i t i a t i o n s ( 6 5 percent) against its products, followed by Canada with 38 (22 percent) and

17 182 Keeping the Borders Open Table 8: Canadian AD/CVD cases and measures by subject country. Rank Subject country Number of Share in the total Final Share in the total Success Initiations of initiations Measures of measures Ratio (%) (%) 1 United States Germany Brazil United Kingdom France Taiwan Korea Japan India China Spain Italy Mexico Others Total Source: Made by the authors with information from the historical listing of SIMA cases, Canada Customs and Revenue Agency.

18 Leycegui and Cornejo 183 Table 9: Canadian AD/CVD cases and measures by HS Section. HS Section Number of Share in the total Number of Share in the total Success Initiations of initiations final measures of measures ratio (%) (%) XV Base metals XVI Electrical equipment X Pulp and paper IV Prepared foodstuffs XII Footwear II Vegetables VI Chemicals XIII Glass and ceramics XVII Vehicles XI Textiles IX Wood XIX Arms XX Other manufactures V Minerals VII Plastics Total Source: Made by the authors with information from the historical listing of SIMA cases, Canada Customs and Revenue Agency.

19 184 Keeping the Borders Open Mexico with 23 (13 percent). Almost all the initiations (95 percent) involved the United States as a party, either as an investigating or subject country; w h i c h i m p l i e s t h a t b e t w e e n M e x i c o a n d C a n a d a t h e r e w e r e v e r y f e w i n i t i a t i o n s, o n l y 8. T h e a b s o l u t e n u m b e r o f i n i t i a t i o n s w i t h i n e a c h i n v e s t i g a t i n g c o u n t r y i s m o r e o r l e s s t h e r e f l e c t o f t h e v o l u m e o f i m p o r t s f r o m e a c h s u b j e c t c o u n t r y. N e v e r t h e l e s s, t h e f o r m e r m e t h o d o l o g y, per se d o e s n o t p r o v i d e a v a l i d i n d i c a t o r o f t h e c o u n t r y w h i c h u s e s A D / C V p r o c e d u r e s m o r e i n t e n s i v e l y. Another method to measure the intensity with which each country uses its AD/CV tools is simply by dividing the number of cases by the total i n t r a - N A F T A i m p o r t v a l u e. T h e r e s u l t w o u l d b e t h e n u m b e r o f c a s e s f o r e a c h, f o r e x a m p l e, b i l l i o n d o l l a r s. 2 5 T h i s a l t e rn a tive i s s h own in Tab l e 1 0 in the seventh column. Roughly, we would say that Canada is almost twice as much an intensive user, as compared to the US; while Mexico s intensity is more than two times that of Canada. The problem of this method is that it does not consider the size of the economy at stake: Mexico is the country with less imports, which makes it the most intensive user; but it is also the country with the smallest economy, so we can expect that the imports are relatively high for the size of the market. Finally, a proposed alternative, is that which measures intensity in terms of the penetration grade that the imports have in the investigating m a r k e t. I n o t h e r w o r d s, t h e a m o u n t o f c o m p e t i t i o n t h a t t h o s e i m p o r t s g e n e r a t e i n t h e e x p o r t i n g m a r k e t, o r h o w m u c h t h e y a f f e c t p r o d u c e r s o f t h i s l a t t e r m a r k e t. U n d e r t h i s m e t h o d o l o g y, t h e p e n e t r a t i o n g r a d e i s c a l c u l a t e d b y a t f i r s t o b t a i n i n g t h e i m p o r t s / G D P r a t i o. T h e n d i v i d i n g t h e number of initiations by the imports/gdp ratio, to obtain a ratio of intensity in the use of AD/CV procedures. The ratio of intensity which results provides 25 This method is equivalent to comparing the share of initiations of each country in the Intra-NAFTA total to their share in the imports value also in the intra-nafta total. See Miranda, Torres and Ruiz; and Thomas Prusa An Overview of the Impact of U.S. Unfair Trade Laws in Beatriz Leycegui, William B.P. Robson, S. Dahlia Stein (eds.), Trading Punches: Trade Remedy Law and Disputes under NAFTA, Washington D.C., National Planning Association, 1995, pp The result of each method would be the same measuring which country is more intensive in the use of AD/CV procedures since the ratio between countries of each method is identical.

20 Leycegui and Cornejo 185 Table 10: Intra-NAFTA AD/CVD cases matrix by investigating and subject country. Investigating Subject country Share in Cases/ Imports/ Intensive Intensive Country Canada Mexico United Total Total Imports GDP Ratio Ratio States value ratio ratio NAFTA Other countries Canada NA Mexico 5 NA United States NA Total Share in total 22% 13% 65% 100% Source: Made by the authors with information from: cases see tables above, imports from the WTO s International Trade Statistics 2000, and GDP from the FMI s International Financial Statistics.

21 186 Keeping the Borders Open t h e n u m b e r o f i n i t i a t i o n s f o r e a c h p e r c e n t a g e p o i n t o f t h e i m p o r t s p e n e t r a t i o n. C o l u m n n i n e o f Ta b l e 1 0 i n c l u d e s t h e c a l c u l a t i o n o f t h e r a t i o o f intensity for NAFTA s imports: the number of cases initiated between NAFTA p a r t n e r s d i v i d e d b y t h e i m p o r t s / G D P r a t i o, c a l c u l a t e d o n l y w i t h i m p o r t s f r o m N A F TA s p a r t n e r s. T h e l a s t c o l u m n i n c l u d e s t h e i n t e n s i v e r a t i o calculated with the same methodology for imports from other non-nafta c o u n t r i e s ( t o t a l n u m b e r o f c a s e s i n i t i a t e d a g a i n s t o t h e r c o u n t r i e s, b y t h e imports/gdp ratio calculated with imports from all other countries). A first c o n c l u s i o n i s t h a t t h e t h r e e c o u n t r i e s u s e l e s s i n t e n s i v e l y A D / C V c a s e s against NAFTA s p a r t n e r s t h a n a g a i n s t t h e r e s t o f t h e w o r l d. P a r t i c u l a r l y, Canada uses AD/CV procedures seven times more intensively against third countries than its NAFTA partners; Mexico six times; and the United States three times. A possible explanation to this phenomena could be the existence o f N A F TA s C h a p t e r X I X r e v i e w s y s t e m. U n d e r t h i s m e t h o d o l o g y, t h e U n i t e d S t a t e s h a p p e n s t o b e t h e m o s t h e a v i l y i n t e n s i v e u s e r o f A D / C V p r o c e d u r e s, e i t h e r a g a i n s t N A F TA s p a r t n e r s ( e x c e e d i n g C a n a d a b y s i x t i m e s a n d M e x i c o f o u r t i m e s ) o r t h i r d c o u n t r i e s ( e x c e e d i n g C a n a d a b y three times and Mexico by two times). Impact of NAFTA on the number of initiations. Figure 1 shows initiations affecting intra-nafta trade by partner by year. This figure reveals that since 1994 the initiations in the three countries fell. In fact, the average of intra-nafta initiations for the period 1994 to 1999 dropped almost 6 0 p e r c e n t ( f r o m 1 8 c a s e s t o 8 b y y e a r ), w h e n c o m p a r e d t o t h o s e i n v e s t i g a t i o n s i n i t i a t e d b e t w e e n t o T h i s o c c u r r e d d e s p i t e t h e fact that intra-nafta trade grew 142 percent from 1990 to The relevant question at this point is what explains the decrease in t h e n u m b e r o f c a s e s? T o t r y t o a n s w e r t h i s q u e s t i o n i t i s r e l e v a n t t o a l s o look at what occurred with the initiations against the rest of the countries, t o o b s e r v e i f t h i s p h e n o m e n o n i s l i m i t e d t o i n t r a - NAFTA trade. From the period 1987 to 1993 to the period 1994 to 1999, the average of initiations against non-nafta partners fell from 82 to 51 per year, a reduction of 39 p e r c e n t. T h e r e f o r e, t h e d e c r e a s e i n A D / C V a c t i v i t y t o o k p l a c e i n i n t r a -

22 Leycegui and Cornejo 187 Figure 1: 20 AD/CVD initiations affecting intra-nafta trade by partner. 15 Initiations Canada Mexico United States Source: Made by the authors with the information from cases of each country. See text. NAFTA trade, as well in trade with other countries, but the reduction in the f o r m e r e x c e e d e d t h e l a t t e r. T h e r e a s o n s f o r t h e r e d u c t i o n i n t h e n u m b e r o f i n i t i a t i o n s a r e n o t c l e a r. S o m e h y p o t h e s i s w h i c h e x p l a i n s u c h d e c r e a s e a r e : t h e p r e s e n c e o f l o w p r i c e s o f c e r t a i n c y c l i c a l c o m m o d i t i e s i n a n d p u s h e d t o the initiation of more cases; trend which was overturned as prices recovered i n s u b s e q u e n t y e a r s, 2 6 a n d t h e M e x i c a n c r i s i s a f t e r w h i c h g a v e producers certain exchange rate protection against imports. Two additional r e a s o n s w h i c h m i g h t e x p l a i n t h e d e c r e a s e i n i n t r a - N A F T A c a s e s a r e : a s m e n t i o n e d, t h e i m p l e m e n t a t i o n o f t h e C h a p t e r X I X r e v i e w s y s t e m ( s e e section below); and the fact that before NAFTA was implemented, AD and CV measures had been adopted in most of the traditionally affected sectors, a n d t h e r e f o r e c o n t i n u e d t o b e i n e f f e c t f o r s e v e r a l y e a r s a f t e r NAFTA s e n t r y i n t o f o r c e. Intra-NAFTA Initiations by HS Section. F i g u r e 2 s h o w s t h e d i s t r i b u t i o n o f t h e i n t r a - N A F T A i n i t i a t i o n s b y H S S e c t i o n. F i v e s e c t i o n s c o v e r t h e 7 0 p e r c e n t o f t h e c a s e s ( b a s e m e t a l s, c h e m i c a l s, e l e c t r i c a l 26 See Miranda Torres and Ruiz, op. cit, pp

23 188 Keeping the Borders Open Figure 2: Share of the AD/CVD initiations affecting intra-nafta trade by HS Section. Others HS Sections 30.0% Base metals 34.0% Plastics 6.0% Vegetables 6.0% Electrical equipment 6.0% Chemicals 18.0% Source: Made by the authors with the information from cases of each country. See text. e q u i p m e n t, v e g e t a b l e s a n d p l a s t i c s ), l e a v i n g t h e o t h e r 3 0 p e r c e n t s p r e a d across 10 HS Sections. The two Sections with more cases are base metals and chemicals, in conjunction accounting for more than 50 percent of the c a s e s. T h e s e m a r k e t s a r e h i g h l y c y c l i c a l, w h i c h s u p p o r t s t h e i d e a t h a t : first, part of the general decrease of cases can be explained by the increase in prices of certain commodities, like steel and fertilizers; and second, that s u c h m a r k e t s a r e n o t e a s i l y s u b j e c t a g a i n t o i n i t i a t i o n s t o t h e e x t e n t t h a t there are still measures in force imposed when the prices where low. TRADE REMEDIES UNDER NAFTA Antidumping and Countervailing Duty Measures AD and CV measures under NAFTA are addressed through a look at the negotiation history, the description and objectives of the most relevant commitments, as well as the cases filed up to January An assessment o f t h e f u n c t i o n i n g o f t h e A D a n d C V b i n a t i o n a l p a n e l r e v i e w p r o c e d u r e s during NAFTA s first 8 years of implementation is also offered. Negotiation. T h e u n f a i r t r a d e p r a c t i c e s d i s c u s s i o n s, c o v e r i n g antidumping and countervailing duty matters were among the most difficult

24 Leycegui and Cornejo 189 and intense during the NAFTA negotiations. What was at stake was basically Mexico s and Canada s interest of not only increasing their access to their most important market, the United States, but of securing such access that had been seriously hampered in the past by the application of such remedies as described in the former section. To this end, the following proposals were forwarded by Mexico to the United States, with Canada s acquiescence w i t h r e s p e c t t o t h e f i r s t t w o, a t t h a t t i m e. O n e w a s r e p l a c e m e n t o f a n t i d u m p i n g l a w s b y a n t i t r u s t l a w s ( h i g h g r o u n d p r o p o s a l ). O n c e t r a d e between NAFTA Parties became fully liberalized, they would not be able to initiate antidumping cases against each other. 27 De par ting from what Canada h a d p r o p o s e d u n d e r T h e C a n a d a - U. S. F r e e T r a d e A g r e e m e n t ( C a n a d a - U S FTA) negotiations, Me x i c o d e s i g n e d a t r a n s i t o r y m e c h a n i s m i n w h i c h t h e implementation would occur piecemeal. Antidumping investigations would c e a s e t o b e i n i t i a t e d a g a i n s t t h o s e p r o d u c t s i n c l u d e d i n a l i s t o f f u l l y l i b e r a l i z e d g o o d s. 2 8 O n c e t h e N o r t h A m e r i c a n m a r k e t b e c a m e t o t a l l y i n t e g r a t e d, a n t i d u m p i n g l a w s w o u l d b e r e p l a c e d b y a n t i t r u s t l a w s. F o r p o l i t i c a l a n d e c o n o m i c r e a s o n s t h i s p r o p o s a l w a s s h o r t l y e l i m i n a t e d f r o m t h e t a b l e o f n e g o t i a t i o n s. H o w e v e r, t h e P a r t i e s d i d a g r e e under NAFTA to establish a Working Group on Trade and Competition 2 9 to report, and to make recommendations within five years of the date of e n t r y i n t o f o r c e o f t h i s A g r e e m e n t ( J a n u a r y 1, ) o n r e l e v a n t i s s u e s c o n c e r n i n g t h e r e l a t i o n s h i p b e t w e e n c o m p e t i t i o n l a w s a n d p o l i c i e s a n d 27 In 1988, New Zealand and Australia agreed to eliminate the application of antidumping measures against each other under the Protocol to the Australia-New Zealand Closer Economic Relations Trade Agreement and amended their competition laws so they could apply to anti-competitive practices affecting Australia-New Zealand trade. The Treaty of Rome of 1957 provided from the outset for the abolition of antidumping laws among member countries. However, it established a transitional period which ended in 1969, in recognition that tariff and non-tariff barriers were still in existence. In addition, C a n a d a a n d C h i l e i n t h e i r f r e e t r a d e a g r e e m e n t h a v e n e g o t i a t e d t h e d u m p i n g o f antidumping laws without establishing a substitute system. 28 To be considered a fully liberalized product, two conditions would have to be fulfilled: the elimination of all applicable tariff and non-tariff barriers to trade within t h e f r e e t r a d e a r e a, a n d t h e n o n - e x i s t e n c e o f a n t i - c o m p e t i t i v e p r a c t i c e s ( p r e d a t o r y pricing). 29 Article 1504 of NAFTA.