U.S. Antidumping Duties On Shrimp Imported From Thailand

U.S. antidumping duties on shrimp imported from Thailand

Summary:

The case happened because US shrimpers call for end GSP. The largest seafood associations in the US tried to lobby campaign in Washington to cut generalized system of preference (GSP) privileges to Thailand. They want the US congress to look into Thailand’s business practices. They said “Thai shrimp imports have been a serious problem for us and shrimp farmers across the US for years, and we need to bring attention to the issue and the country’s business practices.” However, Thailand is already undertaking action to the WTO against the US for this action.

Mr. Somsak Paneet, president of the Thai Shrimp Association, said that the cancellation of GSP privilege will affect not only on shrimp export but also other industries such as garments and jewelry. Unfortunately, it becomes more complicate since the United States Trade Representative (USTR) put Thailand to its Priority Watch Lists.

Moreover, Thai shrimp exporters also ask the Commerce Ministry to file complaints against the U.S. at the World Trade Organization. This is because Thai shrimp exporters have to face with the imposition of “zeroing” and the over “continuous-bond” payments, imposed by the U.S. government as a reason of antidumping policy. Although the complaints about the U.S. moves have been made before, the progress is very slow, due to the complex of the problems.

For zeroing practice, Mr. Poj Aramwattanont, Thai Frozen Foods Association president, claims that zeroing and continuous-bond payment are unfair. Also, he shows confidence that Thailand will win the case because this type of cases has been judged as unfair by the WTO before.

One of the cases that has been judged as unfair by the WTO is Ecuador case. The panel found that the duties that the U.S. imposed on imported shrimps by Ecuador, as a reason of dumping the price in the U.S. market, is violated the international trade rule. This is because Washington’s use of a practice, known as “zeroing” to calculate whether the shrimps were sold below the market price is unfair. As a result of the previous panel decision, zeroing practice leads to overstated margins of dumping, and thus higher duties.

Another trade barrier is that Thai shrimp exporters face a 100 percent bank-guarantee payment in the U.S., known as a continuous bond. Exporters have to pay more that 3.46 billion baht in bonds and 5.79% to 6.82% of shipment values in antidumping duties.

Result:

The U.S. is found to be violated, and they agreed to change its “zeroing” calculation in August. Also, they would adjust its calculation method for continuous bonds. These actions will reduce the cost, they said.

Sources of the cases:

WTO faults some U.S. duties on shrimp. Xinhua Finance News: Asia (Eng)

Wednesday, January 31, 2007.

U.S. shrimpers call for end to GSP. Bangkok Post Website (Eng)

Thursday, June 07, 2007.

Shrimp export firms to press US complaints. The Nation Website (Eng)

Monday, June 18, 2007.

Analysis of the result:

Causes of this case are those about perfect competition, dominant position, and, predatory pricing abuse.

Perfect competition is that firms must be able to compete freely in the market. When the price of imported shrimps from Thailand is very low, it causes competitors in the U.S. market to die out because they cannot compete with the very low cost products. Therefore, the U.S. imposes tariff on shrimps from Thailand to offset foreign dumping.

Dominant position is referred to those who have economic strength and use it to prevent effective competition. U.S. shrimpers claim that Thai shrimpers have dominant position because imported shrimps from Thailand contribute a high volume to the total U.S. imported shrimps.

Moreover, predatory pricing from the lesson I have learned is considered to be an abuse if the dominant company applies it to protect or strengthen its dominant position.

As a result, U.S. shrimpers brought this case to WTO to consider Thailand’s business practice, and the U.S. imposed a tariff as a response to international policy distortion.

According to WTO, zeroing is a calculation method that ignores negative margin of dumping. To know more, see appendix 1 on how it’s calculated. As a result, it causes an unfair increase of dumping liability of exporter (WTO, n.d.). Therefore, Thailand brought this case to WTO, and this case is very similar to the Ecuador’s case which has been judged before as unfair.

My perspective

From the previous result, I quite agree with the decision made by the panel that imposing tariff calculated by using zeroing method, as a reason of antidumping, is unfair because of the following reasons.

According to Article VI of GATT, during the Uruguay Round, antidumping means charging extra import duty on a product in order to bring its price closer to the fair value or to help domestic industries from injury. Also, you need to calculate the extent of dumping, investigate the impact to importing countries, and look into all economic factors that could affect before you can impose tariff (definition, n.d.).

According to Free Trade Organization, Dan Ikenson, policy analyst, claims “Few trade policies engender more bitterness and international ill will than the U.S. antidumping law. For many years, that law has been the weapon of choice among domestic producers seeking to quell import competition.”(zeroing, April 27, 2004)

According to the Agreement on Technical Barriers to Trade, at the Uruguay Round, states “This agreement will extend and clarify the Agreement on Technical Barriers to Trade reached in the Tokyo Round. It seeks to ensure that technical negotiations and standards, as well as testing and certification procedures, do not create unnecessary obstacles to trade.”(Legal, n.d.) Therefore, I think that zeroing is a calculation method that is unnecessary obstacles to trade.

Moreover, from my opinion, I think that antidumping is difficult to determine. From my knowledge, dumping is when a firm sells a product at a lower price in the export market that in the domestic market. Moreover,