Shoes on the Other Foot: Update on US Zeroing Practice

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We’ve written extensively about why certain nations (ahem, China in particular) conveniently seem to keep “forgetting to follow WTO-mandated rules see here and here including the United States. The US is by no means an innocent when it comes to playing the trade game to their advantage, as is the case with the practice called “zeroing.

Zeroing has been used exclusively by the US (none of the other 152 WTO members do this) to bolster their anti-dumping claims and protect trade interests, notably in the steel sector. (See Lisa’s coffee cup-and-Japan example now, now, keep your minds out of the gutter.) Essentially, zeroing happens when, in calculating import prices, the US simply tosses out or “zeroes the instances in which the exporters’ domestic price is lower than the domestic US price, creating a much larger dumping margin, and giving them quite a skewed advantage, many say.

As we’ve previously reported, the WTO called the US out on this in May 2009, ruling against the practice and basically issuing a “cease and desist order. From then on, zeroing was disallowed on a new case basis, but any actions taken on already existent cases were much murkier. (US courts supported the practice.) So the US technically “stopped zeroing, while appealing the ruling. Later that year, they lost the appeal. So, case closed, right?

Apparently not. Other reports indicated the US had stopped zeroing back in December 2006, just before an initial WTO ruling on the issue in 2007. But Bloomberg recently reported that the US Commerce Department just now “proposed ending the way it calculates dumping duties after Japan, the European Union and Thailand said their exports were being penalized. (The steel case with Japan has been ongoing.)

“ËœWhile it has taken a very long time, the Commerce Department has finally acted to remove a serious distortion from antidumping calculations,’ Lewis Leibowitz, a lawyer at Hogan Lovells in Washington who represents U.S. companies that use imported products, said in a statement,’ according to the article.

So what’s the deal? Four years of ambiguity? When did the US actually stop zeroing? Or has it stopped at all? And how long does it really take to comply with WTO laws? Is the WTO effective, then? As the US flails to keep up in the globalized market, it clearly has a hard time letting go of some “tricks of trade that it would just as easily accuse others of employing.

Tell us what you think.

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–Taras Berezowsky

Comments (4)

  1. Mindy Fleishman says:

    The WTO has been used for years (by violating countries)as a weapon to inflict death by a thousand cuts to U.S. trade laws.The U.S. Dept of Commerce “DOC”has repeatedly made the case that their anti-dumping calculation methodology is consistent both with US trade laws and the WTO obligations of the United States.

    Nevertheless-(in response to certain WTO Dispute Settlement findings) the DOC published a Federal Register Notice on Dec 28,2010 in which a new methodology is proposed and explained. The public is invited to comment on this proposal by Jan 27, 2011.This transparent process is in compliance with the Uruguay Round Agreements Act “URAA”. The URAA requires this comment process before regulations or practices may be amended,rescinded, or otherwise modified.
    The weakening of US Trade Laws may be welcome in the short term by those who enjoy the benefits of cheap, dumped imports. However, in the medium and long term it will lead to the further erosion of the US manufacturing base and along with it-American jobs!

    Americans should be grateful for the integrity and hard work of those in the DOC and the United States International Trade Commission for their strong enforcement of US trade laws.

  2. tberezowsky says:

    Thanks for the comment, Mindy.

    It’s true that to fight fire with fire, the DOC has to be as resourceful as it can to combat the WTO failures when it comes to US trade laws.

    Ideally, however, overtly protectionist practices shouldn’t be the answer — but at the same time, what’s the most effective strategy to make sure China plays by the rules?

  3. Get Real says:

    Interesting perspective, not something I have run across before. What other overtly protectionist practices does the U.S. engage in besides zeroing?

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