06 trade remedies

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SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK SEATRANET ADVANCED COURSE NON AGRICULTURAL MARKET ACCESS (NAMA) Module 7:) Safeguards and Other Forms of Contingency Protection SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK OUTLINE This Module covers types of Contingency Protection 1.Safeguards 2.Anti-dumping 3.Subsidy Countervail SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguards SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures Safeguard measures are emergency actions with respect to increased imports of particular products, where such imports have caused or threaten to cause serious injury to the importing members’ industry SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures • Different from other forms of contingency protection in that safeguards are actions taken against fair trade • The WTO Agreement on Safeguards is provided for in Article XIX of GATT 1994 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures • The guiding principles of the Safeguard Agreement include: – Measures must be temporary, normally for four years, but can be extended – They can be imposed when imports are found to cause or threaten serious injury to a competing domestic industry SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures • Serious injury is a strong test requiring “a significant overall impairment in the portion of the domestic industry.” • Domestic industry is the group of producers as a whole of the like or directly competing product, operating within the territory or producers who collectively account for major proportions of the domestic production SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures • Safeguard Measures are applied on an MFN basis – – They must be progressively liberalized The country taking an action must pay compensation to members whose trade is affected SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures • The requirement of increased imports can be met by an absolute or relative increase • The measure is to be applied only to the extent required to remedy or prevent the injury and to facilitate adjustment SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures • Safeguard Actions can include: – an increase in the applicable tariff or – a quota • While the agreement does not deal with how a tariff should be set, it does provide guidance on the development and allocation of quotas • If the Parties cannot agree on the appropriate compensation, the aggrieved party may retaliate 10 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Rationale For Safeguard Measures • The potential to use Safeguards is particularly important at times when tariffs are being reduced – Safeguards provide some comfort to the public and to producers that there is an appropriate mechanism available if tariff reduction leads to a surge in imports with the potential to cause serious injury 12 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguards in Preferential Agreements • Most preferential arrangements (whether unilateral or negotiated agreements) contain a safeguard mechanism – Safeguard mechanisms are particularly important in FTAs since substantially all tariffs are eliminated 13 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures in FTAs • In a FTA, a safeguard mechanism is usually in place for a fixed time period in response to the actual reduction or elimination of the tariff • The various principles of the WTO agreement can be adjusted for a FTA 14 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures in FTAs • There is clear potential for adjusting the principles in an asymmetric fashion if the FTA involves countries at different stages of development – A safeguard mechanism is of significant benefit to FTA negotiations as it produces a “safety net” in case negotiated tariff elimination leads to injury and can be used to help reduce public concerns 15 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Anti Dumping 16 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Dumping • Dumping is defined as selling a good at less than its normal value - Usually the price in the home market or the cost of production • Dumping is an action of the company involved and therefore outside the direct control control of government 17 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Dumping • If an industry makes a dumping complaint, an investigation is required to prove dumping and its value • If dumped sales cause material injury to domestic interests, then dumping duties can be applied equal to amount of dumping margin 18 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Material Injury • To enforce a “dumping duty”, it must be shown that material injury has occurred • Injury can take many forms: – – – – Lost sales Lost profits Reduced employment Unused factory capacity 19 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Dumping • Injury must be found to be material • No definition but left to each country to set limit • Dumping duties remain in effect as long as the action is taking place • Countries can enter into a price undertaking (not to dump) and have duties waived 20 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Dumping • The Anti-Dumping Agreement emerged from the Uruguay Round • Very controversial, seen by many as effective barrier to trade • Re-negotiation included in Doha Round, but with very restrictive mandate 21 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Subsidy Countervail 22 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Subsidy Countervail • Governments sometimes provide monetary support (subsidy) to their producers • UR created first subsidy definition • Support given only when products are exported or to replace imports is prohibited in WTO – If proven to exist thee subsidies must be eliminated 23 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Subsidy Countervail • Under the WTO dispute process an investigation is carried out to determine existence of subsidy and level of support it provides to producers • Another investigation is then undertaken to determine if there is material injury to domestic producers in the importing country 24 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Subsidy Countervail • If material injury exists, then a “countervail duty” may be imposed to match the subsidy • Stays in effect as long as the subsidy continues 25 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK For all types of Contingency Protection : • Administrative steps are well defined in the WTO including timeframes • In all cases the process is transparent • Party has right to appeal • Detailed understanding of agreements has been clarified over time as panel decisions create precedents 26 ...SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK OUTLINE This Module covers types of Contingency Protection 1.Safeguards 2.Anti-dumping 3.Subsidy Countervail SOUTH EAST ASIA TRADE POLICY TRAINING... industry SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures • Different from other forms of contingency protection in that safeguards are actions taken against fair trade • The WTO Agreement... liberalized The country taking an action must pay compensation to members whose trade is affected SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Safeguard Measures • The requirement of increased
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