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The United States for at least sixteen years has had serious concerns with whether the World Trade Organization (WTO) dispute settlement system was operating according to the terms upon which WTO Members had agreed. While the United States has been a major supporter of the WTO system and the dispute settlement system generally, concerns about sovereignty and the proper functioning of the system have been important since at least 2002, reflected in U.S. legislation and actions by three administrations. Concerns have existed on (1) whether panels and the Appellate Body have honored the limitations contained in Articles 3.2 and 19.2 of the Dispute Settlement Understanding (DSU) not to create rights or obligations; (2) the issuance of advisory opinions on issues not raised or not necessary to the resolution of the dispute; (3) actions of the Appellate Body that permit deviation from the DSU without affirmative authorization by the Dispute Settlement Body (DSB); and, former Appellate Body members continuing to be involved in cases after their term has expired (failure to complete appeals in the DSU required maximum time of ninety days). These are all issues that have concerned the United States for years but also have been raised by other members.
Background
Dumping is generally defined as the act of an exporter selling a product in an export market at a price below that which is charged for the same or comparable merchandise in the home market. Where dumping has the effect of causing injury to the domestic industry in the importing country, the General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO) Antidumping Agreement permit antidumping measures, in the form of increased duties, to counteract or offset the dumping.
In fact, the Contracting Parties to the GATT, as well as the Members of the WTO, have recognized that injurious dumping is “to be condemned.” The reason for such strong language is that, although consumers of dumped products may benefit in the short term from lower prices, dumping sends false market signals about the underlying competitive positions of market participants. As U.S. Assistant Attorney General Samuel Graham put it in 1916:
[G]enerally accepted principles of political economy hold that it is not sound policy for any Government to permit the sale in its country by foreign citizens of material at a price below the cost of production at the place produced, for the reason that such a system, in its final analysis and on a sufficient scale, spells bankruptcy.
Hence, governments use antidumping measures to protect their domestic industries from injury caused by unfair international price discrimination.
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