When companies see their access to the U.S. market threatened by actions of U.S. Government agencies in trade cases, whether antidumping, countervailing duty, or safeguards, often they want to ask their government to challenge those actions at the World Trade Organization (“WTO”). Many governments, too, think they should take their grievances over U.S. policies to the WTO rather than challenge U.S. government actions in U.S. courts. However, companies, and governments, should first consider whether the likely benefits to them outweigh the potential costs.
The WTO dispute resolution process is designed to vindicate the rights of sovereign governments, not necessarily those of the private parties to trade disputes. Only governments may appear, and even a victory may not bring meaningful relief to the government or to the affected private parties. Also, the WTO process could put at risk meaningful relief that the private companies might be able to obtain on their own in U.S. courts.
The WTO process lacks a remand mechanism. Thus, should the WTO Appellate Body determine that a dispute resolution panel made a mistake, it could not send the issue back to the panel to correct the mistake. In many cases, this lack of remand authority means that an Appellate Body reversal, even on relatively minor grounds, terminates the proceedings without any resolution.
Without a remand capability, the Appellate Body cannot gather additional information when it has determined that panels below did not gather enough. The Appellate Body is not empowered to go beyond the record. So, the Appellate Body has to conclude that the record is inadequate, whereupon it may decline to rule, either on the whole case, or on some, often important, parts of it.
Even when the WTO finds that the U.S. actions were contrary to WTO obligations, this vindication may be of little practical benefit for a complaining government or an affected company. The WTO retaliation scheme often involves retaliation in other industry sectors, but unless the pain of the retaliation is enough to cause the United States to comply, it typically does not benefit the industry sector that is the focus of the dispute. The government authorized to exact compensation through retaliation must navigate domestic politics to pick industries for retaliation, and often finds it impossible not to incur the wrath of one industry or another. After all, antidumping and countervailing duty cases erupt because one country believes another is shipping too much of a product at an unfair or subsidized price. It would be unusual for the second country to be shipping similar quantities of the same merchandise in the other direction. Retaliation – restricting imports – is never likely to be on the same merchandise. Therefore, the government may be vindicated, and almost inevitably at a political price, and the company frequently gets no relief at all.
Another factor that companies, especially, should consider is whether a WTO challenge could put at risk more meaningful relief that the company might obtain through appeal of the agency actions in U.S. courts. Just as there is a possibility that victory before the WTO could improve the chances of victory before a U.S. court, there is risk that a loss before the WTO could undermine the company’s U.S. court appeal. This risk is acute in antidumping cases because WTO panelists are almost always former government dumping officials: their training and experience is in imposing duties on goods being imported into their countries. They are not very sympathetic with exporting companies, nor as comfortable with interpreting the law from an exporter’s perspective. Also, less obvious, but nonetheless real, is the risk that a victory at the WTO might be used by the United States to trump a victory in U.S. court.
This latter risk arose in the Softwood Lumber case where Canada and the Canadian lumber industry pursued a strategy of challenging an affirmative U.S. International Trade Commission (“ITC”) threat of injury determination under both U.S. law and the WTO. Canada won on both fronts. However, the U.S. Government claimed that the new ITC determination made to “comply” with the WTO ruling allowed the United States to keep its antidumping and countervailing duty orders in place even in the face of an order requiring the ITC to make a negative determination as a matter of U.S. domestic law. The U.S. Court of International Trade (“CIT”) eventually struck down that claim in Tembec, Inc. v. United States, USCIT Slip Op. 06-152 (Oct. 13, 2006). However, by the time the court’s decision became final, the United States had collected billions more in estimated antidumping and countervailing duties and Canada had acquiesced in a settlement that deprived the court decision of precedential effect.
Were the United States to try again what the CIT struck down in Tembec, it surely would fail again. That conclusion, however, does not mean the United States might not try, and for the time being, with the Tembec decision having been denied precedential effect, the United States could again indulge in the principle that justice delayed is justice denied (i.e., the delay and continued collection of cash deposits would force a settlement unfavorable to the respondents).
There are cases that should be taken to the WTO, both by governments and by private companies. More often, however, challenges to market protectionism should be brought in U.S. courts. In some cases, such as the U.S. Commerce Department’s use of a technique known as “zeroing” to find dumping and to inflate antidumping margins, the WTO offers the best chance of obtaining relief. The law does not require choosing forums, but it is prudent to do so, and particularly wise to overcome the reflex suggesting that the WTO could be a panacea for unfair protectionism.