Competitive Advocacy Opportunity: Zeroing in U.S. Antidumping Enforcement
William W. Nye, EAG 08-13, December 2008
Almost all countries have antidumping laws which regulate their imports. The United States and other countries enforce these laws within the terms of the World Trade Organization ("WTO"). There is a difference between U.S. enforcement and the enforcement approach of other countries, however. The United Statesbut not other countries of which I am aware--now uses 'zeroing' in its determination of whether imports are dumped. The use of 'zeroing' will almost always increase the level of any antidumping duty, and will sometimes create a duty where none would have been imposed, had the methodology not been used.
All countries test for dumping by attempting to determine whether imports are being sold at less than 'normal' value. Other countries generally do this by directly comparing the average price at which the product is sold in the country of production with the average price at which the same product are sold in the importing market. If the average of the observed prices in the importing country is lower than the average price in the country of production (the 'normal' value), then the foreign firm is said to be dumping. Using zeroing, however, the U.S. treats import price observations above the 'normal' value as if they occurred at the 'normal' value (rather than at their observed level). Transactions at prices below the normal value are treated at their observed levels. The result of zeroing has been to make the U.S. antidumping laws more restrictive than they might appear, with a positive antidumping margin potentially being found if any single transaction occurs below 'normal' value, even if the average of the import prices in the U.S. is much higher than the 'normal' value.
The U.S. practice of zeroing has recently been challenged at least six times before the World Trade Organization (WTO), and has generally been found to be inconsistent with the obligations of the United States under the WTO.
Many economists feel that the antidumping laws of the U.S., or of any other country, are misguided. Antidumping regulations seem ill suited to play the most likely roles according to which import restrictions might be beneficial: addressing the possibility of predation or strategic trade by foreign firms, or serving as an 'optimal tariff'. Zeroing, therefore, may increase the cost to the U.S. of import protection without any corresponding benefit.
The net impact of the zeroing methodology on the United States (compared to antidumping enforcement without zeroing) depends inter alia on the dispersion of the U.S. prices obtained by foreign exporters under dumping investigation by U.S. authorities. One estimate is that the cost of zeroing to the U.S. could be in the range of $46-112 million/year, with the higher end of the range being more likely.