Paper presented during the workshop on sugar importers forum held at the Holiday Inn Hotel, Westlands, 3-4th April 2002 on:
APPLICATION OF ANTI-DUMPING MEASURES AND SAFEGUARD PROVISIONS UNDER THE COMESA TREATY
This paper is divided in two parts. The first part addresses the application of anti-dumping measures and customs enforcement mechanisms whereas the second part examines the safeguard provisions under COMESA in relation to the provisions under the multilateral trading system of the WTO.
APPLICATION OF ANTI-DUMPING MEASURES AND CUSTOMS ENFORCEMENT MECHANISMS
What is dumping?
Dumping is a situation of international price discrimination where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country. Thus in the simplest of cases one identifies dumping by comparing prices in the two markets thereby determining the dumping margin.
The Kenya Anti-dumping legislation states that imported goods shall be regarded as having been dumped-
a) If the export price of the goods exported to Kenya is less than the comparative price, in ordinary course of trade, for the product when destined for consumption in the export country;
b) If the importation of the goods causes injury or threatens to cause injury to a Kenyan industry in-terms of decline in output, sales, market share, profits, employment and return on investments.
This is also referred to as a causal link between the dumped product and injury to the domestic industry
The Customs and Excise Act also provides for the establishment of an advisory committee to investigate cases of dumping of goods exported to Kenya.
However, the situation is rarely, if ever, that simple, and in most cases it is necessary to undertake a series of complex analytical steps in order to determine the appropriate price in the market of the exporting country known as the “normal value” and the appropriate price in the market of the importing country known as the export price so as to be able to undertake an appropriate comparison.
The WTO agreement on Anti-dumping practices authorises countries to levy compensatory duties on imports of products that are benefiting from unfair trade practices. However, an importing country can levy anti-dumping duties on dumped products only if it is established, on the basis of investigations carried out by it, that such imports are causing material injury to a domestic industry. Investigations for the imposition of such duties should be initiated on the basis of petition made by or on behalf of an industry, alleging that imports are causing it injury.
Likewise, the Kenya Anti-dumping legislation lay down similar criteria for determining injury to the domestic product as a result of the dumped product.
The WTO Agreement on safeguards authorises importing countries to restrict imports for temporary periods if, after investigations carried out by competent authorities, it is established that imports are taking place in such increased (either absolute or in relation to domestic production) as to cause serious injury to the domestic industry that produces like or directly competitive products. WTO rules provide special flexibility to countries to take safeguard measures to restrict imports, for temporary periods in order to promote the development of new or infant industries. Such measures, which could take the form of an increase in tariffs over bound rates or the imposition of quantitative restrictions can ordinarily be introduced only with WTO approval.
The investigations for the imposition of such measures can be initiated either by the government itself or on the basis of a petition from the affected industry. In practice, however, the investigations are generally initiated on the basis of petitions from the affected industry
The Agreement lays down the criteria which investigating authorities must consider in determining whether increased imports are causing serious injury to the domestic industry. It also sets out basic procedural requirements for the conduct of investigations. One aim of the procedural requirements is to provide foreign suppliers and governments whose interests may be adversely affected by the proposed safeguard actions with an adequate opportunity to give evidence and to defend their interests.
The primary purpose of providing such temporary protection is to give the affected industry time to prepare itself for the increased competition that it will have to face after the restrictions are removed. The Agreement seeks to ensure that such restriction are applied only for temporary periods by setting a maximum period of eight years for the application of a measure on a particular product. Developing countries can, however, impose them for a maximum period of ten years.
A government wishing to provide higher protection through the imposition of safeguard measures is expected to notify the WTO secretariat of the:
ü Particular industry or industries, either existing or new, for the development of which such higher protection is necessary;
ü The nature of the proposed restrictive measures (increase in tariffs, imposition of quantitative restrictions etc);
ü The special difficulties that imports pose for the development of such industries;
ü Why measures other than import restrictions are not practical.
COMESA SAFEGUARD MEASURES IN RELATION TO THE PROVISIONS UNDER THE MULTILATERAL TRADING SYSTEM OF THE WTO
To ensure that there is uniformity among member states of COMESA in the conduct of trade remedy investigations, the COMESA Council of Ministers meeting held in Lusaka, Zambia in November last year adopted regulations on trade remedy measures in line with the provisions of Article 10 (1) of the COMESA Treaty. These measures were to reinforce trading practices within the region and ensure that investigations are within the framework of the WTO safeguard agreement. Article 61 of the COMESA Treaty was subsequently amended to address the trade remedy measures.
Application of COMESA safeguard measures
COMESA Safeguard regulations establish rules for the conduct of investigations and the application of safeguard measures. The safeguard measures are applied in conjunction with the existing national legislation for conducting safeguard investigations and reviews in the individual COMESA member states. The member states of COMESA recognise that most of them are also signatories in the WTO and may have national legislation, which is consistent with the WTO safeguard agreement. All COMESA Member states recognise that they have the right to apply their national legislation without amendment in conducting safeguard investigations from the date the safeguard regulations came into force, as their national legislation complies with both the WTO Agreement and the COMESA Safeguard Regulation.
If an investigation is initiated by a COMESA member state finds that the industry under investigation includes imported products only from COMESA countries, the provisions to be applied are the COMESA trade remedy regulations.
If an investigation is initiated by a COMESA member state finds that the industry under investigation includes imported products only from non-COMESA WTO member countries, the provisions to be applied is the WTO Agreement on Safeguards.
If an investigation is initiated by a COMESA member state finds that industry under investigation includes imported products from both COMESA and Non-COMESA WTO member countries, the provisions to be applied are the WTO safeguard agreement, and where not otherwise provided for by WTO, the provisions of the COMESA trade remedy regulations will apply.
A member may apply a safeguard Measure to a product only if that Member has determined that such product is being imported into its territory in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products. Safeguard measures shall be applied to a product being imported irrespective of its source within COMESA.
Investigations for the application of the safeguard measures
A member may apply a safeguard measure only following an investigation by the investigating authority of that Member State. This investigation shall include reasonable public notice to all interested parties and public hearing or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views as to whether or not the application of a safeguard measure would be in the public interest. The investigating authority shall publish a report setting forth its findings and reasoned conclusions reached on all pertinent issues of fact and law.
Provisional safeguard measures
In critical circumstances where delay would cause damage, which would be difficult to repair, a member may take a provisional safeguard measure for a period not exceeding 200 days during which investigations for the application of safeguard measures would have been finalised.
Duration and review of safeguard measures
The period for the initial application of safeguard measure shall not exceed four years. However, this period can be extended provided the total period of application of a safeguard measure including the period of initial application and any extension thereof, shall not exceed eight years.
Notification and consultations on application of safeguard measures
ü A member shall immediately notify the Committee on Trade Remedies upon:
· Initiating an investigatory process relating to serious injury or threat thereof and reasons for it;
· Making a finding of serious injury or threat thereof caused by increased imports;
· Taking a decision to apply or extend a safeguard measure
ü In making the above notifications, the member proposing to apply safeguard measures shall provide the COMESA Committee on Trade Remedies with all pertinent information which shall include: evidence/report of serious injury or threat thereof caused by increased imports, proposed safeguard measure, proposed date of introduction, expected duration and timetable for progressive liberalisation and restructuring of the industry.
ü A member state proposing to apply or extend a safeguard measure shall provide adequate opportunity for consultations with member states having a substantial interest as exporters of the product concerned with a view to exchanging ideas on the proposed safeguard measure
ü All notifications on safeguards shall be made through the COMESA Committee on trade remedies
WAY FORWARD ON THE COMESA SAFEGUARD MEASURES TO BUSINESSES IN THE REGION
The new safeguard rules under COMESA reinforce the WTO’s rules providing for security of market access. Under the current WTO system, importing countries are prohibited from requesting exporting countries to ask their enterprises to restrain their exports under the voluntary export restraints (VER) or similar arrangements.
Under the WTO, tariffs have been bound against further increases, thus restricting the right of countries to raise tariffs as and when they decide to do so. The COMESA rules on safeguard measures require importing countries to take measures to restricts imports only when investigations, after an application by the concerned industry have established that increased imports are causing or are threatening to cause serious injury to the industries. The rules further try to protect the interests of the exporting countries and enterprises by giving them the right to defend their interests during the investigations and to produce, if necessary, evidence to establish that the imposition of restrictions would not be in the interest of the consuming public in the importing country.
It is therefore essential to look at the COMESA safeguard rules not only from the viewpoint of the exporting countries and enterprises but also from the perspective of enterprises which as a result of sudden surge in imports are finding it difficult to compete with foreign suppliers in their domestic markets. These enterprises also have the right to make a presentation to their governments to take safeguard actions to restrict imports.
Such petitions cannot be made by a single or a few enterprises, but by producers whose production constitute a major proportion of total domestic production. In practise such applications or petitions are often made on behalf of producers. Petitions or applications can be submitted only when it is possible to establish that there is causal link between the increased imports and the alleged serious injury to the industry. Complaints of serious injury to the domestic industry as a result of a surge in the imported products from the COMESA region is on the increase. While most of these complaints are due to the inability of domestic industries, long accustomed to heavy levels of protection, to adjust to the changed competition situation under COMESA trade regime, some are undoubtedly genuine.
The ability of the affected industries to take advantage of the COMESA safeguard provisions will depend on how far they are able to build up the case for such temporary protection, taking into account the Agreement’s strict conditions for the imposition of safeguard measures.
On the case of sugar a quantitative restriction was imposed without any investigation having been made to determine the extent injury or Material injury and the causal link to the effected industry. To date the margin of dumping has not been established. The cause of sugar imports into Kenyan can be rightly linked to cases of under valuation or under invoicing or lack of proper controls at our borders. I have no illusion that the Export prices compared with the contracted or the normal value have been determined or established to enable one conclude a case of Dumping of sugar imported into the Kenyan market.