Countervailing duty Essay Example | Topics and Well Written Essays - 5000 words

Countervailing duty - Essay Example Countervailing duties are tariffs or tax charged by an importing country to the country of origin. These duties are basically being imposed on the basis that the produce or products being exported were subsidized disproportionately. By doing so, the importing country can neutralize the effects of unfair trade practices. Countervailing duties work in different ways. These can be levied on imported goods from producers who were not subjected to sales taxes or turnover taxes. Countervailing duties may also be imposed on the domestic production of sale of goods for the benefit of foreign manufacturers. Generally, the idea of countervailing duties is protection both of the importers and exporters. However, in the framework of uneven development, how possible can the concept of fairness be pursued? Many believes that along with other trade instruments, the concept and implementation of the countervailing duties can be prone to abuse and misuse. Furthermore, countervailing duties may only s erve few giants of trade but may be irrelevant to small export-oriented countries falling under the bracket of so-called less developed and developing countries. This paper aims to delve on the analysis of the countervailing duties based how these are being implemented, enforced and resolved under the umbrella of the World Trade Organization. Also, this paper will give particular emphasis on the practices of the United States of America, as a country that tails countervailing duties forcefully1 compared to other countries in the world. I. Brief presentation on the development of countervailing duties The General Agreement on Tariffs and Trade (GATT) There were only two provisions in the General Agreement on Tariffs and Trade that categorically regulate subsidies. These are Articles VI and XVI. GATT Article VI principally provides that the importing country may levy countervailing duties on subsidized imports if these may threaten or be the source of material injury to an established domestic industry2. This Article generalizes the rules on the application of antidumping and countervailing duties. It disapproves the export-sales under normal value, especially when these cause or threaten the material injury. It also describes the basis for the determination of sales below normal value: when export price is less than comparable price. According to Article VI, when these criteria are fulfilled, the importing country is entitled to levy an antidumping duty3. This Article however has been open to different interpretations and inconsistent practices due to its profound formulation. Much more, countries like Canada and the US, despite being the two of the biggest users of antidumping duties excuse themselves from being bound to this provision asserting that their domestic antidumping laws were much ahead of the GATT. Meanwhile, Article XVI stipulates that all subsidizing countries, either the increase their exports or reduce their imports are duty-bound to be notifie d and follow a consultation procedure for limiting subsidization that may cause prejudice to other countries4. However, because Article XVI was stated in a slack one-paragraph provision, this article was widely taken for granted by many countries on the basis that states were reluctant if not playing it safe as the gesture for