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CANADIAN IMPORTS AFFECTED BY ANTI-DUMPING AND COUNTERVAILING MEASURES TABLE OF CONTENTS
Download full document in MS Word format, compressed - zip (36K) through FTP Download full document in Adobe Acrobat format (218K) through FTP Download full document in MS Word format, compressed - zip (36K) through HTTP Download full document in Adobe Acrobat format (218K) through HTTP PUBLIC CANADIAN INTERNATIONAL TRADE TRIBUNAL CANADIAN IMPORTS AFFECTED BY ANTI-DUMPING AND COUNTERVAILING MEASURES 1995-2002 ANALYTIC REPORT Research Team Sandy Greig Director of Economics Approved by: November 2003 PART I - INTRODUCTIONSince 1990, Tribunal research staff has produced occasional studies on Canada's use of anti-dumping and countervailing measures.1 Among the statistics in these staff studies, the percentage of imports into Canada affected by the application of such measures has been the most requested. This information on imports affected has been used by Canadian government officials as contextual information for purposes of policy making and program review, by the World Trade Organization (WTO) as an input to Canada's trade policy review, and by academics in support of their research on Canadian trade issues. In the present study, Tribunal staff reports its estimates of the percentage of imports affected by anti-dumping and countervailing measures for the period from 1995 to 2002. Recognizing the utility of this information and the desirability that it be up-to-date, Tribunal staff plans to prepare and revise its estimates on an annual basis. To facilitate the annual reporting, Tribunal staff has developed a new estimation methodology, which is described in Part II and, in more detail, in Appendix I. PART II - RESEARCH METHODOLOGY1. TerminologyBefore describing the methodology, it is useful to define the terms used in this report. A "case" is a unique Tribunal proceeding. A case is either an "inquiry" or a "review" and may result in one or more "findings" or "orders". The Tribunal inquires into injury caused by dumping and/or subsidizing following a determination of dumping and/or subsidizing by the Canada Customs and Revenue Agency. At the end of an inquiry, the Tribunal issues a finding on whether dumping and/or subsidizing has caused injury or retardation or is threatening to cause injury. The Tribunal reviews a finding or order prior to its expiry, at the end of a five-year period, or upon request, at any other time, if it considers that a review is warranted. At the end of a review, the Tribunal makes an order to rescind or to continue a finding or order, with or without amendment. In this report, the basic unit for counting and analyzing anti-dumping and countervailing findings and orders affecting imports from a country is a "measure". Measures are country specific. Since a finding or an order may affect imports of the same products from different countries, they may include a number of country-specific measures. For example, the Tribunal's finding in Inquiry No. NQ-2000-006 represents two measures: one for the People's Republic of China and one for Vietnam. Measures do not distinguish between different products that are part of the same case. A case may include different products from the same country. Such cases, however, constitute only one measure. For example, in Inquiry No. NQ-2000-006, the Tribunal made separate findings on refrigerators, dishwashers and dryers from the United States. These findings represent one measure. A "measure", as a unit for counting, is different from the unit used by the WTO, which is an "action". It was necessary to develop a different approach to counting because of the type of analysis undertaken. Measures are different from actions in three important ways. Measures do not include undertakings. Undertakings were excluded because of the absence of import data required for estimating the effects of the duties over time. There are only a small number of undertakings in place. Measures count anti-dumping and countervailing duties affecting imports of the same product from the same country only once. To count them as separate actions, as does the WTO, would have resulted in double counting in the analysis of the effects of the measures on imports. Finally, a finding against exports from the European Union counts as a measure against each of those member states that have exported to Canada. In the WTO database, it counts as a single action. 2. MethodologyQuantifying the value of imports covered by anti-dumping and countervailing measures over the period during which they are in place is complicated because imports of a product tend to fall after measures are put in place. This is because anti-dumping and countervailing measures usually have the result of raising the prices of those imports. For this reason, the actual value of imports after a measure is put in place is not an adequate indicator of the imports affected, and it is necessary to estimate what the import value would have been in the absence of anti-dumping and countervailing measures. In order to carry out this "counterfactual" assessment, it is necessary to establish, for each product affected, a base level of imports for a period just before the application of the anti-dumping and countervailing measures. As well, it is necessary to estimate, for each of the years during which the anti-dumping and countervailing measures are in place, what the value of imports of that product would have been absent the measures. The approach used to calculate the base level of imports of a product for the period before the imposition of such measures, and to estimate the level of imports affected for each year in which there was a finding of injury or an order continuing a finding, is set out in Appendix I. As well, certain special issues are considered, including the seasonal application of measures, source and temporal switching of imports, and significant changes in the geographic or product coverage of findings. The estimates of imports affected by anti-dumping and countervailing measures for individual products are summed to produce an estimate of the total value of imports affected by all measures in place in a given year. The sum of these affected imports is divided by the total value of Canadian imports, less re-exports and special transactions trade,2 to provide an estimate of the percentage of Canadian imports affected by anti-dumping and countervailing measures. 3. DatabaseFor this analysis, Tribunal staff has compiled a special database for Tribunal injury inquiries and reviews. The database contains a record of market and import values (by country) for all Tribunal findings of injury, and orders continuing a finding, for the period from 1995 to 2002. Additionally, the database contains the total value of Canadian imports, as previously defined, for every year during this period. PART III - ESTIMATION OF IMPORTS AFFECTED BY ANTI-DUMPING AND COUNTERVAILING MEASURESTable 1 shows the number of Canadian anti-dumping and countervailing measures during the period from 1995 to 2002. In 2002, there were 90 measures in place, relating to 32 cases.
Table 2 shows that the value of imports affected by anti-dumping and countervailing measures increased from $1.1 billion in 1995 to a peak of $1.4 billion in 2001, before declining to $1.3 billion in 2002. Although the number of measures in place fell from 96 at the end of 1995 to 90 at the end of 2002, the average value of imports affected by each measure increased, from about $11.6 million in 1995 to $14.1 million in 2002.
Table 3 shows that the total value of imports into Canada increased from $204 billion in 1995 to a peak of $323 billion in 2000. In 2002, total imports had a value of $311 billion. From 1995 to 2002, the total value of imports into Canada increased by 52 percent. In comparison, the value of imports affected by anti-dumping and countervailing measures increased by 14 percent over the same period.
Table 3 and Figure 1 show that, at the start of the period examined, the percentage share of Canadian imports affected by anti-dumping and countervailing measures was 0.55 percent. From that point, coverage fell steadily each year, to reach its lowest level of 0.31 percent in 1999. The percentage of imports affected increased in subsequent years, to reach 0.44 percent in 2001 before declining to 0.41 percent in 2002.
The following describes how Tribunal research staff estimated what the value of imports for affected products would have been in the absence of anti-dumping and countervailing measures. The appendix addresses three methodological issues. First, it sets out the approach used to calculate a base value for affected imports. It responds to the following question: What value of imports would have been expected in a base period just before the Canada Customs and Revenue Agency's preliminary determination (PD) of dumping and/or subsidizing? Second, it describes how the base value of the imports was adjusted to reflect the underlying growth (or decline) in the market for the years during which the measures were in place. It responds to the following question: If there had not been a finding of injurious dumping and/or subsidizing, what value of imports would have been expected for each of the years during which the finding or order was in place? Finally, it explains the approach used to estimate the effects of certain special issues, such as the seasonal application of duties, source and temporal switching of imports and significant changes in the geographic or product coverage of findings. 1. Calculation of the Base Level of Imports Affected Before estimating the levels of imports affected by measures, it is necessary to know what level of imports existed before measures were put in place. The issue is how to calculate a base-period value for the imports affected by anti-dumping and countervailing measures for a base period. For the purposes of this analysis, the base level of imports selected is the average value of imports in the three calendar years prior to the PD of dumping and/or subsidizing.3 This approach to calculate a base-period value provides a reasonably representative value of the imports affected. It reduces the impact of the period just prior to the PD when there is often a significant artificial increase or decrease in imports, depending on the reaction of the domestic industry to the dumped and/or subsidized imports.4 Taking a three-year average also moderates the potential volatility observed with some year-to-year changes in imports and likely captures a more "normal" pattern of import flows. 2. Estimation of Imports Affected for the Years During Which Measures Are in Place Once base period imports have been identified, the issue is how to estimate the level of imports affected for each year during which the anti-dumping and countervailing measures are in place.5 This is done by advancing the base level of imports affected, on an annual basis, to reflect the underlying growth (or decline) in the market. For each of the five years6 after the issuance of a finding or an order on any product, the value of imports affected was increased or decreased based on an estimate of the market growth for that product.7 For example, starting with the base level of imports, the level of imports was estimated for each year of a finding, including the first year, based on the average annual change in the market value for the product in the three calendar years prior to the PD of dumping and/or subsidizing. An analogous approach was used for estimating the imports affected for each year of an order. The average annual change was based on the three calendar years prior to the order. The average annual changes in the market value were compared for the three-year period before each finding or order. There were six instances of unusually high or low growth in the market value.8 When compounded consecutively over the duration of a finding or an order, the estimated value of imports for those instances was then unusually high (or low) towards the end of the five-year period.9 In order to moderate the impact of these unusual growth rates on the estimated value of imports affected, the base level of imports for the instances was projected forward, based on the observed change in the total value of Canadian imports (i.e. the value used in the denominator). As will be seen in the next section, however, this is a temporary solution. Upon the completion of an expiry review, the actual market values and associated growth rates would be known for several years prior to the scheduled date of expiry, and the actual growth rates would then be used to estimate the value of the imports affected. PDs of dumping and/or subsidizing are made throughout the year. As well, findings and orders expire or are rescinded throughout the year. Accordingly, the estimated value of imports affected was prorated, as appropriate, to account for situations where imports were affected by anti-dumping and countervailing measures covering only several months of a particular year. In both situations, the value of imports affected by anti-dumping and countervailing measures, estimated on an annual basis, was prorated by the number of months during which a measure was in place in a given year. For example, when a PD was made in July or when a finding or an order was rescinded in June, the value of estimated annual imports affected was reduced by 50 percent. At the time of a review, the value of affected imports was recalculated and adjusted retroactively based on the actual growth observed in the market. Actual information on the market growth becomes available at the time of the five-year review. Because this new information typically covers only the three calendar years prior to the start of a review, there is still a requirement to estimate the market for the two to three years following the previous finding or order. For example, the review in 2005 of a finding made in 2000 will add annual market data for 2002, 2003 and 2004, leaving annual market data to be estimated for the "gap" years of 2000 and 2001. The market data for the "gap" years were estimated based on the average annual growth using the market value for the last full year prior to the PD and the market value for the first full year of the review. An analogous approach was used for estimating the "gap" years between two reviews. Once the market data were estimated for the "gap" years, there would be an uninterrupted time series for the five years during which the finding or order was in place. For this five-year period, the base value of the imports (for an inquiry finding) or the last annual import value (for a review order) was revised each year by the year-over-year growth in the market. This value replaced the one estimated in 2a) above. a) Seasonal Application of Measures In five cases, which are listed in Appendix II, all covering agricultural products, there is a seasonal application of measures. For these cases, the imports affected are limited to the season in question. Since the base levels of imports were established for a 12-month period, the annual import data estimated for these products were discounted by the number of months, within a 12-month period, during which these measures were not in place. For example, in Review No. RR-94-007, Whole Potatoes, the Tribunal continued the findings, with an amendment to exclude imports during the period from May 1 to July 31, inclusive, of each calendar year. As a result, for purposes of estimating affected imports, starting with data for 1996, the values of estimated annual imports were discounted by 25 percent to reflect the impact of such an amendment.10 When anti-dumping and countervailing measures are put in place against goods from certain countries, importers may start to import dumped and/or subsidized goods of the same kind from other countries, resulting in new cases and new findings in subsequent years.11 If these cases are treated as unique cases, the value of imports affected by anti-dumping and countervailing measures is likely to be overstated. Under this scenario, the first case appears to have provided only limited protection against dumped and/or subsidized imports, if the same value, or higher values, of dumped and/or subsidized imports continued to come into Canada, only from different sources. These cases, which are identified in Appendix III, need to be considered as a group of cases and were dealt with as follows. The imports of the first case in the group were estimated and revised, as set out above, for each year during which the finding was in place. As long as this case was not rescinded, its annual imports were the point of reference for those of the other cases in the group. Thus, imports for the other cases, similarly escalated and revised, were added to the imports affected for the group, for a given year, only to the extent that they exceeded the corresponding imports of the first case in the group. When the first case in the group was rescinded, the imports of the second case became the reference point for the other cases in the group, and the process continued until the rescission of all cases in the group. In the finding in Inquiry No. NQ-96-002, Fresh Garlic, the Tribunal put in place anti-dumping measures that applied from July 1 to December 31, inclusive, of each calendar year. In response to this finding, importers started to bring in the goods in the first half of the year, the six-month period that falls outside the finding. In the last full year (1995) before the finding, approximately 92 percent of the fresh garlic imported from China entered Canada in the second half of the year. After the finding, the pattern of imports reversed. In 1998, approximately 70 percent of the goods entered Canada in the first half of the year. By 2000, approximately 98 percent entered Canada in the first half of the year. Coinciding with temporal switching, imports in each year during the period from 1998 to 2000, after the issuance of the finding in 1997, continued to increase and to maintain levels significantly higher than those of any year before the finding. This unabated growth in imports, along with a shift in the time of year during which imports entered Canada, strongly suggests that the 1997 finding had very little, if any, impact on the volume of imports. Given the minimal effect of this finding on imports, it was decided to use actual import data collected for the second half of the year at the first review (Review No. RR-2001-001) to estimate imports for 1998, 1999 and 2000, instead of using the methodology set out earlier. It was believed that these data would be more representative of the imports affected, given the temporal switching of imports since the 1997 injury finding.12 d) Significant Changes in Geographic or Product Coverage A Tribunal decision may remove a country from a particular case. In these situations, a country-specific measure is no longer in place and Tribunal staff has removed, from the estimated import values affected, the estimated value for that country-specific measure. As well, a Tribunal decision may remove certain products from the measures applied in a particular case. In five cases (Appendix IV), the Tribunal has removed products that comprise a significant portion of the subject goods. In these situations, Tribunal staff has removed, from the estimated import values affected, the estimated portion attributed to the removed product, according to its share in the base imports. A case in point are the findings in Inquiry No. NQ-89-003, Women's Boots and Shoes. In the second review (Review No. RR-99-003), the Tribunal continued the order concerning women's boots from China, but rescinded the order concerning women's shoes from the same country. To remove the imports attributed to women's shoes that were no longer covered by the findings, starting on May 1, 2000, the estimated import values affected were discounted by 92 percent, the share accounted for by shoes in the base imports. APPENDIX II - LIST OF CASES WITH A SEASONAL APPLICATION OF MEASURES
APPENDIX III - LIST OF CASES INVOLVING SOURCE SWITCHING
APPENDIX IV - LIST OF CASES WITH SIGNIFICANT CHANGES IN PRODUCT COVERAGE
1 . Canada's Use of the GATT Anti-dumping Code (June 1991); The Import Coverage of Tribunal Injury Findings (July 1994); Canadian & International Use of Anti-dumping and Countervailing Measures (July 1995); Canadian & International Use of Anti-dumping and Countervailing Measures-Data Update-1988-1994 (May 1996); Canadian & International Use of Anti-dumping and Countervailing Measures-1988-1995 (May 1997). 2 . Statistics Canada defines special transactions trade as "mainly low-valued transactions, value of repairs to equipment and goods returned to the country of origin." 3 . Imports were derived from apparent imports at landed values. Depending on data availability, the average annual value of imports was calculated on the basis of less than three years of import data. In other situations, it was necessary to estimate the value of imports by using the volume of imports and pertinent pricing information. 4 . The domestic industry may not respond to the price of the dumped and/or subsidized imports by lowering its price. In this case, there may be an artificial increase in the value of imports. Alternatively, the domestic industry may respond to the competition from dumped and/or subsidized imports by decreasing its price. If the domestic industry responded in a measured way, the normal pattern of import growth would likely continue. If the domestic price response were an over-reaction, the import growth would likely be less than expected. If the domestic industry did not sufficiently adjust its price, the import growth would likely be greater than expected. 5 . For injury findings, imports are subject to duties starting on the date of the PD of dumping and/or subsidizing, 120 days before the issuance of a finding. Accordingly, imports during these 120 days were included for purposes of calculating imports affected in the first year of a finding. 6 . Anti-dumping and countervailing measures expire after five years. Towards the end of the five-year period, the Canada Customs and Revenue Agency and the Tribunal may conduct a review to determine if a five-year extension of the measures is warranted. The Tribunal collects market data, generally covering the preceding three years, only at the time of the initial inquiry and at each of the subsequent reviews. 7 . This approach assumes that the market share of imports remains constant. In reality, in markets where imports are fairly traded, the import share of the market over time may remain constant, increase or decrease. 8 . The change in market value for these cases was greater than 20 percent per year or less than minus 20 percent per year. 9 . While it is not unusual to observe double-digit annual market growth rates for certain products, such rates tend to occur sporadically and usually not on a compounded basis over several years. 10 . This methodology assumes that imports enter Canada regularly throughout the year. In reality, these imports may be seasonal in nature, coming into the country in larger quantities in certain months of the year. 11 . An example is the importation of carbon steel plate, with the filing of four complaints over the last 10 years, each typically involving different countries. 12 . A new finding was put in place (Inquiry No. NQ-2000-006) on imports from China that were entering Canada in the first half of the year. With the new finding, imports from China were affected irrespective of the time of year. The two findings were considered a single finding covering the entire year, and imports for 2001 and thereafter were estimated using the usual methodology. |
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