Countervailing and Antidumping Actions: An Evaluation of Canada's Experience with the United States

Abstract

Introduction As is well known, Canada and the U.S. are each other's principal trading partners. Between 1980 and 1988, the average annual total value of trade in all goods and services (imports plus exports) between Canada and the U.S. averaged $103 billion per year. As a result of the 1989 Canada-U.S. Trade Agreement (CUFTA), the total trade between the two countries had reached $290 billion by 1996. Canada's total trade with the rest of the world amounted to less than 29 percent of its total trade with the U.S. alone between 1989 and 1996. This indicates the importance of the smooth movement of goods and services between the two countries and, as well, Canada's particular dependence on this trading relationship. With reference to agrifood trade, the situation is not different from the trade in all goods and services. For example, U.S. total agrifood trade with Canada accounted for more than 17 percent of all its agrifood trade, while total Canadian agrifood trade with the U.S. averaged about 52 percent over the 1989 to 1996 period. Thus, this trade is of key importance for each country. Given this, any trade disruptions between Canada and the U.S. represent a significant cost to businesses in the two countries. An overriding objective of international trade laws is to ensure that exporting nations do not obtain unfair advantage over domestic producers in importing countries. Therefore, most countries have developed their laws to ensure that the trade environment is fair and operates to enhance the value that consumers receive from traded goods and services. A review of the important components of U.S. and Canadian trade laws indicates some significant differences between the letter of the law in each country. It is important to note that the differences do not end with the letter but go also to the spirit and enforcement of the laws. These differences have subjected U.S.-Canada trade disputes to considerable academic analysis over the past two decades, as supported by the number and variety of papers and articles written on the subject (van Duren and Martin 1989; Martin 1991; Lermer and Klein 1990). The two major types of trade dispute that have received the most attention and, certainly, have been used most by the U.S. against Canada are countervailing duties and antidumping actions. While significant work has been done on these, there is a need to revisit the issues within the framework of the emerging rules on dispute settlement mechanisms under multilateral trade agreements such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) (Meilke and van Duren 1990; Schmitz and Sigurdson 1990). This paper, therefore, proceeds with two objectives in mind: first, to evaluate Canada's experience with the U.S. with respect to countervail and antidumping cases over the years to determine their impact on trade relations between the two countries and, second, to assess the contribution of NAFTA and WTO to the improvement of trade dispute settlement between Canada and the U.S. Two methods have been used here: a review of the trade literature, focusing on the economic synthesis of trade disputes, and an analysis of the agrifood-related trade disputes brought by the U.S. against Canada, focusing on countervail and antidumping cases. In addition, we present a brief explanation of the salient characteristics of countervail and antidumping under U.S. trade remedy laws and, in the section following that, we look at some examples of agrifood countervail and antidumping cases brought by the U.S. against Canada from the early 1980s and their resulting decisions. The paper concludes with a review of the changes introduced into international trade disputes by the GATT/WTO dispute settlement mechanisms and their implications on the certainty of trade and cost to business and industries. Antidumping under U.S. Trade Remedy Laws In a competitive market, international product prices are technically established by adding the cost of production of the product to the transportation cost involved in exporting the product, plus all additional charges such as duties and excise taxes. …