What If? Tinkering with the Counterfactual: A Comment on US–Washing Machines (Article 22.6-US)

Edward J Balistreri,Thomas J Prusa,Petros C Mavroidis

doi:10.1017/s1474745621000276

Abstract

AbstractTypically, the WTO Arbitrator, when charged with evaluating the permissible level of countermeasures (suspension of concessions), has chosen a counterfactual state of the world where the challenged (illegal) measure has not been adopted at all. The Arbitrator then would calculate the trade lost because of the adopted (illegal) measure, and thus, decide on the level of permissible countermeasures. In US–Washing Machines (Article 22.6-US), deviating from this custom, the Arbitrator adopted a different counterfactual, assuming that the complainant had adopted a different, ‘reasonable’ measure. The Arbitrator then evaluated the trade lost based on the distance between the adopted (illegal) and the ‘reasonable’ measure and calculated the level of countermeasures. In this paper, we explain the multitude of perils facing dispute settlement if this approach is adopted in future disputes. We also advance a few thoughts on rethinking the workings of the Arbitrator when measuring the level of permissible countermeasures, since similar slippery slopes risk being reproduced in future cases.

Highlights

Facts of the Case In US–Washing Machines,1 Korea scored a victory when claiming that the US investigating authority had imposed antidumping (AD) duties in a manner not consistent with the WTO AD Agreement
Korea proposed the value of countermeasures in future years to be calculated by adjusting that initial remedy value by the annual growth rate of the washing machine market in the United States
What occurred in US–Washing Machines, on the other hand is that market has moved to a new equilibrium, as depicted by point B in the right-side panel

Summary

Introduction

1.4 of the report).3 And if noncompliance continued, Korea proposed the value of countermeasures in future years to be calculated by adjusting that initial remedy value by the annual growth rate of the washing machine market in the United States.4 The US argued for an alternative approach based on an Armington elasticities model With the exception of US – Section 110(5) Copyright Act, which is eminently defensible (because, under Article 25 of the DSU, the Arbitrator could, by virtue of the request by the parties to this effect, decide on the consistency of a reasonable counterfactual, and calculate the amount of permissible retaliation), the other two, and especially the third case, raise more questions than answers.

Results

Conclusion