Annex B-1 Canada's Responses to Questions from the Panel - Second Meeting
Annex B-2 United States' Responses to Questions from the Panel - Second Meeting
CANADA'S RESPONSES TO QUESTIONS FROM
THE PANEL - SECOND MEETING
(17 October 2003)
To Canada Question 5. At para. 47 of its second oral statement, Canada refers to the “failure” of the USITC “to evaluate the effects of any factor other than subject imports, in its threat analysis – not to mention its failure to separate and distinguish such effects from those attributed to the subject imports”. Is Canada suggesting that the asserted obligation to “separate and distinguish” the effects of other factors from those attributed to subject imports requires some particular kind of analysis that consists of separating and distinguishing? Or is Canada of the view that the “separate and distinguish” language describes, in other words, the “non-attribution” requirement set out in Article 3.5 of the AD Agreement and Article 15.5 of the SCM Agreement that “the injuries caused by these other factors must not be attributed to the dumped imports”? If the former, could Canada please explain how it reconciles this view with Appellate Body statements that the AD Agreement does not prescribe the methodology by which an investigating authority must avoid attributing the injuries of other causal factors to dumped imports. 1. Canada is of the view that to comply with the non-attribution requirement of Article 3.5 of the Anti-Dumping Agreement and Article 15.5 of the SCM Agreement, an investigating authority must separate and distinguish the effects of other known causal factors from those of the dumped or subsidized imports. The “separate and distinguish” language used by the Appellate Body in such cases as United States – Hot-Rolled Steel describes, in other words, the “non-attribution” requirement set out in Articles 3.5 and 15.5.
2. For example, the Appellate Body stated in United States – Hot-Rolled Steel:
In order that investigating authorities, applying Article 3.5, are able to ensure that the injurious effects of the other known factors are not “attributed” to dumped imports, they must appropriately assess the injurious effects of those other factors. Logically, such an assessment must involve separating and distinguishing the injurious effects of the other factors from the injurious effects of the dumped imports. If the injurious effects of the dumped imports are not appropriately separated and distinguished from the injurious effects of the other factors, the authorities will be unable to conclude that the injury they ascribe to dumped imports is actually caused by those imports, rather than by the other factors. Thus, in the absence of such separation and distinction of the different injurious effects, the investigating authorities would have no rational basis to conclude that the dumped imports are indeed causing the injury which, under the Anti-Dumping Agreement, justifies the imposition of anti-dumping duties.1
3. The Anti-Dumping Agreement and the SCM Agreement do not prescribe any particular methodology for this non-attribution analysis. Nevertheless, as the Appellate Body has clarified, the requirement that an investigating authority examine any known factors other than subject imports and not attribute to the latter any injurious effects caused by the former, means that the authority must separate and distinguish the effects of other causal factors from the effects of subject imports. In other words, while the Agreements do not prescribe how to carry out the non-attribution requirement, they clearly impose an obligation to separate and distinguish the effects of all known causal factors from those attributed to subject imports.
4. In this dispute, the Commission failed to comply with the requirement to conduct a non-attribution analysis. In its threat analysis, the Commission did not identify, much less examine, any other known factor that could threaten injury to the domestic industry in addition to the subject imports. This failure is particularly striking given that in its present injury analysis, the Commission identified excess domestic supply as another known factor that contributed to injury during the period of investigation.2 Having neglected to even identify any other causal factor in its threat analysis, the Commission also did not separate and distinguish the injurious effects of those other factors from the alleged injurious effects of the dumped and subsidized imports. Indeed, the Commission explicitly rejected the requirement to do so as having no basis in U.S. domestic case law.3 Question 6. With respect to the analysis of events in the future which the US argues underlies the USITC determination of threat of injury, Canada appears to argue that the US failed to adequately explain the reasoning underlying its conclusions. For instance, the United States argues that the statements concerning the restraining effects of the SLA support the conclusion that imports will increase in the future. It might be argued that from these statements, it can be understood that in the absence of restraining effects, i.e., when the SLA is no longer in effect, imports will increase. Is Canada arguing that the failure to specify this latter aspect fatally undermines the USITC’s analysis? Or would Canada agree that if the path of an investigating authority’s reasoning is discernible, even if not clearly stated in its determination, a reviewing Panel may accept that reasoning as adequate? 5. The Panel is correct that Canada contends that the Commission did not provide a reasoned and adequate explanation of its affirmative threat of injury determination, including its finding that subject imports would increase substantially. As Canada has explained in its prior submissions, panels and the Appellate Body have made clear that an investigating authority must explain how the facts as a whole support its determination, addressing factors that detract from as well as support its determination and explaining why the factors considered were deemed relevant.4 Therefore, the Commission’s reasoning must be evident from its Final Determination and if the Panel is forced to speculate about the Commission’s rationale, the Commission’s explanation is not sufficient.5 6. With regard to the effects of the SLA, provided as an example by the Panel in its question, the key problem with the Commission’s analysis is not that it omitted from its Final Determination an explicit statement that without the alleged restraining effect of the SLA, imports would increase in the future. Rather, it is that the Commission’s conclusion that the SLA “appears” to have had only “some” restraining effect6 does not rationally support its finding of a likely substantial increase in imports. The lack of any finding that the SLA had a significant or substantial restraining effect (and the Commission’s discussion of price effects in its current injury determination shows that it understands the difference between “some” effect and a “significant” effect) is what renders unreasoned the Commission’s reliance on this factor to support its finding that imports would increase substantially, even in absolute terms.
7. The unreasoned nature of the Commission’s reliance on this factor and the other “subsidiary factors” on which the Commission relied for its volume finding7 was compounded by its failure to explain why a substantial increase in the absolute volume of subject imports threatened material injury without considering whether any such increase during a period of improving demand would translate into a significant increase in the “relatively stable” subject import market share that was such an important factor in the Commission’s negative current injury determination. These evidentiary and logical lapses in the Commission’s reasoning are not superficial deficiencies; they are structural ones, and cannot be salvaged by the United States’ ex post facto justifications.
Question 7. Is it Canada’s view that an examining authority must consider each of the Article 3.4/Article 15.4 factors in what it refers to as a “predictive context”? (Canada’s answer to the Panel’s question number 9) Could Canada indicate what it would envision in this analysis? For instance, is it Canada’s view that an investigative authority must predict the level of wages, employment, productivity, growth, etc. in the future, and assess whether these levels would support a finding of injury in the future, i.e., threat of injury? How would Canada respond to the argument that such an analysis would of necessity involve a fair degree of uncertainty and speculation? 8. Article 3.4 of the Anti-Dumping Agreement and Article 15.4 of the SCM Agreement require that the examination of the impact of the subject imports on the domestic industry “shall” include an evaluation of “all” relevant economic factors and indices having a bearing on the state of the industry.
9. In the context of a threat of injury analysis, forecasts must be made to evaluate whether or how those factors and indices are likely to change in the future as a result of the impact of the subject imports and whether any projected changes will amount to material injury to the domestic industry. The precise quantitative level of these factors and indices in the future does not have to be established. What matters is that an investigating authority conduct a reasoned and adequate analysis concerning the likely impact of further dumped imports on the domestic industry. This was made clear by the panel in Mexico – HFCS:
SECOFI concluded that imports were likely to increase, based on the increases during the period of investigation, and the available capacity of the exporting producers, but there is no meaningful analysis, based on facts, concerning the likely impact of further dumped imports on the domestic industry in the final determination, e.g., whether such increased imports are likely to account for an increased share of the growing Mexican market, have an effect on production or sales of sugar, or affect the profits of the domestic producers, etc, in such a manner as to constitute material injury.8
10. In this dispute, the Commission failed to conduct such an analysis and did not even attempt to make projections as to future changes in the relevant factors. Canada recognizes that a prediction of future events based on extrapolation of current data necessarily involves some uncertainty, but if a threat determination rests on conjecture or remote possibility, it does not comply with the requirements of Articles 3.7 and 15.7.9
11. In addition, as noted by Canada in its prior submissions, although the Commission did refer to trends in the past with respect to Articles 3.4/15.4 factors, the Commission did not attribute those trends to any material impact of subject imports, nor did it explain how subject imports would affect those trends and produce material injury in the imminent future. The Commission did not identify any clearly foreseen and imminent change in circumstances under which the subject imports would have an injurious impact on the domestic industry in the future.