In this column, I will review the evidence about the recent global trends in contingent protectionism. I will also discuss recent contingent protectionism by Turkey and by other countries against Turkey.
Professor Chad P. Brown of Brandeis University in his latest update, titled “Protectionism Continues Its Climb,” to the Global Antidumping Database found a continued increase in contingent protectionism, led by the US and India. In the second quarter of 2009, combined trade remedy investigations, mostly against China, increased by 12.1 percent relative to the second quarter of 2008. They rose by 18.5 percent in the first half of 2009 over to the first half of 2008. (But to put things in perspective, the number of new investigations had soared by 44 percent in 2008 compared to 2007.) Although antidumping investigations began to level off in 2009 -- after their initial escalation during the global economic and financial crisis in 2008 -- safeguard investigations started to surge in the first half of 2009. Professor Brown also found that in the first half of 2009 contingent protectionist measures, resulting from the completion of investigations initiated earlier, jumped by 30.5 percent relative to the first half of 2008. He expects this upward trend in the imposition of antidumping and countervailing duties and safeguard import restrictions to continue during the rest of 2009 into 2010. Although preliminary import restrictions follow in a few months after an investigation starts, experience tells us, especially regarding dumping investigations, that definitive import restrictions will occur in a huge majority of new investigations with a lag of slightly longer than a year, according to Brown. The sectors that dominated the trade remedy investigations in the first half of 2009 were iron and steel, plastics and rubber. Other sectors that accounted for significant numbers of investigations were chemicals, machinery and wood. The sector that was the primary target of the newly imposed import restrictions was chemicals, followed by textiles and apparel, machinery and iron and steel. China was by far the primary country targeted by both the investigations and the resulting restrictions.
Turkey's import regime has dealt with allegedly dumped or subsidized imports since the enactment of the unfair trade practices Law 3577 in 1989. Law 3577 was amended in 1999 by Law 4412 and supplemented with several decrees and communiqués taking into account GATT 1994 and Turkey's customs union agreement with the EU. The customs union does not exempt Turkey from the EU's contingent protectionism but also does not force Turkey to accept the EU's trade remedy measures against third-party countries. Since 1996 when the customs union went into effect, the EU has initiated several antidumping investigations against Turkey, some of which resulted in either antidumping duties or price undertakings (when the exporter agrees to raise the export price of the product to avoid the possibility of an antidumping duty). Turkey has also resorted to contingent protectionism against the EU. This reciprocal practice of contingent protectionism will end if and when Turkey becomes an EU member.
According to the Undersecretariat of the Prime Ministry for Foreign Trade (DTM), which administers Turkey's trade remedies regime, of the cumulative total 274 dumping investigations, until last March, 182 had resulted in antidumping duties. Last March, there were 35 dumping investigations and 101 antidumping duties. The DTM Web site lists 27 current dumping investigations, the earliest initiated in March 2008, against imports from China (14), Indonesia (3), Malaysia (3), Thailand (2), Bulgaria (1), Hong Kong (1), India (1), Kuwait (1) and Saudi Arabia (1). Sixteen of these 27 investigations were begun since last December. Since last November, 27 dumping investigations that had started before last December resulted in antidumping duties against China (9), Malaysia (3), India (2), Indonesia (2), Taiwan (2), Thailand (2), the US (2), Canada (1), Germany (1), Italy (1), Romania (1) and Vietnam (1); and one subsidy investigation resulted in a countervailing duty against India. The dominance of China as the primary target of Turkey's trade remedy actions conforms to the global trend identified by Brown. The DTM has notified the WTO of six safeguard investigations, either reviews of existing safeguards or the start of new ones (against imports of matches, steam smoothing irons, vacuum cleaners, salt, footwear and motorcycles), begun since last May, in contrast to the cumulative total 14 safeguard actions during 2004 to 2008. This spike in Turkey's safeguard actions also conforms to the global trend identified by Brown.
It seems that Turkey has become increasingly more of a source of contingent protectionism than a target. According to the Global Trade Protection Report 2009, Turkey, which ranked 10th globally in its number of dumping investigations during 1995 to 2008, with 137 investigations, ranked third in 2008, with 22 investigations. Its rank as a target of dumping investigations also jumped from 19th during 1995 to 2008, with 44 investigations, to 10th, with four investigations. Two of these were dumping investigations by the EU, regarding hollow sections in November 2008 and wire rod in May 2008.
At the end of June, the EU had 47 dumping investigations, 129 antidumping and seven countervailing duties in force, besides price undertakings from nine countries covering 12 products. Last week, the EU, in its latest and worrisome contingent protectionist move, imposed pre-emptive and punitive antidumping duties on Chinese steel pipes, to go into effect in October for five years. Lacking evidence that EU producers were actually harmed by Chinese exports, the EU invoked, for the first time, the threat of injury to justify its decision, setting a dangerous precedent that is bound to encourage other industries to seek protection. Moreover, since the EU still does not classify China as a market economy, it based its decision not on the Chinese cost of steel pipes but on a guess of how much it cost to produce them in the US. An increasingly assertive China is expected to challenge the EU decision at the WTO. Expected to surpass Germany as the world's top merchandise exporter this year, China already launched its first ever complaint against the EU at the WTO last week regarding the imposition last January of stiff antidumping duties on Chinese steel fasteners for five years. China is rather upset that between last September and June, the EU and other WTO members, especially India and the US, have instigated 77 cases of contingent protectionism against China, up by 112 percent from those in the same period a year earlier.
