Slamming the Door on Trade Policy Discretion? The WTO Appellate Body's Ruling on Market Distortions and Production Costs in EU—Biodiesel (Argentina)

23 Pages Posted: 13 Apr 2018

See all articles by Meredith Crowley

Meredith Crowley

University of Cambridge - Faculty of Economics

Jennifer Hillman

Georgetown University Law Center

Date Written: December 2017

Abstract

This paper presents a legal-economic analysis of the Appellate Body’s decision that the WTO’s Anti-Dumping Agreement (ADA) precludes countries from taking into account government-created price distortions of major inputs when calculating anti-dumping duties, made in EU-Biodiesel (Argentina). In this case, the EU made adjustments to the price of biodiesel’s principal input – soybeans – in determining the cost of production of biodiesel in Argentina. The adjustment was made based on the uncontested finding that the price of soybeans in Argentina was distorted by the existence of an export tax scheme that resulted in artificially low soybean prices. The Appellate Body found that the EU was not permitted to take tax policy-induced price distortions into account in calculating dumping margins. We analyze the economic rationale for Argentina’s export tax system, distortions in biodiesel markets in Argentina and the EU, and the remaining trade policy options for addressing distorted international prices. We also assess whether existing subsidies disciplines would be more effective in addressing this problem and conclude that they would not.

Keywords: WTO, anti-dumping, export tax, cost adjustment, government distortion, subsidy

JEL Classification: F13, F53

Suggested Citation

Crowley, Meredith and Hillman, Jennifer, Slamming the Door on Trade Policy Discretion? The WTO Appellate Body's Ruling on Market Distortions and Production Costs in EU—Biodiesel (Argentina) (December 2017). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2017/61. Available at SSRN: https://ssrn.com/abstract=3155320 or http://dx.doi.org/10.2139/ssrn.3155320

Meredith Crowley (Contact Author)

University of Cambridge - Faculty of Economics ( email )

Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

HOME PAGE: http://https://meredithcrowley.weebly.com/

Jennifer Hillman

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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