In the late 1980s, developing countries started opening up their economies to foreign trade. Generally speaking, in Latin America this process was a side-effect of programs of macroeconomic stabilization and was intended to help bring discipline to domestic prices. Accordingly, in Latin America trade liberalization took place unilaterally, and not because of commitments contracted under multilateral or regional trade agreements. Such agreements came into being at a later stage, primarily as a means to lock-in a liberalized trade regime. A paradox of trade liberalization in Latin America was that, in countries with large-import competing industries, such as Argentina, Brazil, and Mexico, trade liberalization co-existed with heavy reliance on trade remedies (including antidumping, countervailing, and safeguard measures). Economic policy-makers regarded trade remedies not as an end-result but as a tool to placate import-competing sectors and induce them to acquiesce to an open trade regime. However, they took actions to ensure that trade remedy administrations would not get out of hand and seriously imperil the trade liberalization process. Safeguards and Antidumping In Latin American Trade Liberalization: Fighting Fire with Fire, edited by J. Michael Finger and Julio J. Nogues, is a first attempt at telling this story.

The book is noteworthy on at least three grounds. First, it is a welcome departure from the tendency to focus studies of trade remedies on the experiences of developed countries. This approach is short-sighted since it leads to conceptualizing trade remedy practice exclusively in terms of what developed countries do and to confuse country-specific policies for World Trade Organization (WTO) standards. Two, in discussing trade remedies the book also makes reference to measures with analogous effects such as the ‘transitional safeguard’ under the WTO Agreement on Textiles and Clothing (the ATC), the ‘special safeguard’ under the WTO Agreement on Agriculture, the safeguard under China's Protocol of Accession to the WTO, and the bilateral safeguards under Regional Trade Agreements. Clearly, this is a better way to interpret the term trade remedies since it encompasses all manifestations of demands for industry-specific protection under a liberalized trade regime. Three, the book was co-financed by the World Bank although its basic message stands in stark contrast with the views that World Bank economists traditionally expressed in respect of trade remedies in publications such as Antidumping: How It Works and Who Gets Hurt. In this book, J. Michael Finger, one of the editors of Fighting Fire with Fire, stated his views on antidumping at the time in no uncertain terms:

But make no mistake. There is no trade remedy advocacy in Fighting Fire with Fire. The book does not recommend putting a trade remedy system into place. Neither does it suggest that trade remedy actions are welfare-enhancing, nor that multilateral trade remedy rules are satisfactory from an economic perspective. Instead, the book attempts to provide evidence that such rules can be administered in a sensible manner and argues that this approach supports, rather than undercuts, trade liberalization. This is an insight that has long been recognized by policy-makers and trade negotiators, but has been largely absent from the academic literature.

The book includes seven country chapters and an overview by the editors. There are chapters on Argentina, Brazil, Chile, Colombia, Mexico, and Peru, which are the countries that have used trade remedies most intensively in Latin America. There is also a chapter on Costa Rica, which has hardly used trade remedies, although it is apparent that its inclusion in the book was intended to illustrate how a small economy has coped with the application of these instruments. Each country chapter describes the trade liberalization process, summarizes the legal framework and institutional set up of the trade remedy system, provides a series of basic parameters as to the operation of such system (including number of initiations, products involved, countries affected, and the proportion of initiations resulting in the imposition of measures), and discusses practices with alleged disciplinary effects, illustrated in some instances by reference to case studies. The overview by the editors finds common threads in such practices and draws recommendations for WTO trade remedy rules.

In the view of the editors, a key lesson from the country studies is as follows:

The editors also note that:

and conclude that:

By the expression ‘discretion allowed under WTO rules’, the editors refer to the fact that in some cases WTO trade remedy rules explicitly permit WTO Members (‘Members’) to make choices that result in less restrictive trade remedy measures (for instance, by setting the antidumping duty at an amount sufficiently high to offset the injury caused by the dumped imports but lower than the calculated dumping margin),Footnote ² and that self-imposing stricter standards on all of the WTO trade remedy rules is equally permissible (for example, applying antidumping duties for a period shorter than five years; revoking such duties at the end of that period, with no possibility of extension; or even making much tougher the possibility of affirmative determinations of dumping, injury, and causation).Footnote ³

But the book has its flaws. Unfortunately, as those flaws concern the evidence collected and the assessment of such evidence, Fighting Fire with Fire ultimately fails to demonstrate that Latin American countries, on the whole, are adequate examples of how to manage a trade remedy system judiciously. In fact, as explained below, there is much evidence that directly contradicts the editors' impression that Latin American countries have tended to use trade remedies in a commendable manner.

A first but minor problem with the book is that it does not present any evidence justifying the inclusion of Colombia as an example illustrating modalities in the application of trade remedy rules. This is due to the fact that the chapter on Colombia has no case studies providing details of the investigating authority's actual practice. This chapter emphasizes that the Colombian legislation reflects the flexibility built into WTO rules but, again, does not refer to any examples explaining how such flexibility has been put to good use. It mentions in this context that under the Colombian legislation it is possible to set an antidumping duty at a level lower than the calculated dumping margin but fails to identify any cases where this has actually happened.

A second problem with the book it that it never addresses the issue of why, if Latin American countries applied trade remedies with great discipline, such an approach did not significantly lower the proportion of affirmative findings by Latin American trade remedy authorities as compared to the proportion of affirmative findings by trade remedy authorities not included in the study; for instance trade remedy authorities from developed countries. For example, the chapter on Argentina indicates that over 1995–2004 only 17% of all final injury determinations by the National Foreign Trade Commission were negative (Fighting Fire with Fire: Table 2.5).Footnote ⁴ This compares poorly even with the US experience, since during the period 1980–1998 the rejection rate by the US International Trade Commission was 34%. (Fisher and Osorio, Reference Fisher and Osorio2005: 4).Footnote ⁵ Other chapters in the book show a higher proportion of negative findings by the investigating authorities of Mexico (42%) and Brazil (44%), although not remarkably so (Fighting Fire with Fire: 217 and Table 3.6, respectively).Footnote ⁶

A third and far more serious problem with the book is that it grossly underestimates the degree to which the trade remedy measures applied by Latin American countries have been challenged at the WTO and found to be inconsistent with WTO requirements. The editors brush aside as a legalistic consideration whether the countries surveyed in the book complied with WTO rules, as if lack of compliance with WTO rules had no bearing on whether those countries administered their trade remedy laws in a sensible manner.Footnote ⁷ But this approach fails to recognize that WTO rules have a much broader scope than deadlines and other such procedural formalities. Much of the WTO rules set forth substantive requirements for determinations and hence determinations that meet those requirements are technically more rigorous and exacting than determinations that fail to do so.

Further, the chapter on Argentina boldly states that ‘there are no precedents indicating that foreign exporters have had serious objections to [the] work [of Argentina's National Foreign Trade Commission]’ (Fighting Fire with Fire: 61).Footnote ⁸ It also contends that Argentina lost the WTO case on Footwear and the WTO review of its textile safeguard simply because WTO bodies were too demanding (Fighting Fire with Fire: 69 and 71). To say the least, the first statement is factually inaccurate and the second lacks candor. WTO dispute settlement reports (arising from dispute settlement proceedings brought by Argentina's trading partners) found the Argentine trade remedy measures on Footwear, Peaches, Ceramic Tiles, and Poultry to be WTO-inconsistent, and in its review of the Textiles safeguard under the ATC the WTO Textile Monitoring Body (the TMB) found that such safeguard was not WTO-complaint. Argentina ended up revoking all of these measures, which surely it would not have done if the WTO-inconsistencies involved had been trivial. To illustrate the depth and extent of the difficulties encountered by Argentina's authorities in conducting investigations consistent with WTO requirements, we briefly summarize below Argentina's record in WTO litigation. For ease of presentation, in our discussion we omit referring to findings against Argentina relating to purely procedural issues.

As is well known, the WTO Appellate Body (the AB) report in Footwear has been criticized on the ground that arguably it imposed a requirement to demonstrate that ‘increased imports’ (the import surge underlying the request for a safeguards measure) result from ‘unforeseen developments’ although such requirement intentionally had not been transposed from the text of Article XIX of the General Agreement on Tariffs and Trade 1994 (GATT, 1994) to the text of the Safeguards Agreement. But the flaws in the Argentine determination in Footwear go well beyond lack of compliance with Article XIX of GATT 1994. The panel found that total imports significantly declined during each of the last three years for which the investigating authority had collected data (Footwear Panel Report: 8.162). The panel also found that the investigating authority failed to evaluate a number of requisite indicators of the condition of the domestic industry and demonstrate at least a coincidence in time between the trends in imports and the trends in indicators attesting to the condition of the domestic industry (Footwear Panel Report: 8.277 and 8.278, respectively). Last, the panel found that the investigating authority did not properly examine the role of factors of injury other than imports (Footwear Panel Report: 8.278). According to the panel, these shortcomings made the Argentine determination inconsistent with the requirements under Articles 2.1 and 4.2 of the Safeguards Agreement. All of these panel findings were upheld on appeal. However, to make matters worse, the AB overturned a panel finding in favor of Argentina and ruled that Article 2.1 of the Safeguards Agreement did not permit excluding imports from Members which are parties to a regional trade agreement from the application of a safeguard measure where the underlying injury determination was based on imports from all Members (Footwear AB Report: 114).Footnote ⁹ In sum, in its Footwear determination the Argentine investigating authority did not show much discipline or skill, let alone conformity with basic WTO rules.

Similarly, the Argentine determinations in Peaches, Ceramic Tiles, Poultry, and Textiles are less than exemplary. In Peaches, the panel concluded that the investigating authority failed to meet a number of WTO requirements. In particular, the panel found that the investigating authority did not demonstrate the existence of either ‘unforeseen developments’ (contrary to Article XIX:1(a) of GATT 1994, Peaches Panel Report: 7.32–33 and 7.35) or ‘increased imports’ (contrary to Article XIX:1(a) of GATT 1994 and Article 2.1 of the Safeguards Agreement, Peaches Panel Report: 7.60, 7.69, 7.78, and 7.79).Footnote ¹⁰ The panel further found that in its threat of serious injury determination the investigating authority failed to consider some of the requisite indicators of the condition of the domestic industry (contrary to Article 4.2(a) of the Safeguards Agreement (Peaches Panel Report: 7.99) and to demonstrate that the alleged threat of injury was indeed imminent (contrary to Article 4.1(b) of the Safeguards Agreement, Peaches Panel Report: 7.121, 7.122 and 7.124). Argentina did not appeal any of these findings.

In Ceramic Tiles, the findings of the Argentine investigating authority with jurisdiction over the calculation of dumping margins (the Office for Unfair Trade Investigations at the Ministry of the Economy) were scrutinized. The results were equally unfavorable for Argentina. Specifically, the panel found that the investigating authority failed to determine an individual margin of dumping for each of the exporters included in the sample of respondents (contrary to Article 6.10 of the AD Agreement, Ceramic Tiles Panel Report: 6.101); improperly disregarded part of the pricing information submitted by respondents (contrary to Article 6.8 and paragraph 6 of Annex II of the AD Agreement, Ceramic Tiles Panel Report: 6.80); and neglected to make adjustments for physical differences between home-market and export sales affecting price comparability (contrary to Article 2.4 of the AD Agreement, Ceramic Tiles Panel Report: 6.117). Argentina did not appeal any of these findings. The chapter on Argentina explains away the problems in Ceramic Tiles as attributable to a ‘lack of resources’ (Fighting Fire with Fire: 67).

In Poultry, the complainant challenged the assessment of the evidence available at initiation together with the findings in the final dumping determination and the final injury determination. In particular, the panel found that at initiation the investigating authority applied an upward adjustment to normal value (the weighted average home-market price) for which it did not have adequate evidence (contrary to Article 5.3 of the AD Agreement, Poultry Panel Report: 7.52, 7.70, 7.72, and 7.73). ). The panel noted that, according to Brazil, the complainant, if such adjustment at issue had not been made there would have been no dumping margin at initiation (Poultry Panel Report, footnote 81).Footnote ¹¹ The panel also found that at initiation the investigating authority calculated the weighted average export price excluding all transactions with prices higher or equal to normal value (contrary to Article 5.3 of the AD Agreement, read in light of Article 2.4.2, Poultry Panel Report, paragraphs 7.76, 7.77 and 7.81). Needless to say, calculating the weighted average export price considering only transactions with prices lower than normal value tilted this calculation towards showing a positive dumping margin. Another deficiency at initiation observed by the panel was that at this stage normal value was calculated based upon a single home-market transaction, whereas export prices covered a period of seven months, although there was no evidence that the price of such domestic transaction was indicative of trends over a longer period of time. The panel found that this approach violated Article 5.3 of the AD Agreement (Poultry Panel Report: 7.82, 7.85 and 7.86).

The panel concluded that several aspects of the final dumping and injury determinations likewise did not comport with WTO rules. Specifically, the panel found that in making its final dumping determination the investigating authority failed to calculate an individual dumping margin for two respondents (contrary to Article 6.10 of the AD Agreement, Poultry Panel Report: 7.215–7.217); improperly excluded certain home-market sales from the calculation of normal value for two respondents (contrary to Article 2.2.1 of the AD Agreement, Poultry Panel Report: 7.268, 7.271, and 7.274–7.275); improperly disregarded the entirety of the export price data submitted by three respondents (contrary to Article 6.8 of the AD Agreement, Poultry Panel Report: 7.184, 7.187, and 7.188); failed to deduct freight expenses from normal value in the case of one respondent (contrary to Article 2.4 of the AD Agreement, Poultry Panel Report: 7.236–7.238 and 7.240); failed to deduct sales taxes, finance costs, sales commissions and freight expenses from the ‘facts available’ normal value (contrary to Article 2.4 of the AD Agreement, Poultry Panel Report: 7.241 and 7.246–7.249); and improperly applied an upward adjustment to all of the normal values on account of alleged physical differences between home-market sales and export sales (contrary to Article 2.4 of the AD Agreement, Poultry Panel Report: 7.250, and 7.259–7.260). Evidently, omitting necessary adjustments or introducing unnecessary adjustments made the calculated dumping margins higher than what they would have been otherwise.

In addition, the panel found that in making its injury determination the investigating authority examined certain indicators of the condition of the domestic industry over a time period that was different from the period used for evaluating other such indicators, without providing a justification for this approach (contrary to Article 3.1 of the AD Agreement, Poultry Panel Report: 7.278, 7.280–7.281 and 7.283–7.285); failed to exclude from its analysis imports from exporters that had been found not to have dumped (contrary to Articles 3.1, 3.2, 3.4, and 3.5 of the AD Agreement, Poultry Panel Report: 7.296 and 7.303–7.307; and failed to consider some of the requisite indicators of the condition of the domestic industry (contrary to Articles 3.1(b) and 3.4 of the AD Agreement, Poultry Panel Report: 7.296 and 7.303–7.307). Argentina did not appeal any of the panel's findings.

In Textiles, the determination of ‘damage’ (the analogue concept to injury underpinning the application of transitional safeguards under Article 6 of the ATC) by Argentina's National Foreign Trade Commission in respect of five groups of textiles imported from Brazil was reviewed by the TMB. The TMB found that none of the investigating authorities' affirmative determinations of damage complied with the requirements under Article 6 of the ATC. In particular, the TMB found that, in the year prior to the application of the transitional safeguards, the volume of imports had experienced a severe contraction in two cases (Minutes TMB: 14–15 and 16–17), and had stabilized in another two cases (Minutes TMB: 18 and 21). The TMB also found that, in the one case where imports had continued increasing even in the recent past, data did not show a clear correlation between trends in import volume and trends in the condition of the domestic industry (Minutes TMB: 27, 29, and 39). On account of these findings, in all five cases the TMB recommended Argentina to rescind the transitional safeguards (Minutes TMB: 15, 17, 20, 25, and 39). Armed with these findings by the TMB, Brazil requested the establishment of a WTO panel to review the transitional safeguards at issue.Footnote ¹² Argentina avoided the panel process by withdrawing the transitional safeguard in respect of all five products.Footnote ¹³

The one conclusion that flows from this review is that it is clear that Argentina's practice, while not consistently flawed, cannot be held as an appropriate example of fortitude in the application of trade remedy measures.

A fourth problem with the book is precisely that it glosses over the fact that, even where countries followed sensible practices such as setting the duration of antidumping duties at two or three years instead of five years (as the chapter on Argentina reports, Fighting Fire with Fire: 64), those practices often co-existed with less commendable practices such as the ones described in connection with Argentina's record in WTO litigation. Most certainly, there is little virtue in setting the duration of an antidumping duty at less than five years if the determinations underpinning such duties are marred by all sort of substantive deficiencies.

A fifth and fatal problem with the book is that it gives insufficient attention to the extent to which, in some cases, thoughtfulness and creativity in the use of trade remedies were eventually superseded by misuse. The experience of Mexico is most instructive in this regard. However, one would not know it based upon the chapter on Mexico, given that this chapter, while outstanding in terms of identifying and describing through short case-studies disciplinary practices followed by the authorities mainly prior to the late 1990s, does not focus on later-day practices with the opposite effect. So the chapter on Mexico tells us much as to what went right with trade remedy practice in this country but says very little as to what went wrong.

The chapter on Mexico emphasizes the innovations by the investigating authority as regards the analysis of injury and causation. In particular, it explains that the investigating authority developed its own approach to the ‘lesser-duty’ rule. Mexico did not follow the version of the ‘lesser-duty’ rule pioneered by the European Community, which consists of determining a margin of injury reflective of the degree by which the prices of dumped imports undercut either domestic prices or a notional ‘target’ for domestic prices (where domestic prices have already been depressed by the dumped imports).Footnote ¹⁴ Instead, the Mexican investigating authority conceptualized the margin of injury as the degree by which the prices of dumped imports undercut a competitive market benchmark. This first option for such market benchmark was the world price for the product concerned or, failing this, the prices of undumped imports.Footnote ¹⁵ Absent these two possibilities, the market benchmark would reflect the level of domestic prices prior to the impact of the dumped imports or would be set in a way that would not make importation of the dumped goods prohibitive, so as to maintain some competition in the domestic market. In Tripolyphosphate, the antidumping duty corresponded to the difference between the world price and the prices of dumped imports, whereas in Hydrogen Peroxide the duty corresponded to the difference between the prices of undumped imports and those of the dumped imports (Fighting Fire with Fire: 230–231). Hence, the application of an antidumping duty so calibrated would pull the prices of the dumped imports up to the world price or the prices of undumped imports. In Bond Paper, no antidumping duty was imposed since the prices of undumped imports were lower than the prices of the dumped imports (Fighting Fire with Fire: 236–237). In Telephone Connectors, the antidumping duty reflected the difference between domestic prices prior to the impact of the dumped imports and the prices of the dumped imports, while in Diiodohydroxyquinoline and Sulfuric Acid the antidumping duty was set in a way that would not make the importation of the dumped good prohibitive, with a view to preserve competition in the domestic market and minimize adverse effects upon consumers, respectively (Fighting Fire with Fire: 228–232).

The chapter on Mexico also explains that the investigating authority granted user-specific exemptions from antidumping duties in cases where domestic producers were unable to supply products with certain technical characteristics or intellectual-property content (Fighting Fire with Fire: 233–234).

There are three aspects of Mexico's experience that were omitted from the chapter but are worth mentioning because they are further illustrations of how to manage sensibly a trade remedy regime. First, in making its dumping determination in Fishmeal and testing for sales at prices below cost as part of this process, the investigating authority calculated the exporters' production costs based upon long-run data, on account that production costs from the one-year period preceding the investigation where distorted by circumstances limited to that period (Fishmeal Final Determination: 22–29). Since long-run costs were much lower, most of the sales at issue were shown to have been made at prices above total cost, and the comparison of ‘normal value’ (the weighted-average of home-market prices filtered through total cost) against export prices yielded dumping margins of zero or consistently on the low end (Fishmeal Final Determination: 38, 50, 60, and 69). Second, in making its injury determination in Fishmeal, the investigating authority ruled that the low prices of the dumped imports had been driven by a recession in the world market for fishmeal and in this sense had not been responsible for the fall observed in domestic prices (Fishmeal Final Determination: 132–133 and 163–164). Hence, the dumped imports had not been a direct source of injury to the domestic industry (Fishmeal Final Determination: 167). Notably, this approach is equivalent to interpreting the first sentence of Article 3.5 of the AD Agreement, which governs the determination of causation, as requiring that injury be shown to result from the fact that the dumped imports are dumped. Third, in a number of investigations exemptions from antidumping duties have been granted on much broader grounds than technical characteristics and intellectual property content. For example, in Fatty Acid the investigating authority exempted from antidumping duties import shipments destined to markets where domestic production does not compete (Fatty Acid Final Determination: 223.B, 224 and 225), while in Ethylene Glycol Monobutyl Ether (EGME) it exempted from antidumping duties import shipments destined to the retail trade (EGME Final Determination: 252).

Thus, the Mexican experience in managing a trade remedy system does provide very useful insights as to how to use discretion to generate relatively low levels of protection and hence steer such a system in a way that would not conflict too harshly with a liberalized trade regime. But the approach may be unsustainable in the long run, because discretion can be used to administer trade remedy law in a good way, or it can be used to administer trade remedy law in a bad way. The chapter on Mexico recognizes this point but such this recognition is buried in a footnote (Fighting Fire with Fire: footnote 27) and, therefore, does not figure prominently in the paper. The footnote makes reference to the 1997–98 investigation on High Fructose Corn Syrup (HFCS) as one example of discretion gone wild. As explained below, HFCS is more in the nature of the proverbial tip of the iceberg.

The United States challenged the antidumping duties on HFCS at the WTO. The panel identified several non-trivial substantive flaws in the investigating authority's final injury determination. In particular, the panel found that, in making its threat of injury determination, the investigating authority improperly based its findings purely on an expectation of increased dumped imports, failing to take into consideration the current condition of the domestic industry (thus violating Article 3.7 of the AD Agreement, read together with Articles 3.1 and 3.4, HFCS Panel Report: 7.131). Further, the panel found that in a threat of injury determination Members are required to consider all of the indicators enunciated in Article 3.4 of the AD Agreement, thus rejecting Mexico's allegations that its HFCS determination was WTO-complaint, although such determination did not discuss data on elementary indicators such as production, capacity utilization, or profits (HFCS Panel Report: 7.142 and 7.140). The panel also found that the investigating authority improperly limited its analysis to the industrial segment of the market and disregarded altogether the household segment thereof (contrary to Articles 3.1, 3.2, 3.4, and 3.7 of the AD Agreement, HFCS Panel Report: 7.152–7.153).Footnote ¹⁶ None of these findings was appealed.

In passing, it is interesting to note that Mexico did not part with its antidumping duties on HFCS easily.Footnote ¹⁷ Worst of all, subsequently to the revocation of such duties, it introduced a domestic tax on soft-drinks sweetened with HFCS (which was virtually all imported), while exempting soft-drinks sweetened with sugar (which was all domestic-made) from that tax, with the clear intention to continue protecting its sugar industry from imports of HFCS. The United States challenged this tax at the WTO. The panel ruled that such tax was WTO inconsistent and this finding was upheld on appeal.Footnote ¹⁸

HFCS is not the only trade remedy dispute at the WTO where Mexico has been involved as defendant. The United States also challenged at the WTO Mexico's antidumping duties on Long-Grain Milled Rice (Rice) together with several amendments to Mexico's Foreign Trade Law introduced in March 2003. The panel identified a number of substantive flaws in the investigating authority's injury determination, which, as in HFCS, were not minor. In particular, the panel found that that the authorities failed to consider data for a 15-month period prior to the date of initiation of the investigation, contrary to the requirement in Article 3.1 of the AD Agreement that determinations be based upon ‘an objective examination of positive evidence’ (Rice Panel Report: 7.65). The panel also found that the authorities improperly limited its analysis to data that only covered six months in each of the three years included in the period of investigation contrary, again, to the requirement in Article 3.1 of the AD Agreement that determinations be based on ‘an objective examination of positive evidence’ (Rice Panel Report: 7.86). The panel chastised the investigating authority for having adopted this approach, ‘as the authority was aware of, and accepted, the fact that the period chosen reflected the highest import penetration, thus ignoring data from a period in which it can be expected that the domestic industry was faring better’ (Rice Panel Report: 7.86). Footnote ¹⁹ Lastly, the panel ruled that the authorities did not comply with Article 3.1 AD Agreement in examining the effects of the volume and prices of the alleged dumped imports (Rice Panel Report: 7.110, 7.111, and 7.113). The panel was also critical of the analysis undertaken by the investigating authority in this regard and characterized it as based ‘on assumption after assumption’.Footnote ²⁰ On account of the magnitude of these flaws, the panel exercised judicial economy and declined making findings about a number of additional US claims on injury matters (Rice Panel Report: 8.2). In short, although not in so many words, the panel concluded that the investigating authority's injury determination was an utter failure.

In Rice, the panel reviewed additionally the determination of ‘facts available’ dumping margins and the coverage of anti-dumping duties. In particular, the panel found that the investigating authority improperly based upon ‘facts available’ the dumping margin for an exporter that had not made any sales to Mexico during the period of investigation (contrary to Article 6.8 of the AD Agreement, Rice Panel Report: 7.168). The panel further found that the investigating authority failed to exclude from the application of antidumping duties two exporters which had been found not to have dumped (contrary to Article 5.8 of the AD Agreement, Rice Panel Report: 7.145).Footnote ²¹ The panel also ruled in favor of the United States in respect of almost all of the US claims regarding the amendments to the Foreign Trade Law. All of these findings were upheld on appeal.Footnote ²² Pursuant to the panel and the Appellate Body reports, the investigating authority conducted a re-investigation. In its re-determination, the investigating authority concluded absence of both dumping and injury and consequently lifted its antidumping duties on Rice.Footnote ²³

Mexico is currently facing another WTO panel proceeding where its antidumping duties on Steel Pipes from Guatemala have been challenged. The panel complaint is very extensive, and includes a number of claims replicating the claims made by the United States in Rice.Footnote ²⁴ For instance, Guatemala alleges that the investigating authority failed to consider data for a period of several months prior to initiation and that it limited its analysis to data that only covered six months in each of the three years included in the period of investigation. Notably, in Electric Power Transformers Mexico's investigating authority reversed its affirmative preliminary determination, with the clear intent to forestall WTO litigation.Footnote ²⁵

Mexico's investigating authority has not limited its approach of cherry-picking the period of investigation to Rice and Steel Pipes. Investigations where this approach was applied include Line Pipe, EGME, Tripled Press Stearic Acid (TPSA), Fatty Acid, and Beef. In Line Pipe, the investigating authority disregarded data for a period of 19 months prior to initiation.Footnote ²⁶ In EGME, TPSA, Fatty Acid, and Beef, the investigating authority neglected to consider data for periods ranging between 11 and 9 months prior to initiation.Footnote ²⁷ These omissions are a source a concern because the investigating authority ends up bypassing evidence that might detract from making affirmative determinations of dumping and injury.

Unfortunately, Mexico's investigating authority appears to have drawn inspiration from its cherry-picking of the period of investigation to engineer what may be best characterized as a ‘carrousel’ approach to the determination of injury. In particular, in a number of cases the investigating authority has looked at different groups of domestic producers (not necessarily with a significant overlap between them), every time it evaluates a different indicator attesting to the condition of the domestic industry. For example, the investigating authority can examine trends in sales according to data for nine companies, trends in inventories according to data for another six companies, and trends in profits according to data for a different three companies, with only one company being present in all three groups. Perhaps unsurprisingly, in the cases involving this approach the investigating authority tends to conclude that the indicators reviewed consistently show that the domestic industry has been injured by the dumped imports. Rice is a good illustration of this approach. In Rice, the investigating authority examined production on the basis of data for ten domestic producers, sales on the basis of data for 11 domestic producers, inventories on the basis of data for six domestic producers, capacity utilization on the basis of data for five domestic producers, employment on the basis of data for seven domestic producers, profitability and return on investment on the basis of data for a different group of seven domestic producers, and cash flow on the basis of data for six domestic producers.Footnote ²⁸ This may well be the witches' brew to which J. Michael Finger was referring in his earlier book. It is doubtful that this ‘carrousel’ approach would survive WTO review, because it seems to fly in the face of the requirement under Article 3.1 of the AD Agreement that injury determinations be based on an ‘objective examination of positive evidence’.

There are, additionally, two episodes in Mexico's practice that perfectly exemplify what does not qualify as a judicious way to apply WTO trade remedy rules, or take advantage skillfully of the discretion that WTO trade remedy rules allows. In Apples, the investigating authority rejected the entirety of the questionnaire responses submitted by the two respondents involved on the basis of the argument that the export prices therein were higher than the import prices reported by one particular importer that was buying from those respondents. Instead of testing the accuracy of the respondents' export price data through verification, as foreseen in Article 6.7 of the AD Agreement and done routinely by the investigating authority in other proceedings, the investigating authority assumed that the export price data at issue were false, extended this conclusion to all of the pricing data submitted by the respondents, and proceeded to calculate their dumping margin on the basis of the ‘facts available’, thus arriving at a dumping margin of 101% (Apples Preliminary Determination: paragraphs 47–48 and 60). This would appear to be no more than an unfortunate judgment call by the investigating authority if it were not for the fact that, according to Mexican custom, regulations applicable at the time, the import price data reported by importers of apples were not entirely reliable for purposes of import duty assessment, because of concerns about the possibility of under-invoicing (Apples Preliminary Determination: paragraphs 10–11). Thus, according to Mexico's own customs regulations, the investigating authority should have viewed the importers' pricing data, and not the exporters' pricing data, as suspect.

In Beef, the investigating authority imposed duty rates based upon ‘facts available’ to shipments of beef that did not meet certain grading standards applied in the United States and came from cattle that had been slaughtered 30 days or more prior to importation (Beef Final Determination: paragraph 654). It goes without saying that this approach to the application of ‘facts available’ had no legal basis either in the AD Agreement, or in the Mexican Foreign Trade Law or Regulations. Some of the affected respondents challenged this measure before a NAFTA panel. At the NAFTA panel, the investigating authority argued that it had introduced such antidumping measure on public health grounds (NAFTA Panel Decision of March 15, 2004: paragraph 10.22). Unsurprisingly, the NAFTA panel found this measure legally invalid and the investigating authority withdrew it subsequently (Beef Re-Determination: paragraph 278).

In light of the nature and frequency of the missteps discussed above, it is only fair to conclude that Mexico's trade remedy practice has ceased to be as good an example of thoughtful self-restraint in the application of trade remedies as it may have been back in the mid 1990s.

The message in Fighting Fire with Fire is that conformity with WTO requirements and the judicious exercise of the discretion allowed within WTO rules minimizes the degree of protection dispensed through trade remedies and this in turn helps a liberalized trade regime take root. Hence, a trade remedy practice that is both WTO-compliant and imaginative is pro-trade rather than a deterrent to trade. But Fighting Fire with Fire fails to demonstrate that Latin America's practice, on the whole, remains a proper example of how to apply trade remedies in a WTO-compliant and imaginative manner. Thus, the book has developed an intuitive and appealing message but it has also fallen short of coming up with enough good examples that would support that message.

As Fighting Fire with Fire fails to recognize that in the trade remedy experience of Latin American countries discipline has tended to co-exist with laxity, and that episodes of rigor have often been superseded by episodes involving rampant misuse, the book does not discuss what could explain this pattern. Is this pattern inevitable or does it depend on the circumstances under which a trade remedy system operates? The Latin American record suggests that reliance on discretion by technocrats is not sufficient to ensure virtuous long-run trade remedy management since technocrats come and go, and, when they go, philosophies as to how to best to use discretion are likely to change. To what extent can active recourse to judicial review, institutional independence, or staffing by irremovable career civil servants make a difference in this regard?

Chile seems to have escaped such a pattern, although this appears to be primarily on account that it hardly ever uses trade remedies anymore.Footnote ²⁹ Is this attributable to an aversion on the part of both the Chilean industry and the Chilean Government to employ trade remedies more actively, arising from the success Chile has achieved as an export-based economy? Or is this traceable to the fact that that in Chile, after a long period of trade reform, import-competing industries have contracted significantly and uncompetitive import-competing producers have been weeded out, thus cutting down to minimal size the natural clientele of a trade remedy regime? In any event, the Chilean policy of placing the trade remedy administration at a fully independent institution such as the Central Bank, capable of resisting heavy pressure, both from other areas of the government and outside the government, seems to have been a very effective tool for avoiding the massive relaxation of technical standards, as appears to have happened elsewhere. Unfortunately, when the trade remedy regime gets contaminated by political concerns, it ceases to play the function of a filter dispensing protection to a few industries that meet certain technical criteria, and ends up dispensing protection still in small doses, but in this case to those industries that are politically well connected. There is, of course, little sense in running a trade remedy regime along these lines, because a comparable outcome could be achieved by returning to the traditional means of providing protection. One can only hope that Fighting Fire with Fire will pave the way for literature that will explore how virtuosity in the administration of trade remedies can be preserved.