Slamming the door on trade policy discretion? The WTO Appellate Body’s ruling on market distortions and production costs in EU—Biodiesel(Argentina)

Meredith Crowley and Jennifer A. Hillman

No 2017/61, RSCAS Working Papers from European University Institute

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 (search for similar items in EconPapers)
JEL-codes: F13 F53 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-agr and nep-int
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Related works:
Journal Article: Slamming the Door on Trade Policy Discretion? The WTO Appellate Body’s Ruling on Market Distortions and Production Costs in EU–Biodiesel (Argentina) (2018)
Working Paper: Slamming the door on trade policy discretion? The WTO Appellate Body's ruling on market distortions and production costs in EU-Biodiesel (Argentina) (2017)
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