Hoist with their own petard: how emerging markets use U.S. anti-dumping laws ... against America.

• Author: Layton, Duane W.

In the movie Independence Day, a computer technician, played by Jeff Goldblum, discovers that the aliens are using our satellites to synchronize their attacks on earth. Much the same thing is happening today in the very real battle taking place between governments and industries over access to markets. As tariffs on goods fall and quotas are removed, numerous developing countries, led by China and India, are using antidumping and other "trade remedy" laws to protect their domestic markets from imports. Who did they learn this from? You got it, America.

The term "trade remedy" refers essentially to three types of legal proceedings that occur at the national level: antidumping, countervailing duty, and safeguards. Each is different, but all have one thing in common--if the requirements of the law are met, the government of the importing country has the right to impose remedial tariffs (and occasionally quotas) that can insulate a domestic industry from most, if not all, import competition for many years.

Throughout most of the twentieth century, the only countries that tended to use trade remedy laws were the United States, the European Union, Canada, and Australia. Occasionally, Argentina, Korea, or some other non-traditional user would attempt to block imports that threatened a strategic industry or a politically powerful domestic interest. In 1996, for instance, Guatemala brought a now-famous antidumping case that targeted imports of cement from Mexico. That case went on to become the first dispute over antidumping duties heard by the new World Trade Organization. But for the most part, it was the larger, more industrialized countries that used these laws. They had bound their tariffs at relatively low levels and agreed to eliminate quotas in successive "rounds" of multilateral trade negotiations (e.g., the Kennedy Round). As a result, their domestic industries were exposed to the greatest level of import competition. Meanwhile, the developing countries could continue protecting their most sensitive industries the old-fashioned way--through high tariffs, restrictive quotas, and/or innumerable non-tariff barriers to trade.

The creation of the WTO in 1995 changed everything. Almost overnight, the developing countries that joined the WTO were forced to liberalize their markets in ways they had never done before. Inefficient, often state-owned, industries faced real competition for the first time, including from industries located thousands of...