Colombia Soundly Defeated At WTO Arbitration Panel In Potato Trade Dispute With EU

The World Trade Organization today publicized a ruling  on a potato dumping trade dispute on Colombian anti-dumping tariffs of between 3% and 8% on frozen French fries from Belgium, the Netherlands, and Germany that Colombia imposed in 2018, saying that the frozen potato prices were artificially low.

One irony is that Colombia belongs to the Andes region of South America, which is the global origin of potatoes, and though the country reports some 60 varieties of the tuber, inefficient agriculture and transportation infrastructure means frozen imports can be cost-competitive with local packaged offerings.

In 2016 frozen French fry exports to Colombia reached €23 million before the tariffs were imposed, affecting 85% of EU French fry shipments to Colombia. The arbitration panel confirmed three of the four WTO rulings.

“It sends a strong signal to any country thinking of restricting EU exports that anti-dumping investigations must fully comply with WTO rules,” said the EU in a statement. “These unwarranted duties imposed in November 2018 for a 2-year period, target almost all (85% or €19.3 million) of EU exports of frozen fries to Colombia and range from around 3% to 8% additional duty rate. The EU considers that these measures are incompatible with WTO law, both on substance and on procedure.”

Because the WTO appellate panel currently lacks a quorum, the parties agreed to a binding “Multi Party Interim Appeal Arbitration Arrangement,” or MPIA.

Spin doctoring

The same day, Colombia’s Ministry of Commerce, Industry and Tourism (MinCIT) issued a puzzling statement saying: “Arbitrators Agree with Colombia In Appeal Process.” The government went on in the statement to make some dubious assertations. Says MinCIT:

• The arbitration decision released today establishes that Colombia was right to initiate the investigation process that ended in the imposition of anti-dumping duties on frozen potato chips from Belgium, the Netherlands and Germany.
• The arbitrators also sided with Colombia that the WTO Anti-Dumping Agreement allows the legal interpretations of the investigating authorities to be taken into account before issuing the courts’ preferred interpretation.
• With this arbitral decision, the balance is tipped in favor of Colombia in view of the results obtained in this lawsuit that is being advanced before the WTO.
• Thus, and taking into account the final report of the WTO panel known in October and added to this arbitral decision , Colombia will have to rectify some technical aspects of the decisions adopted that led to the imposition of anti-dumping duties.
• These include the use of the DIAN database to calculate dumping margins, the confidential treatment of certain information submitted during the investigation and technical aspects of the calculation of dumping margins.
• The Minister of Commerce, Industry and Tourism, Germán Umaña Mendoza, expressed his satisfaction with the decision and at the same time said that Colombia is respectful of the WTO dispute settlement mechanism, so the pertinent steps will be taken to implement the considerations of the arbitrators in a reasonable period, taking into account the processes of domestic legislation.

Summary of key findings (from WTO):

Colombia challenged four findings of inconsistency by the Panel. With respect to the initiation of investigation, the Arbitrators agreed with the Panel that Colombia’s interpretation of the phrase “where appropriate” in Article 5.2(iii) was not “permissible” within the meaning of Article 17.6(ii), but considered that the Panel applied the legal standard in an overly stringent manner. The Arbitrators considered that an unbiased and objective authority could have found the use of third-country sales prices in the application at issue to be “sufficient” to initiate the investigation. The Arbitrators therefore reversed the Panel’s finding and found that the European Union had not established that Colombia acted inconsistently with the obligation under Article 5.3 of the Anti-Dumping Agreement to determine the “sufficiency” of evidence to justify the initiation.

With respect to MINCIT’s confidential treatment of information, the Arbitrators found that the information at issue was “provided on a confidential basis” by the applicant and “treated” by MINCIT as confidential. The Arbitrators therefore upheld the Panel’s finding that, given the lack of a showing of “good cause” for the confidential treatment, MINCIT acted in a manner inconsistent with Article 6.5 of the Anti-Dumping Agreement.

With respect to exporters’ requests for adjustment, the Arbitrators disagreed with Colombia that part of the European Union’s “packaging cost-related claim” under Article 2.4 fell outside the Panel’s terms of reference because it was not identified in the panel request. Rather, the Arbitrators considered that the allegation at issue concerned factual details that led to Colombia’s failure to perform a fair comparison and need not be spelt out in the panel request. The Arbitrators therefore upheld the Panel’s finding that the claim fell within its terms of reference.

With respect to MINCIT’s injury and causation determinations, Colombia contended that the term “dumped imports” in Article 3 refers to any imports for which an authority calculates a positive dumping margin, including de minimis margins (i.e. less than 2 %). The Arbitrators considered that such an interpretation would render ineffective the requirement under Article 5.8 to immediately terminate an investigation where an authority determines a de minimis dumping margin, and was not supported by other arguments based on context and negotiating history. The Arbitrators concluded that Colombia’s interpretation was not “permissible” within the meaning of Article 17.6(ii), and upheld the Panel’s finding that Colombia acted inconsistently with Articles 3.1, 3.2, 3.4 and 3.5 of the Anti-Dumping Agreement.

Photo © Loren Moss