Friday, March 26, 2010

Zeroing Classic Conflict of Law and Rational.

After explaining what zeroing is here. Then explaining the legal background here. I now conclude with my personal critic of practice.

The idea that a dumping margin should be calculated by subtracting one average price by another not so average price is a little perverse. It breaks the rules of math. The amount the normal price exceeds the export price should equate to the amount the normal average price exceeds the export average price. Adding, subtracting or multiplying the same number or effect to each side of the calculation is the basis of algebra. The export price can not equate to the average export price, where not all prices are averaged but are altered to make some equal to the normal values, and the rest averaged. It breaks the rules of math, it makes apples oranges and grapes peaches. If the these rules were applied to everyday purposes planes would fall out of the sky and building would collapse.

The fact that this is somehow fine is linked the the permissible statutory interpretation doctrine from Chevron. Basically, there are words here, and they say something, but it is possible to read them differently. The two step process is, ask first if the words of the statute are ambiguous, then ask if the interpretation is permissible? Well the statute is almost always ambiguous. Otherwise why would it be challenged in court?  Then the interpretation is almost always permissible. It is much easier to find an interpretation permissive, than  not permissive. This is the deference given by the courts to the executive branch in interpreting statutes. Theory behind the deference to the executive branch in interpretation the statute is that if the executive branch interprets that differs from Congresses intent, Congress is in a much better place to correct them than the court politically and the executive is also more accountable as a political branch to the people than the court.

But in this case law of dumping duties is derived from a non-self executing treaty. Which means a treaty was negotiated, and instead of being adopted as law, Congress passes it into law as a US domestic law. Then the executive branch interprets the law. But usually, the executive and Congress, would prefer to interpret a treaty that benefits their domestic political base. If the executive chooses to interpret in a way the that penalizes unfairly foreign companies on behalf of U.S, domestic parties Congress is not about to pass a law to rectify it. So both the executive branch and the Congress have no, or limited interest, in trying to interpret a trade treaty fairly. The only branch left to interpret a statute based on a treaty fairly is the judicial branch. But if the judicial branch decides it best to leave the question to the political branches, as it does with other domestic law, then the only recourse left is external.

So faced with the inability to get a fair hearing in the United States system, the foreign companies must challenge the practice zeroing in the WTO dispute settlement body (DSB). But,  WTO rulings are not binding on the US courts, nor are they binding on the executive branch. The court defers again the the executive to uphold, or squirm around, WTO rulings, whichever it prefers. If the executive does nothing, or not enough, then the recourse, of the foreign interests is trade barrier retaliation. That sets off a trade barrier retaliation that is calibrated to cause enough damage to domestic industries, to get the domestic industries to pressure the executive the change the offensive policy. Is this anyway to run a railroad?

Obviously its no way to run a railroad. The zeroing interpretation should not have been held permissible in the first place. But like a kid who can not back down from a fight, when the WTO ruling against the practice came down, the US courts could not back down. There are plenty of reasons why a WTO DSB ruling should not be binding on a US court. Maybe using the Charming Betsy doctrine in conjunction with WTO ruling to change the executive interpretation of a treaty, also would set a bad precedent. But if all three branches of government have no interest in upholding trade treaty obligations then the only course will always be the WTO DSB and trade retaliation. Even in clear cut poorly interpreted statutes like this one.

The Court of International Trade prides itself, and rightly so, as one of the few courts in the world where foreign and domestic companies can come and challenge the enforcement of trade policy. It is better than most nations offer their trading parties. Many rulings are a testament to fairness. But it still would be better for the court to decide cases such zeroing in light that it is the last chance of fairness before the convoluted remedies WTO DSB are used.