To learn more about SITE, you can contact the TED projects at jlee@american.edu.
 
 

1. The Simulation Venue

2. The Scenario

Students participating in the simulation will be divided into the following teams.

1. The WTO three-judge panel for Dispute Resolution

2. The Press

3. Government of the United States

4. Government of China

5. Representative from the State of Louisiana

6. Representative from the Cajun community 

3. Background on the Scenario

A. General Information

B. The US Position

The two U.S. agencies responsible for determining if a tariff should be imposed are the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC). U.S. dumping investigations all follow the same course as they proceed through the ITC and the (DOC). The first significant step after the filing of a dumping petition by a U.S. industry is at the ITC, which will make a preliminary finding as to whether the imports from the accused country or countries injure, or threaten to injure, a U.S. industry. If the ITC preliminarily finds injury the investigation then moves to the DOC. The DOC then conducts an investigation of individual companies' pricing to determine if dumping is occurring. If the DOC so determines that dumping has occurred, the investigation returns to the ITC, which would then make the final decision on whether imports from a particular country injure a U.S. industry. The ITC final injury investigation will be much more rigorous and detailed than the preliminary ITC injury investigation.

In this particular crawfish case, the ITC indeed ruled preliminarily that material injury had occurred; in other words, Chinese crawfish tail meat had been sold in the U.S. at a "less-than-fair-price. In the investigation by the DOC, because China was not a member of the WTO and was classified as a "non-market economy," the DOC used information obtained from countries other than China to try to determine how much it would cost to produce crawfish in a market economy. Based on prices in Spain, the DOC constructed a "fair market price," which was well above the prices Chinese processors charged for their exports. [SEE TABLE BELOW] As a result, the DOC proposed a tariff ranging from 86%-201%, bringing up the price of Chinese imported crawfish to a value equal to U.S. processed crawfish. The ITC upheld its preliminary ruling, which finalized the tariff schedule.

C. The PRC Position

The Chinese position is difficult to define as China is not a member of the WTO and is not classified as a "market economy". The Chinese may argue that because its economy is not as developed as those developed free market economies in the West, it can afford to pay laborers lower wages for the same level of productivity. Therefore, if China is a communist country whose economy is not comparable to the United States economy, how can it be proven that dumping in fact occurred?

Chinese officials may argue that since U.S. Department of Commerce officials did not use Chinese figures for determining "fair-market value" of processed crawfish tail meat, the tariffs imposed cannot be accurate to actual prices in China.

Another point of argument provided by the Chinese side is that the drastic increase in imports during the period of investigation is due to the fact that Louisiana crawfish processors suffered adverse weather conditions during the winter of 1995-1996, which led to sharply-reduced U.S. production of all crawfish products, including processed tail meat, during January-June 1996. In addition, adverse winter weather in 1994-1995 reportedly reduced somewhat the crawfish harvest during January-June 1995. In contrast, in 1995 China had unusually favorable weather, resulting in an extended crawfish season. The additional months of harvesting led to significant increases in production of tail meat, and since the United States is China's primary market, exports to the United States increased significantly. Hence, the flow of supply and demand for crawfish required an increase of exports to the United States.

Furthermore, in arguing in the WTO court, China may point out that the practice of unilaterally imposing dumping tariffs by the U.S. is unfair, as China enjoys Most Favored Nation trading status with the United States.

D. The State of Louisiana Position

The Louisiana Crawfish Coalition, a group representing crawfish tail meat processors in Louisiana, initially petitioned the Department of Commerce, complaining that imports of crawfish tail meat from China were destroying one of Louisiana's prime industries. Some statistics provided by the coalition include:

"It's the cultural blow, as much as the economic threat, that hurts. Curled thumb sized crawfish are an essential ingredient in dishes like gumbo and etoufee that help define Louisiana's identity. Generation of Cajuns were raised dropping baited wire traps into the bayous of the Athcafalaya Basin, then boiling their catch on the slope of the levee." Harold Benoit, Head of the Louisiana Crawfish Coalition "In many of the rural parishes that farm crawfish, the seasonal jobs provided by this industry are the only jobs available to many of these workers who also fish and trap for a living." Sen. Mary Landrieu from Louisiana.

The US crawfish tail meat industry is composed of about 45 processors, all but one of which are located in Louisiana.

E. The Cajun Cultural Perspective

The crawfish has become the ultimate symbol used to represent the Cajun people, dwellers of Louisiana since the mid-18^th century. The Cajuns were cruelly exiled from New Acadia (Nova Scotia) by the British in 1765 after refusing to swear allegiance to the British Crown. In one of the nation's mass migrations, more than 10,000 found a permanent home in Louisiana. Since then, the transplanted Acadians settled into the bayous of Southwestern Louisiana, living in relative isolation, and developing one of the oldest and most distinctive cultures in America. Today, more than one million people of Cajun or mixed Cajun blood live in Louisiana. Acadiana, or "Cajun Country" has been recognized and authenticated in the State of Louisiana in 22 of the 65 parishes that comprise the state.

"Liassez les bons temps rouler" (Let the good times roll) has always been a part of theCajun basic philosophy. Lacking formal education, they lived close to the land, intermarried, and proudly retained their customs, their religion and their own provincial form of the French language, a form of provincial French passed down orally for three centuries. Quite different from both the written Parisian Frence, "Cajun French" has virtually disappeared. But their distinctively accented English and Cajun idioms prevail as do their music and food, in which the crawfish plays an important role. Cajuns are justifiably proud of their association with the crawfish, as evidenced by the many folktales concerning the creature: for example, one such folktale tells the story that crawfish actually came to Louisiana with the Acadians. They were originally lobsters up in Acadia, but chose to follow their people into exile. During the long and difficult trip, the lobsters got smaller and smaller, so that by the time they got to Louisiana they were only a few inches long.

Today in Louisiana and throughout the United States, the crawfish has come to symbolize the Cajun culture, showing up everywhere--on bumper stickers, t-shirts, and other souvenirs sold to visitors from around the world. The crawfish is celebrated in such Louisiana festivals as Mardi Gras and even the annual Breaux Bridge Crawfish Festival, an annual clebration that attracts tens of thousands of visitors who travel from afar to sample crawfish in Cajun cuisine, participate in a crawfish eating contest, attend a crawfish peeling demonstration, or even cheer on the contestants in the crawfish race.

Hence, the crawfish dispute between China and Louisiana represents more than trade. As a symbol of a distinct culture, crawfish in Louisiana have been compared to cars in Detroit and wine in France. To upset the crawfish industry would not only put thousands of Louisianians out of work, but it would seriously jeopardize a way of life for a culture symbolized mainly by its food.

F. WTO Rules

What is Dumping?: Dumping is, in general, a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country. Thus, in the simplest of cases, one simply compares prices in two markets. However, the situation is rarely, if ever, that simple, and in most cases it is necessary to undertake a series of complex analytical steps in order to determine the appropriate price in the market of the exporting country (known as the "normal value") and the appropriate price in the market of the importing country (known as the "export price") so as to be able to undertake an appropriate comparison.

Article VI of GATT and the Anti-Dumping Agreement: The GATT 1994 sets forth a number of basic principles applicable in trade between Members of the WTO, including the "most favoured nation" principle. It also requires that imported products not be subject to internal taxes or other charges in excess of those imposed on domestic goods, and that imported goods in other respect be accorded treatment no less favourable than domestic goods under domestic laws and regulations, and establishes rules regarding quantitative restrictions, fees and formalities related to importation, and customs valuation. Members of the WTO also agreed to the establishment of schedules of bound tariff rates. Article VI of GATT 1994, on the other hand, explicitly authorizes the imposition of a specific anti-dumping duty on imports from a particular country, in excess of bound rates, in cases where dumping causes or threatens injury to a domestic industry, or materially retards the establishment of a domestic industry. Agreement on Implementation of Article VI of GATT 1994, commonly known as the Anti-Dumping Agreement (" AD Agreement"), provides further elaboration on the basic principles set forth in Article VI itself, to govern the investigation, determination, and application, of anti-dumping duties.

Previous Agreements: As tariff rates were lowered over time following the original GATT agreement, anti-dumping duties were increasingly imposed, and the inadequacy of Article VI to govern their imposition became ever more apparent. For instance, Article VI requires a determination of material injury, but does not contain any guidance as to criteria for the determining the existence of such injury, and addresses the methodology for establishing the existence of dumping in only the most general fashion. Consequently, contracting parties to GATT negotiated more detailed Codes relating to anti-dumping. The first such Code, the Agreement on Anti-dumping Practices, entered into force in 1967 as a result of the Kennedy Round. However, the United States never signed the Kennedy Round Code, and as a result, the Code had little practical significance. The Tokyo Round Code represented a quantum leap forward. Substantively, it provided enormously more guidance about the determination of dumping and of injury than did Article VI. Equally important, it set out in substantial detail certain procedural and due process requirements that must be fulfilled in the conduct of investigations. Nevertheless, the Code still represented no more than a general framework for countries to follow in conducting investigations and imposing duties. It was also marked by ambiguities on numerous controversial points, and was limited by the fact that only Parties to the Code were bound by its requirements, and only 27 countries were Parties.

4. Relevant Cases in TED

JAPRICE Japan Rice Trade

INDIATEA Tea Exports India

TOMATO Tomato Dispute

BEAR Bears and Trade

ECFURBAN EC Fur Import Ban

HAWKSBILL Hawksbill Turtle

LOBSTER US-Canada Lobster Feud

SALMON Salmon and Herring

SHARK Shark Trade and Soup

SWIFT Swift Trade and Soup

CRAYFISH Europe Crayfish Feud

BLUECRAB Bluecrabs and Water

SALMON2 Salmon2 Case

5. Bibliography

McQuaid, John. "Jefferson Sees Hope in China on Settling Crawfish Dispute", New Orleans Times-Picayune, April 4, 1997, p. A6.

____________. "U.S. Raises Tariffs to Stem China's Crawfish Imports", New Orleans Times-Picayune, July 24, 1997, p A1.

Passell, Peter. "Economic Scene: Protecting America's Crawfish From Those Chinese Crawfish", New York Times, August 28, 1997, p. D2.

Sayre, Alan. "Commerce: China Crawfish Are Being Dumped Into U.S.", Houston Chronicle, March 24,1997, p. 6B.

Yardley, Jim. "Recipe for a Trade War; Louisiana Resists Imports of Chinese Crawfish," Atlanta Journal and Constitution. September 17, 1996.

"Breaux: Louisiana's Suffered From Chinese Crawfish Imports", Congressional Press Release, July 28, 1997.

"Breaux: Ruling Shows Dumping Crawfish Tailmeat in U.S.," Congressional Press Release, March 20, 1997.

"China Faces Crawfish Tariffs", Financial Times, August 30, 1997, p.2.

"Crawfish Issue Boils Over Into Anti-Dumping Case", Houston Chronicle, August 28, 1997, p. 3.

"Landrieu: Louisiana Crawfish Industry in a Crisis!" Congressional Press Release, August 28, 1997.

"Path Clear for Crawfish Fines", Journal of Commerce, September 2, 1997, p. 3A.

"Trade Wars: Hunting Commie Crawfish," Economist, February 28, 1998, p. 35.

"U.S. Rules China Dumping Crawfish; Readies Punitive Tariffs", Agence France Presse, August 30, 1997.
 
 

4/30/98