Zeroing

Bloomberg reports, EU Renews WTO Complaint Over U.S. `Zeroing' Practice. Zeroing refers to the bizarre method of calculating antidumping duties--a method that has no basis in economic theory or common sense and that serves as yet another barrier to trade.

Here is how Phill Swagel and I described zeroing in our paper on antidumping:

One ongoing dispute concerns the U.S. practice of “zeroing,” which allows officials to disregard instances in which foreign firms charge prices over fair value, thus offsetting supposed instances of undercharging. Consider, for example, a foreign firm that sells a product in its home and U.S. markets. Six months a year, the firm charges $10 in its home market and $8 in the United States; the other six months a year, it charges $8 at home and $10 in the United States. On average, the firm charges $9 both overseas and in the United States. But under zeroing, a U.S. official can define this as dumping, with each sale in the first half of the year assigned a dumping margin of $2 and each sale in the second assigned a dumping margin of zero (rather than -$2). Instead of letting the overpricing offset the underpricing, which would mean no tariff, the average
dumping margin—and the resulting tariff—is $1.

Europe’s version of zeroing was recently found to be contrary to its WTO obligations.The U.S. government has asserted that its version differs from the Europeans’ and is attempting to defend its practice before the WTO. The WTO is unlikely to accept Washington’s defense, hinting at yet another defeat for the United States in the WTO dispute process.

This is an international dispute the United States deserves to lose.