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.