"We're pleased that a World Trade Organization (WTO) arbitrator
agreed with the United States today that the European Union has no current right to retaliate against the
1916 Act. The arbitrator rejected the EU's argument that it could apply a regulation resembling the 1916
Act to an unlimited amount of imports from the United States.
"The Administration has been and will continue to work with
Congress to fully comply with U.S. WTO obligations in the 1916 Act dispute. Today's award will not
"While the award leaves open the possibility that the EU could
retaliate in the future if there are quantifiable 1916 Act judgments or settlements against EU
companies, we do not believe this will pose a problem. If Congress continues to make progress and
repeals the 1916 Act, this matter will be resolved.
"Legislation repealing the 1916 Act is pending in both the U.S.
House of Representatives and the U.S. Senate. On January 29, 2004, one such bill, HR 1073, was
reported favorably out of the Committee on the Judiciary of the U.S. House of
The 1916 Act generally prohibits the importation of a good into
the United States at prices substantially less than the market value of the good in a foreign
market with the intent of destroying, injuring or monopolizing an industry in the United
States. Violators are subject to treble damages and various penalties, including imprisonment.
On March 31, 2000, a WTO panel found that, by providing for the
imposition of treble damages, fines and imprisonment and by not providing a number of procedural
safeguards, the 1916 Act is inconsistent with Article VI of the General Agreement on Tariffs
and Trade 1994, with Articles 1, 4 and 5.5 of the Agreement on Implementation of Article VI of
the General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement"), and with
Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization. The
Appellate Body upheld these findings on August 28, 2000. On September 26, 2000, the WTO
adopted these findings.
The United States was given until December 20, 2001, to bring the
1916 Act into conformity with the WTO agreements. On January 7, 2002, the EU requested WTO
authorization to retaliate against the United States for failing to bring the 1916
Act into conformity with the WTO agreements. Specifically, the EU sought to adopt a regulation that
would allow the EU to impose on U.S. companies found to dump their products in the EU
additional duties corresponding to three times the amount of damage suffered by companies in the EU
"when certain specific intents analogous to those required under the 1916 Act are established."
The EU refused to recognize any limitation as to how it would apply this retaliatory measure.
The United States objected to this request, and the matter was referred to arbitration. Under
WTO rules, the arbitrator was to determine whether the level of retaliation proposed by the EU was
"equivalent" to the level of harm suffered by the EU as a result of the 1916 Act.
In February, 2002, however, the EU and the United States requested
the Arbitrator to suspend the arbitration proceeding while the U.S. Congress considered a
proposal to repeal the 1916 Act.
The EU and the United States agreed that the arbitration
proceeding could be reactivated at the request of either party after June 30, 2002. On September 19,
2003, the EU requested the reactivation of this arbitration proceeding.
In its February 24 award, the arbitrator found that the United
States met its burden of proving that the "level of suspension" (i.e., amount of retaliation) proposed
by the EU is not equivalent to the "level of nullification or impairment" (i.e., economic harm to the
EU that results from the 1916 Act). Article 22 of the WTO Understanding on Rules and Procedures
Governing the Settlement of Disputes requires such equivalence. The arbitrator found that
the level of nullification or impairment can be determined by adding (a) the value of "final
judgments" against EU entities as a result of the 1916 Act and (b) the value of settlement awards
being paid by EU entities as a result of 1916 Act litigation.
However, to date, final judgements against EU entities under the
1916 Act had been "zero" and recent settlement values cannot be considered because the parties
involved in those settlements have kept the terms of those settlements confidential. Therefore
the amounts of those settlements are not quantifiable, thus making them "too remote", "too
speculative," and "not meaningfully quantified." The arbitrator also found that the EU failed to
demonstrate that the 1916 Act had a "chilling effect" on trade.
The U.S. submissions in this proceeding are available on USTR's