./.RESTRICTEDWORLD TRADE
ORGANIZATIONG/ADP/IG/W/36
19 April 2001
(01-1964)
Committee on Anti-Dumping Practices
Informal Group on Anti-CircumventionOriginal:  English
ANTI-CIRCUMVENTION AND TARIFF ESCALATION
Paper by Japan
The following communication, dated 17 April 2001, has been received from the Permanent
Mission of Japan.
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1. It is well known that import tariffs tend to be higher for processed products than for
intermediate products and raw materials.  For instance, the import tariffs applied to finished textiles
and clothing products are generally higher than the import tariffs for cloth and these again tend to be
higher than those applied to fibre used to manufacture cloth.  This phenomenon is called tariffescalation.  Developing countries have frequently criticized that tariff escalation is practiced by the
developed countries.  Developing countries have also argued that it would create artificial incentives
to establish processing industries and assembly operation in the developed countries and thereby
assign developing countries to suppliers of raw materials and inputs.
2. Anti-dumping duties tend to be imposed on finished products and therefore tend to have an
impact equivalent to that of tariff escalation.  Anti-circumvention duties would accentuate the tariffescalation effect of anti-dumping duties.  This can be illustrated with examples provided in the non-
paper submitted by the EC (G/ADP/IG/W/30).
• In example 1, finished fibre imported into country A is subject to an anti-dumping duty.  The EC
supposes that the transforming uncut fibre into cut fibre is "a relatively simple process, involving
no particular know-how and only ve ry minor material investment".
In this case, the anti-dumping duty prevents imports of finished fibre, and moreover, if the anti-
circumvention measure is imposed on cut fibre, it will prevent imports of semi-finished fibre.
Even though the transforming uncut fibre into cut fibre is a simple process requiring little
investment and should therefore take place in developing countries, the effect of the two measuresis to assign to these countries the role of supplying raws materials for fibre.
• In example 2, an anti-dumping duty is imposed on motorcycles, and the EC supposes that the
process of the assembly of motorcycles from parts does not require any particular training, know-how, equipment or installations.  In this case, the anti-dumping duty prevents imports of
motorcycles, and moreover, if the anti-circumvention measure is imposed on the parts, it willprevent imports of their parts.  However, manufacturing processes that do not require any
particular training, know-how or investment, normally take place in developing countries.  The
two measures together are therefore very likely to have the effect of reducing suppliers of
motorcycle parts in developing countries as well as in preventing them from acquiring expertise in
manufacturing motorcycles.G/ADP/IG/W/36
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• In example 3, country A imposes an anti-dumping duty on mobile phones from country B.  The
EC supposes that the process of the assembly of mobile phone in country C from parts made in Bdoes not require specific training or know-how, a c onsiderable investment.  In this case, the anti-
dumping duty prevents imports of mobile phone s, and moreover, if the anti-circumvention
measure is imposed on mobile phones from country C, it will prevent imports of them.  Such
assembly operations are likely to take place in developing countries.  An anti-circumventionmeasure imposed in such situations are therefore likely to transfer assembly operations from
developing countries to other countries.  The measure having the effect of preventing developing
countries from acquiring expertise of mobile phones.
3. It follows from the above that, if anti-circumvention duties were permitted under the WTO
Agreements, developing countries would not only have to face the obstacle of tariff escalation and
anti-dumping duties on finished products but also anti-circumvention duties on inputs and productsresulting from simple assembly operations.  As a result, further obstacles to developing of
manufacturing industries in developing countries, which would be consistent with the WTO rules,
could be easily introduced.
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