PREVENTING THE ANTI-CIRCUMVENTION INSTRUMENT FROM UNDERMINING DEVELOPMENT THROUGH INVESTMENT

Abstract

AbstractCompanies from emerging economies have started internationalizing their production operations; they are following the same path as American, European and East Asian corporations before them, setting up factories in third countries to serve their export markets from closer locations and produce more efficiently. Thus, it is no longer only developed countries’ multinationals which are moving their operations to developing countries, but emerging market companies that are increasingly engaging in production abroad. This is having beneficial effects in countries where these companies invest and might help them start their own industrialization process. This has attracted the ire of developed countries, which are now targeting these downstream production plants abroad by using the so-called anti-circumvention instrument, resulting in trade defence duties imposed on the parent companies being extended to their foreign subsidiaries. This application of the anti-circumvention instrument departs from its historic rationale and might hinder the development of countries in need of foreign investment. Therefore, affected governments should consider taking international legal action to bring developed countries to the negotiating table to put a halt to this abuse of the anti-circumvention instrument.