GENEVA — A new confrontation between the U.S. and other major trading powers over reform of global antidumping rules could throw another wrench into the troubled Doha trade liberalization talks.

This story first appeared in the December 17, 2007 issue of WWD. Subscribe Today.

“It’s a very serious issue,” Peter Allgeier, the deputy U.S. trade representative, said at the end of a heated session here last week.

The showdown is over the partial inclusion in a draft negotiating text seeking to strengthen current global rules of a practice known as “zeroing” that’s used by the U.S. to calculate punitive antidumping duties.

The U.S. method, critics assert, inflates the final amount of duty levied. When the Commerce Department calculates a weighted average dumping margin for a given company, it takes into account numerous comparisons between sales in the U.S. and sales or costs in the home market.

It is not uncommon for the Commerce Department to find that some comparisons reveal dumping — the price in the U.S. is lower than the home market price — while others reveal no dumping — the price in the U.S. is higher than the home market price. Where a comparison reveals no dumping, Commerce assigns a zero to that comparison, rather than a negative number equal to the amount by which the U.S. price exceeds the home market price. This practice is commonly referred to as “zeroing.”

Antidumping duties are imposed on imports found to be sold in the importing country at below the value the products are sold in their home market. Efforts to remove the zeroing formula would draw a strong bipartisan reaction from Congress and politically influential U.S. industry groupings, trade sources said.

“I think the issue could be a deal breaker,” said Robert Lighthizer, head of the international trade practice at Skadden, Arps, Slate, Meagher & Flom LLP, in Washington.

Lighthizer, a former deputy USTR, said antidumping formulas are “always done in the last days” of trade negotiations. The WTO-sponsored Doha talks are aimed at lowering tariffs and other barriers to global trade, but have been stalled over issues such as farm subsidies and tariff-dropping formulas.

A series of case rulings by the WTO’s Appellate Body found the practice of zeroing breached global rules. A group of 18 nations led by Japan and including Brazil, China, India, South Korea, Mexico, Pakistan, Norway and Switzerland, as well as Hong Kong, said: “If the use of such practice prevails in the future, it would nullify the results of trade liberalization efforts.”

“We are both perplexed and disappointed by the chair’s inclusion of zeroing,” Japan’s ambassador, Ichiro Fujisaki, told envoys.

Brazil said the proposal was “a step backward” and argued the imbalance in antidumping “would grant increased opportunities for imposing obstacles to trade flows.”

In response to the onslaught of criticism, Allgeier said the U.S. believes some of the findings of Appellate Body “are counter to the outcomes envisioned by the negotiators during the Uruguay Round [1986-1994].”

Similarly, Alan Wolff, who leads Dewey Ballantine’s international trade practice out of Washington, said, “Those who clamor for weaker disciplines over unfair trade threaten the continuation of the current, remarkably open, international trading system.”