China Starts WTO 'Market Economy' Dispute Against US, EU

by Mary Swire,, Hong Kong

16 December 2016

China has successfully requested World Trade Organization (WTO) dispute consultations with the United States and the European Union (EU) regarding their continued application of a non-market economy (NME) “analogue country” approach in anti-dumping duty (AD) proceedings against Chinese exports.

The Chinese Government is insisting that all WTO members should treat it as a market economy (ME) after December 11, being the 15th anniversary of its WTO accession. In accordance with Article 15 of China’s Protocol of Accession, it is insisting that all WTO members should abandon the NME approach whereby domestic prices are not used as a benchmark against which to compare export prices.

Instead, for NMEs, WTO rules allow the use of data from another ME country – an “analogue country” – as the basis for calculation. This means that NMEs may be subject to ADs that can be higher because they are considered to more likely provide government subsidies that artificially lower domestic prices.

Conversely, under standard rules for MEs, ADs are calculated by comparing the export price of a product with the domestic prices or costs of the product in the exporting country. Using ME methodology in cases against China would therefore significantly reduce the level of ADs that could be imposed. It is feared by some countries that Chinese exports would then be likely to increase.

China has maintained that, under the Accession Protocol, each WTO jurisdiction has a clear obligation to consider Chinese export prices under the ME approach after December 11. It believes that Article 15 establishes an obligation under international law, and does not contain any leeway for judgments to be made on Chinese markets by any jurisdiction before acceptance of that legal obligation.

“Since WTO acts as a rule-based multilateral trading system, its rules must be observed to ensure an orderly and sustained development of international trade and investment.” Chinese Minister of Commerce Gao Hucheng said in an op-ed in the People’s Daily on December 12, which was also published on the Commerce Ministry’s website.

While “most of WTO members have fulfilled their obligations stipulated under the Article 15 in the Protocol ahead or on schedule,” he added, “China urges each party to keep their word, observe international law, and fulfill their international obligations. As for those who refuse to keep their promises, … they cannot use such excuses to postpone the fulfillment of their obligations. China will adamantly protect its legitimate interests and reserves the right to take further measures.”

In a further statement, Chinese Ministry of Commerce spokesperson Shen Danyang confirmed that “China has communicated with WTO members on many occasions, and urged them to favorably fulfill their obligations according to the schedule. Unfortunately, however, the United States and the EU have not performed their obligations so far.”

“The United States and the EU are the WTO members that have adopted the most anti-dumping measures against China,” he continued. “The [NME] practice used by their investigations has resulted in AD rates on Chinese enterprises being artificially raised, which strongly reduces the exports and employment of the relevant Chinese businesses.”

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