The Chinese government has requested consultations with the United States at the World Trade Organisation (WTO) regarding the use of the ‘non-market economy’ (NME) methodology in anti-dumping investigations, according to US lawyers Wiley Rein.
The law firm, which represents numerous US industries that oppose China’s request for market economy status, anticipated China’s actions in a report published in 2015
.China’s request is based on the 11 December 2016 expiration of Paragraph 15(a)(ii) of its Protocol of Accession. The Chinese claim that this provision was the sole legal basis for the application of the NME methodology, and that its expiration means WTO members may no longer use the methodology to determine dumping margins.
Opponents of China’s arguments—including the US government—argue that language remaining in the Protocol after the expiration of Paragraph 15(a)(ii) continues to provide clear legal authority for WTO members to apply the NME methodology in accordance with domestic law.
“China’s claim is misplaced,” said Alan H. Price, chair of Wiley Rein’s International Trade Practice. “Despite the fact that provision (a)(ii) expired yesterday, the remainder of Section 15 remains in full force and effect and continues to provide sufficient authority to treat China as an NME. Treating China as a market economy would be an unwarranted step with significant negative ramifications.”
In September 2015, Price co-authored a report entitled The Treatment of China as a Non-Market Economy Country After 2016, which concludes that China is not a market economy. Price represents numerous domestic steel producers and other domestic producers in anti-dumping and countervailing duty investigations. He also advises the US industry and the US Trade Representative in connection with WTO disputes regarding China’s raw material export restrictions.
US law provides six factors to determine whether, as a substantive matter, a country qualifies as a market economy for the purpose of US anti-dumping investigations. If an analysis of those factors demonstrates that prices and costs in the country are not set by market forces, the US Department of Commerce will use ‘surrogate values,’ or prices and costs in a third country at a similar level of economic development, to calculate dumping margins.
According to Wiley Rein, ‘as a substantive matter, the Chinese government continues to intervene extensively in its domestic economy to support domestic firms in international competition. Because economic outcomes are not determined by market forces, standard anti-dumping methodologies do not reflect true margins of dumping and result in incomplete relief for US industries against dumped Chinese imports.’
In February 2016, Price testified before the US-China Economic and Security Review Commission (USCESRC) on this topic, concluding that whether you look at criteria in United States, European Union, or Canadian law—and each government’s approach to China as a major trading partner—China is not a market economy.