Source: East Asia Forum
Authors: Henry Gao, SMU, and Weihuan Zhou, UNSW
On 14 June 2019 the WTO issued a communication announcing that the panel proceedings in case DS516 (European Union — Measures Related to Price Comparison Methodologies) initiated by China against the European Union had been suspended at the request of China. Called by US Trade Representative Robert Lighthizer as the ‘most serious litigation matter that we have at the WTO right now’, the case could affect billions of dollars of Chinese products. But its significance rises beyond commercial interests.
This case concerns Section 15 of China’s WTO Accession Protocol, which allows other WTO Members to treat China as a non-market economy (NME) in anti-dumping investigations. Anti-dumping, typically in the form of import tariffs, addresses the practice of ‘dumping’ where an exporter sells goods to another country at a lower price than its normal value in its home country.
When calculating normal values, Section 15 allows investigating authorities to disregard domestic prices in China and use surrogate prices from a third country instead — known as the NME methodology. This methodology can greatly increase the likelihood of positive findings of dumping, leading to exaggerated dumping margins sometimes as high as 1731 per cent.
Section 15(d) states that the NME provision ‘shall expire 15 years after the date of accession’. China took this to mean that the NME methodology would not be continued beyond 10 December 2016. Come 11 December 2016, however, neither the United States nor the European Union (EU) was willing to give up such a convenient tool. Therefore, the day after, in an unprecedented move, China filed separate WTO cases against the United States and the EU for allegedly breaking promises.
One may argue that regardless of whether Section 15 allows …continue reading