Study Of Non-market Economy Rules In The Legal System Of International Trade Relief

The United States and the European Union are the two largest economic entities in the world. Both of them are the most significant trade partners of China. The bilateral trade relations between U.S and China as well as EU and China have developed more and more rapidly and deeply since China's economic reform and opening to the outside world. However, in the meanwhile, the trade imbalance between China and U.S. as well as China and EU have been expanded and such imbalance has led to the hot trade frictions between their bilateral trade relations. There are still a lot of trade barriers for Chinese export products entering into the markets of both the U.S and EU. Antidumping and product specific safeguard are among a number of current issues raising significant problem in US-China and EU-China trade relations. By far, The U.S. and EU have been the top economic entities that have ever applied antidumping measures towards China. According to official statistics, the U.S. and EU have initiated 118 and 111 antidumping investigations respectively toward Chinese products by the end of 2005. Besides that, both of them become the only economic entities that initiated the product specific safeguards against Chinese textile products in the year 2005. In both the U.S. and EU trade laws, particularly their antidumping laws, The Non market economy (NME) rules have become the main concerns and difficulties of Chinese exporters when responding to the trade remedy proceedings, especially the antidumping proceedings. Anti-dumping, subsidy and safeguard measures are the only legal trade remedies WTO members can utilize according to the WTO law, and the NME rules are related with all of them. In both the United States and EC Anti-dumping law, China has been treated as a NME country or state trading country. With this perception, in taking antidumping measures against Chinese products, both the United States and the European Union authorities adopt the so-called "surrogate approach" to determine the fair (normal) value and the countrywide duty rule to determine the dumping margin, by disregarding micro-economic elements like cost of production, level of economic development, lower labor costs, and so on; The NME status exempts China from the countervailing duty investigations in both U.S. and EU Countervailing duty laws, but China's good fortune may not last forever since the Congress of U.S. are thinking to amend the case law rule fixed in Georgetown Steel Corp v. United States; in the safeguard field, the U.S. has revised its 1974 Trade law to transfer the Section 406 (implicating to Communist countries, including China) to Section 421 and Section 422 for the purpose of applicable specifically to China. Section 421 and 422 has been incorporated into Article 16 of Protocol on the Accession of China and it become China's international duty to all WTO Members.The NME treatment toward China rooted deeply in the early Cold War and have not changed since China adopted its open-door policy and even acceded to WTO. According to Article 15 of "Protocol on the Accession of the People's Republic China", the United States and the European Union will continue to treat China as a Non market Economy country until the year of 2015. According to the main views ofsome U.S. authorities, the Comparative Advantages theory are not appropriate to explain the trade relationship between the Market and Non market economy countries. They try to provide a sound basis of NME Rules in market economy country's antidumping and other trade laws by the Interface theory, theory of Economic Advantages and the theory of State Interest.The international legal basis of NME rules in both U.S. and EU antidumping laws are not sound enough, since the 1955 Interpretative Note to the first paragraph of Article VI (GATT) only stated that: "It is recognized that, in the case of imports from a country which has a complete or substantially complete monopoly of its trade and all domestic prices are fixed by the State, special difficulties may exist in determining price comparability for the purposes of paragraph I, and in such cases importing contracting parties may find it necessary to take into account the possibility that a strict comparison with domestic prices in such a country may not always be appropriate." As follows from the text of the interpretative note, it is no more than a statement of fact providing no specific indications as to what course of action investigating authorities should take in dealing with centrally planned economy countries. In practice, the issue was left to the discretion of the national administrations.The NME rules of U.S. and EU antidumping laws are unreasonable and discriminate to China, the Market Economy criteria of U.S. and EU are mainly explained and controlled by the administration and are easily influenced by political considerations (e.g. under U.S. law, the decision of the U.S. Department of Commerce to designate a trading partner as a non-market economy is not subject to judicial review), the administrative authorities have broad discretion to decide the selection of surrogate countries and the requirements and procedures to apply for separate rate.There are two possible solutions to resolve the NME issues. The first one is the diplomatic method. Under the motion of Chinese government, the U.S.-China Joint Commission Commerce and Trade Working Group on Structure Issues has been established to discuss whether to graduate China from NME to ME as a whole and Chinese government has also formally applied for the recognition of MES by EU; besides that, as a member of the WTO, China can suggest to revise the related provisions of WTO Antidumping Agreement in the new Doha Round negotiation; the second is the legal method. Chinese exporters or government can resort to legal remedies respectively from the Domestic court of U.S. and EU or the WTO Disputes Settlement Mechanism. The rule that NME designating is not subject to judicial review in the U.S. court may not block Chinese exporters to bring complaints on issues such as surrogate country selection or single countrywide duty to the U.S. court. Besides that, according to the WTO rule, Chinese government has the right on behalf of Chinese export producers to bring such complaints to the WTO disputes Settlement Mechanism.