Legal Analysis On Application Of Out-of-Country Benchmark By America’s Countervailing Duty Against China

With the development of economical globalization and increase of internationaltrade conflicts, countervailing investigation has become one of the most complicated,difficult, controversial issues in the multilateral trade system. As Canada firstlycarried out countervailing investigation against China, America begins to combineanti-dumping and countervailing investigation against China frequently in recent twoyear and China has become a main target country suffered from countervailinginvestigation. The countervailing issue involved in the recent case UnitedStates-Definitive Anti-dumping and Countervailing Duties on Certain Products fromChina (hereinafter referred to as “the Case”) deserves our more attention. In the Case,America used a benchmark outside of China instead of Chinese private prices tocalculate benefits of subsidies. However, the Panel and the Appellate Body did notsupport the claim of China for benchmark. Once the out-of-country benchmark isabused by other WTO members, the enterprises in China will suffer from seriouseconomic losses. In view of the above-mentioned facts, by using SCM Agreement,relevant cases which resort to out-of-country benchmark and the report of the Paneland the Appellate Body in the Case, this paper focuses on the application ofout-of-country benchmark in American countervailing investigation against Chinaunder WTO framework and discusses the influence caused by out-of-countrybenchmark to China, thereby putting forward advices and solutions. This paper is composed of introduction, the main body and conclusion. The mainbody is divided into five chapters.Chapter I introduces the definition and legal basis of out-of-country benchmark.Firstly, it gives specific definitions about benefits of subsidy and out-of-countrybenchmark and the origin of out-of-country benchmark in order to present an initialintroduction. Secondly, it makes theoretical analysis of legal basis aboutout-of-country benchmark from the aspect of WTO, America and China through SCMAgreement, relevant provisions of American regulations and China’s Protocol ofAccession.Chapter II analyzes the first case resorting to out-of-country benchmark in WTO——US-Softwood Lumber IV as the issue of out-of-country benchmark involved inthe Case is not only continuation of but also extension of US-Softwood Lumber IV.Therefore, this paper reviews the situations where out-of-country benchmark isapplicable in the report of the Panel and the Appellate Body, the conditions wheregovernment takes the dominant role as a supplier and different interpretations madeby the Panel and the Appellate Body.Chapter III discusses the reason why America refused in-country benchmark andthe claims of China from three aspects in the Case——SOCB loans, prices ofSOE-produced products and land use rights. In terms of SOCB loans, this paperaddresses the benchmark of benefits conferred by government’s providing loans andthe conditions in which in-country rates are allowed to object in SCM Agreement.Then it distinguishes two core concepts,“market influence” and “governmentinvolvement” mentioned by the Panel, and shows how to determine proper benchmark;in terms of prices of SOE-produced products, this paper presents evidence typesjudging market distortion according to SCM Agreement and discusses whether the“per se rule” used by USDOC is reasonable; in terms of land use rights, it introducesprice order used by USDOC on this issue and the reason why America claimed thatChinese land reform is not so thorough and the land use rights in China aremaintained in a limited degree.Chapter IV analyzes the consistency of benchmark actually used by USDOC with SCM Agreement. It first illustrates whether American regulations are consistentwith WTO rules. As China did not challenge the benchmark used in SOE-producedproducts, this paper only discusses benchmarks actually used by USDOC with respectto SOCB loans and land use rights. The benchmark of SOCB loans actually used byUSDOC is neither comparable nor reflecting that borrower could “actually obtain onthe market”. From a one-sided view, USDOC held that the price of land use rights inChina is distorted and the benchmark actually used by USDOC is not proper.Chapter V shows that the application of out-of-country benchmark by Americanot only aggregates unfavorable position of China in WTO countervailinginvestigation, but also intervenes the independency of Chinese economic development.Therefore, our country should check the abuse of out-of-country benchmark from aninternational aspect and claim defenses against such benchmark, as well as reform ournational economical system fundamentally.