Is The Surrogate Country Price Comparison Methodology Still In Force After The Expiry Of Section 15(a)(ii)

There have been nearly two decades since China joined the World Trade Organization in 2001,during which China has been taking active part in international trade while fulfilling its WTO commitments.The negotiation process of China’s accession to the WTO was the collide and compromise of different interests and demands between China and the WTO members,finally leading to the conclusion of the Protocol on China’s Accession to the WTO.As an integral part of the WTO Agreement,the China’s Accession Protocol includes several specific commitments made by the Chinese government and special rules tailored specifically for China,one of which is the commitment of Chinese government to be subject to a “non-market economy rule” to the importing WTO Members in anti-dumping investigations.The Section 15 of the China’s Accession Protocol set up the arrangements for the question regarding the price comparability in determining subsidies and dumping in the export of Chinese products.It stipulates that in anti-dumping investigations,the importing WTO Member may use a methodology that is not based on a strict comparison with domestic prices or costs in China if the producers under investigation cannot clearly show that market economy conditions prevail in the industry producing the like product with regard to manufacture,production and sale of that product.Article VI of the General Agreement on Tariffs and Trade(GATT 1994)details the generally applicable method for calculating dumping margins in antidumping investigations.It provides that importing countries should calculate the difference between the product’s export price and the price of the product in the domestic market of the exporting country in the ordinary course of trade.However,where it is determined that the exporting country has a state-controlled economy,the WTO recognizes that price comparisons in antidumping investigations may be difficult,and thus makes an exception for importing WTO members to deviate from the strict comparison with domestic prices.This exception was later incorporated into the Second Note Ad of GATT 1994 Article VI:1 and the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994(“Anti-Dumping Agreement”).As a more detailed and feasible provision to address the above difficult situation of China,Section 15 of the China’s Accession Protocol clearly grants the importing WTO members the right to use the Surrogate Country Price Comparison Methodology when they determine China to be a non-market economy.Based on this,the United States,the European Union and some other WTO members continue to adopt the “Surrogate Country Price Comparison Methodology” when launching anti-dumping measures against Chinese enterprises and producers,that is to say the domestic price is not used for comparison,surrogate country’s domestic prices instead.After China’s accession to the WTO,the United States and the European Union in particular,have been applying the exceptional method to many Chinese export products on the legal basis of the Section 15.The result is that Chinese exporters are more likely to be identified as dumping,and the margin of dumping can be set higher,thus applying higher anti-dumping duties.However,Section 15(d)of China’s Accession Protocol provides that the provisions of Section 15(a)(ii)shall expire in fifteen years after the accession which is on 11 December 2016.Section 15(a)(ii)is the provision that permits the Surrogate Country Price Comparison Methodology under the non-market economy rule.The topic concerning the legal effect and consequence after the expiry of the Section 15(a)(ii)and the non-market economy status of China has been controversial and discussed a lot from the publish of the Accession Protocol.Chinese government has always implied that the non-market economy rule set forth in the Section 15 would no longer apply to China after Section 15(a)(ii)expires in 2016,thus the importing WTO members have no right to use the Surrogate Country Price Comparison Methodology in the anti-dumping investigations against Chinese exporters anymore.And Chinese government supposes that the importing WTO members especially the US and EU shall grant China market economy recognition in any event after the Section 15(a)(ii)expires according to the provisions in Section 15(d).Such claims do not get a consent reply.The US and EU reject the views of Chinese government and still holds that the expiry of Section 15(a)(ii)would not impair their right to use the non-market economy rule which is consistent with the GATT 1994 or the Anti-Dumping Regulations,as well as the remaining part of the Section 15,neither do they agree on the market economy status of China after 2016.In 2017,debates over China’s non-market economy status intensified after China brought the United States and the European Union to the dispute settlement system of the World Trade Organization on 12 December 2016.The two separate disputes concern common issues relating to the application of the so-called Surrogate Country Price Comparison Methodology in antidumping investigations against China under Article 15 of the Protocol on the Accession of China to the WTO.While DS 515: United States — Measures Related to Price Comparison Methodologies did not compose a panel,the United States joined DS 516: European Union — Measures Related to Price Comparison Methodologies as a third party,which is currently before a WTO panel composed on 10 July,2017.The United States and the European Union have been actively participating in the consultations and the Panel and Appellate Body proceedings in DS 516.This WTO case is of great concern to many interested organizations,enterprises or individuals who have been paying attention to the ongoing progress.A lot of commentators and scholars have expressed their opinions about the issues.Moreover,they expect to see how the final report by the Panel would be.However,on 7 May 2019,China requested the panel to suspend its proceedings in accordance with Article 12.12 of the DSU and later soon on 14 June 2019,the panel decided to grant China’s request and suspend its work.Although there has not been a conclusion of the disputing issues given by the WTO Panel,the legitimacy of using Surrogate Country Price comparison to China and the non-market economy status of China remain significant topics in the international trade law field and any changes to the agreement of those disputes by a member government would be important to the Chinese exporters as well as the China’s status in WTO mechanism.This thesis aims to introduce the disputes concerning the expiry of Section 15(a)(ii)of the Accession Protocol through the overview of the historical background of Surrogate Country Price Comparison Methodology and the heated debates over the non-market economy status of China after the DS515 and DS516.The first chapter will introduce the basic concepts or definitions of the surrogate country price comparison methodology as well as the most related non-market economy,and present the relevant theoretical and legal basis.The discussion and analysis of the main questions would be based on the overall framework of the WTO rules as well as the provisions regarding the anti-dumping investigation,combined with the public negotiation opinion materials from disputing parties as well as case materials under the principles of international law and treaty interpretation methods.The author intends to summarize the disputing issues demonstrated by the governments of China,the US and the EU,then probe into the legal nature and effect of the Section 15 in China’s Accession Protocol so as to make a reasonable analysis of the impact and legal consequences due to the expiry of Section 15(a)(ii).It is concluded in this thesis that importing WTO members including the United States and the European Union could no longer use the Section 15 of China’s Accession Protocol as the legal basis to apply the Surrogate Country Price Comparison Methodology to the Chinese enterprises in anti-dumping investigations after the Section 15(a)(ii)expired.The Author do not think China’s market economy status shall be granted directly for the reason of this expired provision,however,the Chinese government is encouraged to fully establish the facts of China’s market economy conditions with reference to the criteria elements in the national laws of those importing members,because the right to use the non-market economy rule under the Section 15 has been terminated though,the importing WTO members may seek for the exception provided by GATT 1994 and the Anti-Dumping Agreement to apply the Surrogate Country Price Comparison Methodology by proving the “difficulty”,let alone that they insist on the prior non-market economy rule now.If the importing members alleges the exceptional circumstance in the GATT 1994 by determining China remains non-market economy country,Chinese enterprises may have the right under the remaining Section 15(a)(i)to defend for themselves but actually when the Chinese government has not established market economy conditions to the importing WTO members,Chinese enterprises are still in a disadvantageous position to exercise this right which is somehow another burden of proof.In consideration of the current developing trend of tensions and the international trade friction between China and the United States as well as other main trading partners under the economic globalization,the United States and the European Union would not abandon the surrogate country price comparison methodology to Chinese products.Since it is difficult for those targeted exporting enterprises to make influential defenses and arguments in the anti-dumping investigations,Chinese government is expected to promote a more preferential supporting environment from legal or political aspect.Chinese government could take efforts to better express its legal opinions thus to gain more support from the WTO and other countries,and meanwhile,Chinese government should strengthen the construction of legislative,executive and judicial system governing the domestic market,encourage and require the enterprises to conduct production and business activities subject to the market economy conditions.Only through the joint efforts of both government and those enterprises,could this ongoing issue regarding price comparison methodology be gradually solved by really gaining a recognition of market economy status from the main WTO importing members,mainly the United States and the European Union.