WTO Dispute Panel Lapses in China Non-Market Economy AD Duty Dispute
China’s World Trade Organization challenge to the European Union’s non-market economy treatment of its goods in antidumping duty cases has now fallen further into inactivity. The WTO on June 15 issued a notification that it is disbanding a panel requested by China in 2017 to decide the dispute, one year after China asked the WTO to suspend the panel. Under WTO rules, a panel may only be suspended for a year before its authority lapses. A similar WTO challenge filed by China against its continued non-market economy treatment by the U.S. never made it past initial consultations (see 1612120019 and 1710300043). China had argued in both cases that a provision of its agreement to join the WTO required that all countries treat it as a market economy beginning Dec. 11, 2016.
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As part of the non-market methodology in antidumping duty cases, the U.S. Commerce Department uses “surrogate” third-country prices and costs to set artificial “home country” prices for Chinese companies, which are then compared to those companies’ U.S. sales prices to set AD rates. Use of surrogate prices from richer countries can make those U.S. sales appear relatively cheaper, inflating AD rates. Trade lawyers have also said Chinese companies find it difficult under the current regime to avoid dumping, because they have no idea what prices and costs Commerce will eventually compare to their U.S. sales (see 1602290025).