China's Status in the Context of WTO Law

China's status in the context of WTO law

anti-dumping

1.1the concept and characteristics of dumping in WTO law
If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product .
Dumping was defined in Art.Ⅵ.1 GATT 1947:

The contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threaten material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry.

Three requirements in this provision: less than the normal value, injury, and relationship between dumping and injury.
Characteristics of dumping are as following:
First, dumping is man-induced behaviour. In general, export products have higher price in import market than in domestic market, because of transportation cost,losses during transport, insurance cost, and importer tariffs, etc. All of these reasons raise the price of export products in import country. The situation of less than the domestic market is uncommon. This is the man-made situation that the exporter has special target to sell goods less than the normal value, such as sales of surplus products or open up new markets.
Second, dumping is unfair competition. In THE WTO ANTI-DUMPING AGREEMENT , the author said:

Dumping has traditionally been defined as the type of price discrimination between national markets ; in which a producer sells at a lower price abroad than in his home market( price dumping). It is often considered unfair that a producer who benefits from protection in his home market and therefore can charge high prices there, subsequently uses the artificially high profits generated on the protected home market to subsidize low-priced export sales. He is perceived to thereby unfairly compete with domestic producers in the -open- importing country market which cannot afford such low prices. Over time, a second form of dumping, so-called cost dumping, has been treated as objectionable.

Third, dumping may cause material injury or materially retardation in import country. Footnote 9 of ADA provides that the term" injury" shall be taken to mean material injury or material retardation of the establishment of such an industry and shall be interpreted in accordance with the provisions of this Article, unless otherwise specified. The result of dumping is always the disruption of economic order of import country.
For those reasons discussed above, dumping is harmful to international trade order. Many governments take action against dumping in order to defend their domestic industries and international organizations do the same to protect members avoidence of injury.

1.2 the theory of anti-dumping
The cornerstone of the GATT is the principle of non-discrimination .Article Ⅰ GATT General Most-Favoured-Nation Treatment and Article Ⅲ GATT National Treatment on International Taxation and Regulation all represent the non-discrimination principle of GATT.
Article Ⅵ GATT provide the legal basis of condemnation of dumping. But it is only condemnation, not prohibition . The WTO allows governments to act against dumping where there is material injury to the competing domestic industry. But the WTO agreement does not provides a specified procedure or method to deal with dumping. It gives the discretion to every member. That means, every member has his own definition of dumping and own treatment of dumping . During the period from Jan.1st 1995 to Dec. 31th 2004, 38 WTO members applied a total of 1,656 anti-dumping measures. By the end of 2009, 80 members (the 27 European Union member state counting as one) had notified their national implementing legislation on customs valuation to the committee.

Ⅱ non-market theory
2.1 non-market theory
Article 2.7 ADA provides that Article 2 is without prejudice to the second Supplementary Provision to paragraph 1 of Article Ⅵ in Annex Ⅰto GATT 1994 .The ad Article Ⅵ provides:

Paragraph 1
2. It is recognized that, in the case of imports from a country which has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State, special difficulties may exist in determining price comparability for the purposes of paragraph 1, 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.

This provision said states 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 where all domestic prices are fixed by the State, special difficulties may exist in determining price comparability for the purposes of paragraph 1, 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.
This is the definition of non-market economy in WTO law. From this provision, the characteristics of non-market economy are: the country which its trade is completely or substantially completely monopolized by the state; and the country which domestic prices are fixed by the State. This definition has been used by various authorities to ignore prices and costs in "non-market economies" on the ground that they are unreliable because they are not set by market but by the State. The prices are fixed by the State, so they are not the reflecting of market and they cannot truly performance the real supply and demand of the market. They are distorted prices.
These authorities would then use prices or costs in a market-economy country as the basis for normal value in cases involving non-market economies( the so-called surrogate or analogue country concept) .

2.2 the basis of China be considered as non-market in the context of WTO law
In U.S- China Bilateral WTO Agreement, the anti-dumping provision sets a limitation of 15 years:

Anti-dumping
The agreement ensures that the United States can continue to apply our current non-market economy methodology in anti-dumping cases involving imports from China for 15 years. China can ,of course, request review under U.S. Law of specific sectors or the economy as a whole to determine if it is market oriented and no longer subject to the special methodology.

In Protocol on The Accession of The People's Republic of China,WTO continue to use the limitation of 15 years:

15. Price Comparability in Determining Subsidies and Dumping
(d) Once China has established, under the national law of the importing WTO Member, that it is a market economy, the provisions of subparagraph (a) shall be terminated provided that the importing Member's national law contains market economy criteria as of the date of accession. In any event, the provisions of subparagraph (a)(ⅱ) shall expire 15 years after the date of accession. In addition, should China establish, pursuant to the national law of the importing WTO Member, that market economy conditions prevail in a particular industry or sector, the non-market economy provisions of subparagraph (a) shall no longer apply to that industry or sector.

From those above, China will be treated as non-market economy unless China could be recognized as market-economy under the importing member's national law. This means that there's no standard measure of market-economy. The judgement will be taken in different countries and the results will be different. The definition is uncertain, the result is uncertain. They depends on the national laws of those countries.

Ⅲ consideration of China's economic system in the context of WTO law
3.1 current economic development of China
After the 1979, under the reform and opening policies, China freed its farmers to produce and sell for profit rather than under instruction from the state. It began moving industry out from under the system of state-prescribed targets and quotas. Years after 1979, and after the accession into WTO, China's nowadays economic environment has made a big step.
First, market mechanism is running a basic role in the resource allocation. In the end of 2002, 96% consumable, 95% agriculture and sideline products, and 88% means of production were released from state-control system, the prices of them were decided by the market's supply-demand relations ( see Form 1 ). The marketization indexes of 2002 and 2003 are 72.8% and 73.8% . In 2004, 2005 and 2006, the indexes increased to 73.3%, 78.3% and 77.7%. According to those digital information and analysis, it is obviously that the market system which suitable for China's situation has been established.This typical market system including means of livelihood and production, combined with visible and invisible market, future market and spot market, guided by wholesale market and retail market(see Form 2 ). The distribute and commodity networks spread all over the cities and countries, become the carriers of commodities circulating in the market system.

Second, market system jurisprudence has been completely established. In order to adapt to market system, laws relating to market economy developed in the past years. Series of laws came into existence, such as The Law of the People's Republic of China on Combating Unfair Competition, Auction Law of the People's Republic of China, Standardization of the Operation of Chain Stores Opinion, etc. These laws efficiently regulated the orders of market which could regulate the system into lawful, compete by order and adapt to market economy.
Third, the market developing in multi-level and multi-form. As discussed in first point and related to Form 2, this market contains and combines many forms of managerial forms, such as visible market and invisible market, future market and spot market; it also has many networks all around the country, no matter distribute network or commodity network, no matter in cities or countries, or villages.
Fourth, the speed of market system development was fast. Every one has to admit the fast development speed of China's economy. Modern and effective forms of circulation and sale which had been experienced by western countries in the past hundreds of years accepted and came into effect efficiently in China in the past ten years. New retailing status and chains operate develop quickly. More than 80% big-and-middle-sized retailing industries manages those companies automatically, more than 70% chain enterprises established POS, MIS/BRP management system, about 30% enterprises established digital management system.
Even the market system has developing fast in the past thirty years, it has a lot of problem. For example, laws rules on the market was not developed, still in developing. In some aspects there are no rules came into effect, so the confusion arise.
As discussed above, we can see China's market economy is in transition. It is becoming a market economy, but it has problems in many aspects.

3.2 China's recognition in WTO
After accession into WTO, China was and is beset with many problems. The most serious one is anti-dumping activities by members of WTO in exporting area . The cause of this problem is China's market economy did not recognized.
As discussed in first two parts, the WTO do not has standard rules for recognition of market or non-market economy . It only has general provisions. These provisions confer national laws to establish the specified standard and give power and freedom for members to recognize the business partner as market or non-market economy. "GATT was designed by market economies for market economies." However, there is not a standard criterion for the market vs. Non-market economy distinction.There are two main problems in this method of recognition of members economy status.
First, there are no uniform standards. Every member has its own anti-dumping law which set up its own standard from its own view. These standards were made according to current and future economy situation which might effect their economy system. For example, a comparison of legal standard for market economy treatment in US, EU, Mexico and Malaysia is listed in form 3 .

UNCTAD Criteria: In the Glossary of Customs Terms of the United Nations Conference on Trade and Development(UNCTAD), UNCTAD defines a market economy and non-market economy in the following ways:

A national economy of a country is a market economy that relies heavily upon market forces to determine levels of production, consumption, investment and savings without government intervention.
A national economy is a non-market economy in which the government seeks to determine economic activity largely through a mechanism of central planning, as in the former Soviet Union, in contrast to a market economy, which depends heavily upon market force to allocate productive resources. In a "non-market" economy, production targets, prices, costs, investment allocations, raw materials, labor, international trade and most other economic aggregates are manipulates within a national economic plan drawn up by a central planning authority, hence, the public sector makes the major decisions affecting demand and supply within the national economy.

European Union: In the Council Regulation (EC) No 905/98 of 27 April 1998, the EU allows Chinese respondent enterprises to apply for the status of market economy in anti-dumping investigations and stipulates five criteria for determining the status of a market economy, as following:

(1)Decisions of firms regarding prices, costs and inputs, including for example, raw materials, cost of technology and labor, output, sales and investment, are made in response to market signals reflecting supply and demand, and without significant State interference in this regard, and costs of major inputs substantially reflect market values;
(2) Firms have one clear set of basic accounting standards and are applied for all purposes;
(3) The production costs and financial situation of firmer non-market economy system, in particular in relation to depreciation of assets, other write-off, barter trade and payment via compensation of debts;
(4) The firms concerned are subject to bankruptcy and property laws which guarantee legal certainty and stability for the operation of firms;
(5)Exchange rate conversions are carried out at the market rate.

United States: In the 1960s, the United States Department of Treasury developed and used what was know as the "surrogate country" approach for applying anti-dumping law to non-market economies. This approach was adopted and codifies by Congress in the Trade Act of 1974. congress also adopted Treasury's another methodology, known as the "factors of production" approach, in the Trade Agreement Act of 1979 as an alternative method to be used in non-market economy cases where there was no available surrogate country. In the Omnibus Trade and Competitiveness Act of 1988, US Congress enacted numerous reforms to the anti-dumping laws, starting with a definition of non-market economy. The Act requires six standards when making a determination. Those six standards are as the following:
(1) the extent to which the currency of the foreign country is convertible into the currency of other countries.
(2) The extent to which wage rates in the foreign country are determined by free bargaining between labor and management.
(3) The extent to which joint ventures or other investments by firms of other foreign countries are permitted in the foreign country.
(4) The extent of government control over the allocation of recourses and over the price and output decisions of enterprises.
(5) Such other factors as the administrating authority considers appropriate.

The second groups of problem are about the status of transitional countries, such as what kind of status should transitional countries be considered as? Should them be considered or recognized as market economy or non-market economy? Should them be considered as a special group and have special rules dealing with them? If there are some special rules, what kind of approach could deal with this sensitive problem which could not only be considered as pure economic problem but also something related to politic situation; if there are no special rules, what kind of approach should "non-market economy" countries use to protect their rights and benefits.
As discussed in Part 3.1, China has made a great step on its economy. It is not that central-planned economy any more. Market runs under the law of supply and demand, under series of laws which govern on market. Every principle keep eyes on moving forward and keeping market in great order and great development. Though there are still some aspects which are not in accord with the determination made by the main leading members in WTO, for example, there are still state-owned or state holding enterprises in core industries which were and are playing important role in one country's key branches; the exchange rate are still official; local protection are still exist, etc. China is turning into "market economy", but not totally enough. For developing only about thirty years, she still has shortcomings when compared to definitions made by leading members who developed in past hundred years. It is obvious that China is the country called in "transition".
The part could not deny is that China's economy status recognized by 77 countries by end of February 28, 2008. But main leading members of WTO such as United States and European Union still do not give recognition of market economy status to China which make China suffered by anti-dumping activities in past years( Form 4 ).

Form 4: Global Anti-Dumping Initiations on Chinese Products

From the data above, the percentage of suffered by anti-dumping activities increased from year to year.
A list of United States take activities on Chinese products is Form 5 .
美国目前正在实施的对华贸易救济措施涉案产品一览表(更新至2010年7月)

2010-08-04

序号 产品中文名称 产品英文名称 措施类别 税令公布日 税令更新
日期
1 涤棉印花布 Greige polyester cotton printcloth 反倾销 1983.09.16 2005.06.27
2 高锰酸钾 Potassium permanganate 反倾销 1984.01.31 2005.06.21
3 三氯硝基甲 Chloropicrin 反倾销 1984.03.22 2004.08.23
4 氯化钡 Barium chloride 反倾销 1984.10.17 2004.08.05
5 铁制铸件 Iron construction castings 反倾销 1986.05.09 2005.06.29
6 石蜡 Petroleum wax candles 反倾销 1986.08.28 2005.09.29
7 搪瓷厨具 Porcelain-on-steel cooking ware 反倾销 1986.12.02 2005.11.22
8 圆锥滚子轴承 Tapered roller bearings 反倾销 1987.06.15 2006.09.15
9 重锻造手动工具
(轴、扁斧、棒、楔、锤、锄) Heavy forged hand tools-Axes & adzes, Bars & wedges, Hammers & sledges, Picks & mattocks 反倾销 1991.02.19 2006.02.16
10 硅金属 Silicon metal 反倾销 1991.06.10 2006.12.21
11 烟花 Sparklers 反倾销 1991.06.18 2005.12.05
12 碳钢焊接接口 Carbon steel butt-weld pipe fittings 反倾销 1992.07.06 2005.11.21
13 对氨基苯磺酸 Sulfanilic acid 反倾销 1992.08.19 2006.05.11
14 螺旋形弹簧锁垫圈 Helical spring lock washers 反倾销 1993.10.19 2006.07.03
15 鲜蒜 Fresh garlic 反倾销 1994.11.16 2006.10.19
16 曲别针 Paper clips 反倾销 1994.11.25 2000.08.15
17 硅锰合金 Silicomanganese 反倾销 1994.12.22 2006.09.14
18 铅笔 Cased pencils 反倾销 1994.12.28 2005.12.20
19 氨基乙酸(甘氨酸) Glycine 反倾销 1995.03.29 2005.11.15
20 纯镁 Pure magnesium (ingot) 反倾销 1995.05.12 2006.07.10
21 糠醇 Furfuryl alcohol 反倾销 1995.06.21 2006.10.06
22 过硫酸盐 Persulfates 反倾销 1997.07.07 2008.04.21
23 淡水小龙虾尾肉 Crawfish tail meat 反倾销 1997.09.15 2008.12.11
24 碳钢板 Carbon steel plate 反倾销 1997.10.24 2009.10.11
25 盐渍蘑菇 Preserved mushrooms 反倾销 1999.02.19 2010.04.28
26 非冷冻浓缩苹果汁 Non-frozen apple juice concentrate 反倾销 2000.06.05 2005.11.02
27 钢筋 Steel concrete reinforcing bar 反倾销 2001.09.07 2007.08.09
28 铸造焦炭 Foundry coke 反倾销 2001.09.17 2007.01.10
29 颗粒状纯镁 Pure magnesium (granular) 反倾销 2001.11.19 2007.03.26
30 热轧碳钢板 Hot-rolled carbon steel flat products 反倾销 2001.11.29 2007.12.27
31 蜂蜜 Honey 反倾销 2001.12.10 2007.08.02
32 折叠礼品盒 Folding gift boxes 反倾销 2002.01.08 2007.05.18
33 折叠金属桌椅 Folding metal tables and chairs 反倾销 2002.06.27 2007.11.06
34 铁钒合金 Ferrovanadium 反倾销 2003.01.28 2008.12.19
35 无可锻性铸铁管件 Non-malleable cast iron pipe fittings 反倾销 2003.04.07 2008.08.15
36 糖精钠 Saccharin 反倾销 2003.07.09 2009.06.08
37 聚乙烯醇 Polyvinyl alcohol 反倾销 2003.10.01 2009.04.13
38 碳酸钡 Barium carbonate 反倾销 2003.10.01 —
39 棕刚玉 Refined brown aluminum oxide 反倾销 2003.11.19 2009.03.13
40 可锻性玛钢管件 Malleable iron pipe fittings 反倾销 2003.12.12 2009.04.22
41 彩色电视机 Color television receivers 反倾销 2004.06.03 —
42 四氢糠醇 Tetrahydrofurfuryl alcohol 反倾销 2004.08.06 —
43 金属台面烫衣板 Ironing tables 反倾销 2004.08.06 —
44 聚乙烯零售包装袋 Polyethylene retail carrier bags 反倾销 2004.08.09 —
45 手推车 Hand trucks 反倾销 2004.12.02 2010.04.28
46 咔唑紫颜料 Carbazole Violet Pigment 23 反倾销 2004.12.29 —
47 木制卧室家具 Wooden bedroom furniture 反倾销 2005.01.04 —
48 皱纹纸 Crepe paper 反倾销 2005.01.25 —
49 冷冻暖水虾 Frozen warm-water shrimp and prawns 反倾销 2005.02.01 —
50 薄页纸 Tissue paper 反倾销 2005.03.30 —
51 镁金属 Magnesium 反倾销 2005.04.15 —
52 氯代异氰(三氯异氰尿酸) Chlorinated Isocyanurates 反倾销 2005.06.24 —
53 画布 Certain artist canvas 反倾销 2006.06.01 —
54 文具纸 Certain lined paper 反倾销 2006.09.28 —
55 活性碳 Certain activated carbon 反倾销 2007.04.27 —
56 聚酯纤维 Certain polyester staple fiber 反倾销 2007.06.01 —
57 六偏磷酸钠 Sodium Hexametaphosphate 反倾销 2008.03.19 —
58 圆形焊接碳钢管件 Circular welded carbon quality steel pipe 反倾销 2008.07.22 —
59 圆形焊接碳钢管件 Circular welded carbon quality steel pipe 反补贴 2008.07.22 —
60 钢钉 Steel nails 反倾销 2008.08.01 —
61 薄壁矩形钢管 Light-walled rectangular pipe and tube 反倾销 2008.08.05 —
62 薄壁矩形钢管 Light-walled rectangular pipe and tube 反补贴 2008.08.05 —
63 复合编织袋 Laminated woven sacks 反倾销 2008.08.07 —
64 复合编织袋 Laminated woven sacks 反补贴 2008.08.07 —
65 亚硝酸钠 Sodium nitrite 反倾销 2008.08.27 —
66 亚硝酸钠 Sodium nitrite 反补贴 2008.08.27 —
67 非公路用轮胎 New Pneumatic Off-the-Road Tires 反倾销 2008.09.04 —
68 非公路用轮胎 New Pneumatic Off-the-Road Tires 反补贴 2008.09.04 —
69 未加工橡胶磁铁 Raw flexible magnets 反倾销 2008.09.17 —
70 未加工橡胶磁铁 Raw flexible magnets 反补贴 2008.09.17 —
71 钢丝衣架 Steel wire garment hangers 反倾销 2008.10.06 —
72 电解二氧化锰 Electrolytic manganese dioxide 反倾销 2008.10.07 —
73 聚对苯二甲酸乙二酯膜、片和条 Polyethylene terephthalate film, sheet, and strip 反倾销 2008.11.10 —
74 低克重热敏纸 Lightweight thermal paper 反倾销 2008.11.24 —
75 低克重热敏纸 Lightweight thermal paper 反补贴 2008.11.24 —
76 非封闭内置弹簧部件 Uncovered innerspring units 反倾销 2009.02.19 —
77 环形焊接碳钢管线管 Circular welded carbon quality steel line pipe 反补贴 2009.01.23 —
78 小直径石墨电极 Small diameter graphite electrodes 反倾销 2009.02.26 —
79 环形焊接压力管 Circular welded austenitic stainless pressure pipe 反倾销 2009.03.17 —
80 环形焊接压力管 Circular welded austenitic stainless pressure pipe 反补贴 2009.03.19 —
81 钢制螺杆 Steel threaded rod 反倾销 2009.04.14 —
82 羟基亚乙基二膦酸 HEDP 反倾销 2009.04.28 —
83 空调用截止阀 Frontseating service valves 反倾销 2009.04.28 —
84 环形焊接碳钢管线管 Circular welded carbon quality steel line pipe 反倾销 2009.05.13 —
85 柠檬酸和柠檬酸盐 Citric acid and certain citric salts 反倾销 2009.05.29 —
86 柠檬酸和柠檬酸盐 Citric acid and certain citric salts 反补贴 2009.05.29 —
87 后拖式草地维护设备 Tow Behind Lawn Groomer 反倾销 2009.08.03 —
88 后拖式草地维护设备 Tow Behind Lawn Groomer 反补贴 2009.08.03 —
89 厨房用搁板和网架 Kitchen Appliance Shelving and Racks 反倾销 2009.09.14 —
90 厨房用搁板和网架 Kitchen Appliance Shelving and Racks 反补贴 2009.09.14 —
91 乘用车和轻型卡车轮胎 Certain passenger vehicle & light truck tires 特保 2009.09.26
92 油井管 Oil Country Tubular Goods 反补贴 2010.01.15 —
93 钢绞线 PC Strand 反倾销 2010.05.17
94 钢绞线 PC Strand 反补贴 2010.05.17
95 油井管 Oil Country Tubular Goods 反倾销 2010.05.24
96 磷酸盐 Potassium Phosphate Salts 反倾销 2010.05.25
97 磷酸盐 Potassium Phosphate Salts 反补贴 2010.05.25
98 钢格栅板 Steel Grating 反倾销 2010.06.01
99 钢格栅板 Steel Grating 反补贴 2010.06.01
100 窄幅织带 Narrow Woven Ribbons with Woven Selvedge 反倾销 2010.06.13
101 窄幅织带 Narrow Woven Ribbons with Woven Selvedge 反补贴 2010.06.13
102 机织电热毯 Woven electric blankets 反倾销 2010.06.28
103 镁碳砖 Magnesia Carbon Bricks 反倾销 2010.07.27
104 镁碳砖 Magnesia Carbon Bricks 反补贴 2010.07.27

The two forms above show how serious China has been suffered by anti-dumping activities, because China is not market economy.

In order to solve this kind of problem, not only for China, also for countries suffered in this situation. This problem can turned into the point which plays an important role in WTO that what should transitional countries be considered.
First, the second Supplementary Provision should not be used against countries such as China, Vietnam, Ukraine and other economies in transition which have a vibrant and ever-increasing private sector.
Second, the countries should loose their treatment of non-market economies. For the changes are so fast in those transitional countries, WTO members should loose the treatment. For example, the Unites States has six standards for recognition of market-economy. In the past, one country could not be recognized as market economy if it did not meet all these standards; if the Unites States loose the treatment, not force countries to fix all the standards, when countries who are in fast changes meet four or five out of six, they could give recognition of market economy.
Third, if the second approach could not work, the majority rule should take effect. The proportion of recognition of countries should work in WTO. As an inter-governmental organization, WTO should not only worked as a equipment of making interests for leading members, but also as an instrument to improve world trade system and people's life.

China, as in transition, fast changes takes everyday, it should not be treated as non-market economy any more.