Empirical evidence on surrogate country method for non‐market economy: US anti‐dumping policy towards China

• Published date: 01 August 2019
• Date: 01 August 2019
• DOI: http://doi.org/10.1111/twec.12804

2452

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wileyonlinelibrary.com/journal/twec World Econ. 2019;42:2452–2466.

© 2019 John Wiley & Sons Ltd

Received: 8 April 2018

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Revised: 20 February 2019

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Accepted: 10 April 2019

DOI: 10.1111/twec.12804

ORIGINAL ARTICLE

Empirical evidence on surrogate country method

for non‐market economy: US anti‐dumping policy

towards China

HyerimKim1

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DukgeunAhn2

1Center for International Commerce and Strategy,Seoul National University, Seoul, Korea

2Graduate School of International Studies,Seoul National University, Seoul, Korea

KEYWORDS

anti-dumping, non‐market economy, surrogate country method

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INTRODUCTION

The method of dumping margin calculation differs depending on whether the exporting country is

considered market economy or non‐market economy (NME). The rationale for this distinction is that

the domestic prices are considered unreliable for determining the normal value of the goods in a

country where prices are distorted by state intervention. International rules as well as domestic laws

addressing dumping practices, therefore, permit alternative methodologies for calculation of normal

values in anti‐dumping (AD) investigations against exporters from NME countries.

Since there is no multilaterally agreed definition of NME, each country applies discretionally spe-

cial methods for calculating NME normal values. This situation was aggravated for China since it

agreed that the importing members might not always use a strict comparison with domestic prices or

costs in determining price comparability if WTO members find state intervention in pricing struc-

ture.1

Importing countries are allowed to decline prices or costs originating from China and instead

use proxy values for conducting price comparison in AD investigations.

In recent years, the legal interpretation on expiration of China's NME status has raised huge con-

troversy not just in the WTO dispute settlement system2

but also in academia.3

The legal ambiguity

1Section 15, Accession Protocol of the People's Republic of China, WT/L/432 (23 November 2001).

2China brought complaints against the United States and European Union. See United States—Measures Related to Price

Comparison Methodologies (DS515) and European Union—Measures Related to Price Comparison Methodologies (DS516).

The panel for DS516 was composed in July 2017, WT/DS516/10 (11 July 2017).

3For interpretational issues on expiration of China's NME status in Section 15 of its WTO Accession Protocol, see, e.g.,

Nicely (2014), Tietje and Nowrot (2011) and Weijia (2013). In fact, there are many studies to argue that China is not

automatically granted market economy status, see Bown and Mavroidis (2013), Miranda (2014) and O'Connor (2011).