China’s NME status at the WTO: analysis of the debate

Mirek Tobiáš Hošman

doi:10.1108/jitlp-09-2020-0054

Abstract

PurposeAlthough officially ended in July 2020, China’s dispute about its non-market economy (NME) status at the World Trade Organization (WTO) is far from being resolved. The NME status enables China’s counterparts to disregard Chinese prices in antidumping proceedings and instead use the so-called surrogate country methodology. This paper aims to structure and analyze the complex debate, which emerged with the disputes China has filed against the European Union and the USA at the WTO, and therefore provide a point of reference for future analysis of and debates about China’s NME status.Design/methodology/approachThe analysis is based on the existing academic literature on the topic and on the legal WTO-related documents (e.g. multilateral agreements, China’s Accession Protocol, legal findings of the WTO dispute panels).FindingsFour different interpretations of the respective legal documents about China’s NME status are discussed and strong and weak aspects of these interpretations are pointed out. Also, several misunderstandings and mistakes appearing in the debate are clarified.Practical implicationsAs the question of China’s position at the WTO and its NME status has not been resolved yet and some authors believe that China will pursue its case again once the WTO Appellate Body revives its functionality, the analysis of the debate can serve as a point of reference for the academic debate and the future research on this topic. Moreover, it offers an introduction to China’s NME position at the WTO for the newcomers to this topic.Originality/valueAlthough China’s NME status has been much discussed, there is no literature review that would structure the debate and point out some of the (dis)advantages of the respective arguments and interpretations. Rather than adding to the large corpus of literature about the NME status, this study takes this corpus as the object of its analysis.

Highlights

Among the many challenges the World Trade Organization (WTO) is facing – be it the need to quickly find a new Director-General who will replace the early-resigned Roberto Azevedo, the ongoing trade conflict between the USA and China or the deteriorating judicial system manifested by the suspension of the Appellate Body functioning – there is© Mirek Tobiaš Hošman
In determining price comparability under Article VI of the General Agreement on Tariffs and Trade (GATT) 1994 and the AntiDumping Agreement, the importing WTO Member shall use either Chinese prices or costs for the industry under investigation or a methodology that is not based on a strict comparison with domestic prices or costs in China based on the following rules: (i) If the producers under investigation can clearly show that market economy conditions prevail in the industry producing the like product with regard to the manufacture, production and sale of that product, the importing WTO Member shall use Chinese prices or costs for the industry under investigation in determining price comparability
(ii) 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 manufacturing, production and sale of that product

Summary

Introduction

Among the many challenges the World Trade Organization (WTO) is facing – be it the need to quickly find a new Director-General who will replace the early-resigned Roberto Azevedo, the ongoing trade conflict between the USA and China or the deteriorating judicial system manifested by the suspension of the Appellate Body functioning – there is© Mirek Tobiaš Hošman. Among the many challenges the World Trade Organization (WTO) is facing – be it the need to quickly find a new Director-General who will replace the early-resigned Roberto Azevedo, the ongoing trade conflict between the USA and China or the deteriorating judicial system manifested by the suspension of the Appellate Body functioning – there is. The author would like to thank this journal’s anonymous referees for their valuable comments. The author would like to express his gratitude to Oldrich Krpec and Maria Lucia Boi for their insight and support

Objectives

Conclusion