Inadequacy of SCM Rules of Benefit Determination in the Context of Non-market Economies

Abstract

China’s decision to withdraw from the dispute pertaining to its Non-Market Economy (NME) status has bolstered the Member States’ intentions of resorting to stronger disciplinary actions against China and other NMEs. While anti-dumping measures have traditionally been pursued against NMEs, in recent years Member States have resorted to anti-subsidization measures as well. Even though the Appellate Body has warned against double counting, Member States continue to undertake Countervailing Duties (CVD) investigations against NMEs in addition to Anti-Dumping Duties (ADD) investigations. This article moves beyond the conventional discussions around double counting and attempts to determine whether the emphasis on antisubsidization measures against NMEs is justified. The paper focusses on the specifics of the Subsidies and Countervailing Measures (SCM) Agreement, particularly the rules on benefit determination. There have been instances where the Appellate Body has adopted innovative methods of benefit determination to deal with situations where governments’ actions have distorted the markets. Can these same rules be applied against NMEs? And if so, are they effective and do they factor in all aspects of market distortions in NMEs? This article attempts to answer these questions by relying on China as an example. SCM Agreement, Benefit Determination, NME, NME Methodology, Alternative Benchmarks