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NMEs and the Double Remedy Problem

Published online by Cambridge University Press:  13 October 2017

THOMAS J. PRUSA
THOMAS J. PRUSA*
Affiliation:
Rutgers University and NBER
*
*Email: [email protected].
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Abstract

In 2007, the US reversed its long-standing policy prohibiting the simultaneous imposition of anti-dumping duties (ADDs) and countervailing duties (CVDs) against non-market economies. The EU followed the US lead and also began imposing simultaneous ADDs and CVDs. The practice, however, leads to double remedies, which are when a domestic subsidy is offset by both an ADD and a CVD. The WTO Appellate Body recently ruled that double remedies were inconsistent with the Agreement on Subsidies and Countervailing Measures and that the burden was on the investigating authorities to ensure that double remedies were not being imposed.

Type
Review Article
Information
World Trade Review , Volume 16 , Issue 4: Symposium on State-Owned Enterprises in China , October 2017 , pp. 619 - 634
Copyright
Copyright © Thomas J. Prusa 2017 

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Footnotes

Prepared for Columbia Law School Trade Law Seminar (Fall 2016).

References

1 C. P. Bown (2016), Global Antidumping Database, The World Bank, June, http://econ.worldbank.org/ttbd/gad/ .

2 In 2002, the EU and US granted Russia and other Eastern European countries ‘market economy’ status. Since that time, only Vietnam and China have been subject to NME methodology.

3 Bown (2016), Global Antidumping Database. The AD margins for the other targeted countries are computed using one of the other three methods.

4 First formalized in the 29 March 2007 USDOC Memorandum ‘Countervailing Duty Investigation of Coated Free Sheet Paper from the People's Republic of China – Whether the Analytical Elements of the Georgetown Steel Opinion are Applicable to China's Present-Day Economy’ (hereinafter ‘Georgetown Steel Memo’), http://ia.ita.doc.gov/download/prc-cfsp/CFS%20China.Georgetown%20applicability.pdf.

5 Georgetown Steel v. United States, 801 F.2d 1308, at (Fed. Cir. 1986).

6 Ibid., at 1316.

7 Georgetown Steel Memo, p. 2.

8 Poland and Czechoslovakia were the subjects of the Georgetown Steel case.

9 Georgetown Steel Memo, p. 2.

10 Ibid.

11 Ibid., p. 5.

12 Panel Report, United States – Definitive Anti-dumping and Countervailing Duties on Certain Products from China, WT/DS379/R (adopted 25 March 2011), modified by Appellate Body Report, WT/DS379/AB/R (adopted 25 March 2011) [hereinafter US–AD and CVD (China)].

13 This note still applies – Article 2(7) of the current Anti-Dumping Agreement explicitly provides that ‘this Article is without prejudice to the second Supplementary Provision to paragraph 1 of Article VI in Annex I to GATT 1994’.

14 C. P. Bown and P. C. Mavroidis (2013), ‘One (Firm) Is Not Enough: A Legal–Economic Analysis of EC–Fasteners’, 12 World Trade Review, argue that the AB decision in EC–Fasteners raises the specter that neither China nor Viet Nam's NME status will automatically sunset at the end of the accession period. We will discuss this at greater length later in the paper.

15 Namely, Articles VI:3 and 1:1 of the GATT 1994 and Articles 10, 12.1, 12.8 19.3, 19.4, and 32.1 of the SCM Agreement.

16 Panel Report, US–AD and CVD (China), para. 14.120 (Article 19.4 of the SCM Agreement), 14.130 (Article 19.3 of the SCM Agreement), 14.136 (Article VI:3 of the GATT 1994), 14.138 (Article 10 of the SCM Agreement), 14.139 (Article 32.1 of the SCM Agreement), 14.147 (Article 12.1 of the SCM Agreement), 14.148 (Article 12.8 of the SCM Agreement), 14.182 (Article I:1 of the GATT 1994).

17 It is noted that Article 9.2 of the WTO Anti-Dumping agreement contains very similar wording.

18 US–AD and CVD (China) AB, para. 547 et seq.

19 Ibid., paras. 596–604.

20 The US’ CVD statute requires the USDOC to treat the entire subsidy as a benefit, even if it is not fully passed-through to the prices. Said differently, US CVD rules assume complete pass-through of the subsidy and do not require the USDOC to measure pass-through in a typical CVD investigation.

21 See Froot, K. A. and Klemperer, P. D. (1989), ‘Exchange Rate Pass-Through When Market Share Matters’, 79(4) American Economic Review, 637–654 Google Scholar; M. Knetter (1994), ‘Is Export Price Adjustment Asymmetric?’, 13 Journal of International Trade and Finance, 55–70 Google Scholar; Goldberg, P. K. and Knetter, Michael M. (1997), ‘Goods Prices and Exchange Rates: What Have We Learned?’, 35(3) Journal of Economic Literature, 1243–1272 Google Scholar.

22 See Rogoff, K. (1996), ‘The Purchasing Power Parity Puzzle’, 34(2) Journal of Economic Literature, 647–68Google Scholar; K. Froot, M. Kim, and K. Rogoff (2001), ‘The Law of One Price over 700 Years’, International Monetary Fund Working Paper, WP/01/174.

23 At the time of this WTO proceeding, US statutes prohibited the USDOC from making any adjustments to its calculated CVD to account for pass-through issues. Whether the statutory changes enacted subsequent to this case are sufficient to satisfy the WTO AB will likely be the subject of future WTO disputes.

24 The US Congress recently changed the statute to allow USDOC to make adjustments.

25 Appellate Body, US–AD and CVD (China), para. 541.

26 The USDOC's response to the Section 129 proceeding highlights the complications in attempting to measure the extent of double remedy. See USDOC memo ‘Section 129 Proceeding Pursuant to the WTO Appellate Body's Findings in WTO DS379 Regarding the Antidumping Duty Investigation of Circular Welded Carbon Quality Steel Pipe (CWP) from the People's Republic of China: Preliminary Determination of Adjustments to the Antidumping Duty Cash Deposit Rates’, 31 May 2012.

27 For simplicity, in these examples I assume the firm's home market price is equivalent to a price obtained using the constructed value method. This is not necessarily the case and I make this assumption only to be explicit on how the dumping amount and countervailing duty would be calculated.

28 The US does not have a lesser duty rule so the dumping amount would be the dumping duty.

29 United States – Measures Related to Price Comparison Methodologies (WT/DS515) and European Union – Measures Related to Price Comparison Methodologies (WT/DS516).

30 A fuller discussion of this can be found in Bown and Mavroidis (2013), ‘One (Firm) Is Not Enough’, 243–271.

31 European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R (adopted July 28, 2011).

32 Ibid., para. 376.

33 Ibid., para. 381.