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Introduction: Non-market Economies in the Global Trading System—The Special Case of China

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Non-market Economies in the Global Trading System

Abstract

This chapter opens the discussions of the issues relating to non-market economies under the multilateral trading system by highlighting the importance of these issues and outlining the development of these issues in relation to China. It sets out the structure of the book and summarises how each subsequent chapter contributes to the understanding of and debate over non-market economies, the interpretation and application of the relevant WTO rules especially those on anti-dumping and subsidies, and the anti-dumping laws and practices in major jurisdictions, using China as a special case.

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Notes

  1. 1.

    The GATT, concluded in October 1947, is an international agreement which lays down rules on trade in goods applicable to its signatories, officially referred to as “Contracting Parties”. See General Agreement on Tariffs and Trade, Oct. 30, 1947, 61 Stat. A-11, 55 U.N.T.S. 194. The GATT Contracting Parties held eight rounds of negotiations to further develop trade rules and reduce trade barriers. The last GATT round – the Uruguay Round negotiation completed in 1994 – established the WTO. The instrument establishing the WTO is the Marrakesh Agreement Establishing the World Trade Organization. See Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1869 U.N.T.S. 201 (1994) [hereinafter GATT 1994].

  2. 2.

    Protocol on the Accession of the People’s Republic of China, WTO Doc. WT/L/432 (Nov. 23, 2001) [hereinafter Chinese Accession Protocol].

  3. 3.

    John Jackson, State Trading and Non-market Economies 23(4) int’l lawyer 891, 891–3 (1989).

  4. 4.

    See generally William Davey, Article XVII GATT: An Overview in State Trading in the Twenty-First Century 17, 36 (Thomas Cottier and Petros Mavroidis (eds.), 1998); Andrea Mastromatteo, WTO and SOEs: Article XVII and Related Provisions of the GATT 1994, 16(4) world trade rev. 601–618 (2017); For a more detailed discussion of the negotiating history of Article XVII, John Jackson, World Trade and the Law of the GATT, 329–364 (The Bobbs-Merrill Company, 1969).

  5. 5.

    Indeed, a recent OECD report shows the growing involvement of state-owned enterprises (SOEs) in international commercial activities across many major nations, See Organisation for Economic Cooperation and Development, State-Owned Enterprises as Global Competitors: A Challenge or an Opportunity? (OECD Publishing, Paris, 2016).

  6. 6.

    World Trade Organisation, GATT Analytical Index, Article VI Anti-Dumping and Countervailing Duties, 228, www.wto.org/english/res_e/booksp_e/gatt_ai_e/art6_e.pdf.

  7. 7.

    The second Supplementary Provision to GATT Article VI:1 reads: “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.” GATT 1994, supra note 1, Interpretative Note 2 to Art. VI.

  8. 8.

    Jackson, supra note 3, at 894.

  9. 9.

    For a great volume on the various issues of the negotiations and the outcomes of the negotiations, See Deborah Cass, Brett Williams & George Barker, China and the World Trading System: Entering the New Millennium (Cambridge University Press, 2003). For China’s economic reforms and development during the period of accession negotiations and the implications of China’s WTO commitments, See Nicholas Lardy, Integrating China Into the Global Economy (Brookings Institution Press, 2002).

  10. 10.

    General Agreement on Tariffs and Trade, Working Party on China, GATT Doc. GATT/AIR/2392 (Mar. 11, 1987); General Agreement on Tariffs and Trade, Working Party on China’s Status as a Contracting Party, GATT Doc. L/6191/Rev.1 (Feb. 25, 1988).

  11. 11.

    General Agreement on Tariffs and Trade, Working Party on China’s Status as A Contracting Party: Introduction and General Statements – Note by the Secretariat, Spec(88) 13 (Mar. 29, 1988).

  12. 12.

    See, e.g., General Agreement on Tariffs and Trade, Working Party on China’s Status as A Contracting Party: Annotated Checklist of Issues – Note by the Secretariat, Spec(88)13/Add.5 (Jun. 9, 1989).

  13. 13.

    General Agreement on Tariffs and Trade, Working Party on China’s Status as A Contracting Party: Communication from China, 2, Spec(88)37 (Jul. 11, 1988).

  14. 14.

    General Agreement on Tariffs and Trade, Working Party on China’s Status as A Contracting Party: China’s Foreign Trade Regime – Note by the Secretariat, 1, Spec(88)13/Add.4/Rev.1 (Mar. 4, 1993). For a comprehensive note on China’s foreign trade regime, see General Agreement on Tariffs and Trade, Working Party on China’s Status as A Contracting Party: China’s Foreign Trade Regime – Note by the Secretariat, Spec(88)13/Add.13 (Sep. 7, 1993).

  15. 15.

    General Agreement on Tariffs and Trade, Global Multilateral Trading System: The Role of the PRC, (address by Peter D. Sutherland), GATT Doc. GATT/1633, (May 10, 1994), at 4.

  16. 16.

    See, eg. World Trade Organisation, Communication from China, WTO Doc. WT/ACC/CHN/1 (Dec. 7 Dec, 1995); World Trade Organisation, Communication from China, WTO Doc. WT/ACC/CHN/15 (Jul.13, 1998); World Trade Organisation, Communication from China, WTO Doc. WT/ACC/CHN/30 (Jul. 18, 2000).

  17. 17.

    Chinese Accession Protocol, supra note 2.

  18. 18.

    Working Party on the Accession of China, Report of the Working Party on the Accession of China, WTO Doc. WT/ACC/CHN/49 (Oct. 1, 2001) [hereinafter Working Party Report].

  19. 19.

    Chad P Brown, Should the United States Recognize China as a Market Economy, Peterson Insti. Int’l Econ., 6–7 (Dec., 2016); Cecilia Bellora & Sebastien Jean, Granting Market Economy Status to China in the EU: An Economic Impact Assessment, Policy Brief. No. 11, Centre d'Etudes Prospectives et d'Informations Internationales, 1–16, (Sep., 2016).

  20. 20.

    Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 201 (1994) [hereinafter Anti-Dumping Agreement].

  21. 21.

    A summary of the dispute and its current status can be found at: World Trade Organisation, European Union — Measures Related to Price Comparison Methodologies, WT/DS516, www.wto.org/english/tratop_e/dispu_e/cases_e/ds516_e.htm. Simultaneously, China brought a dispute on the same subject matter against the US, which somehow remains under consultation. See World Trade Organisation, United States — Measures Related to Price Comparison Methodologies, WT/DS515, www.wto.org/english/tratop_e/dispu_e/cases_e/ds515_e.htm.

  22. 22.

    China Opening Statement, European Union – Measures Related to Price Comparison Methodologies, WT/DS516, Opening Statement by Ambassador Zhang Xiangchen as a part of the Oral Statement of China at the First Substantive Meeting of the Panel in the Dispute (Dec. 6, 2017), ¶ 7, http://images.mofcom.gov.cn/wto2/201712/20171213174424357.pdf.

  23. 23.

    First Written Submission by the European Union, European Union – Measures Related to Price Comparison Methodologies, WT/DS516 (Nov. 14, 2017), http://trade.ec.europa.eu/doclib/docs/2017/November/tradoc_156401.pdf; Third Party Submission of the United States, European Union – Measures Related to Price Comparison Methodologies, WT/DS516 (Nov. 21, 2017), https://ustr.gov/sites/default/files/enforcement/DS/US.3d.Pty.Su.pdf.

  24. 24.

    Memorandum from Leah Wils-Owens, to Gary Taverman, China’s Status as a Non-Market Economy (U.S. Dep’t Com., Oct. 26, 2017), https://enforcement.trade.gov/download/prc-nme-status/prc-nme-review-final-103017.pdf.

  25. 25.

    See, e.g., Mark Wu, The ‘China, Inc’. Challenge to Global Trade Governance, 57 (2) Harv. Int’l. L. J., 261, 324 (2016); Michael Flynn, China: A Market Economy, 48 Geo. J. Int’l L., 297, 329 (2016).

  26. 26.

    Lisa Toohey and Jonathan Crowe, The Illusory Reference of the Transitional State and Non-Market Economy Status, 2(2) China J. Comp. L., 314, 333–334 (2014); Matthew R. Nicely, Time to Eliminate Outdated Non-Market Economy Methodologies, 9(4) Global Trade & Customs J. 160, 161 (2014).

  27. 27.

    Aaditya Mattoo, Dealing with Monopolies and State Enterprises: WTO Rules for Goods and Services in State Trading in Twenty First Century 37 (Thomas Cottier and Petros Mavroidis (eds), 1998).

  28. 28.

    See generally Alexander Polouektov, Non-Market Economy Issues in the WTO Anti-Dumping Law and Accession Negotiations: Revival of a Two-tier Membership? 36(1) J. World Trade 1–37 (2002).

  29. 29.

    U.S. Trade Policy Priorities: Robert Lighthizer, United States Trade Representative, 4 (Centre for Strategic & Int’l Studies, Sep. 18, 2017), https://csis-prod.s3.amazonaws.com/s3fs-public/publication/170918_U.S._Trade_Policy_Priorities_Robert_Lighthizer_transcript.pdf?kYkVT9pyKE.PK.utw_u0QVoewnVi2j5L.

  30. 30.

    Matthew R. Nicely and Brian Gatta, U.S. Trade Preferences Extension Act (TPEA) of 2015 Could Lead to Increased Use of ‘Particular Market Situation’ in Calculating Normal Value in Anti-Dumping Cases 11(5) Global Trade & Customs J. 238–243 (2016).

  31. 31.

    The White House, Presidential Proclamation on Adjusting Imports of Steel into the United States (Mar. 8, 2018), https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states/; The White House, Presidential Proclamation on Adjusting Imports of Aluminum into the United States (Mar. 8, 2018), https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states/.

  32. 32.

    Office of the U.S Trade Representative, President Trump Announces Strong Actions to Address China’s Unfair Trade (Mar. 22, 2018), https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/March/president-trump-announces-strong.

  33. 33.

    Office of the U.S. Trade Representative, Following President Trump’s Section 301 Decisions, USTR Launches New WTO Challenge Against China (Mar. 23, 2018), https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/March/following-president-trump%E2%80%99s-section.

  34. 34.

    Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending Regulation (EU) 2016/1036 on Protection Against Dumped Imports From Countries Not Members Of The European Union and Regulation (EU) 2016/1037 On Protection Against Subsidised Imports From Countries Not Members Of The European Union, 2017 O.J., (L338/1).

  35. 35.

    European Commission, Commission Staff Working Document on Significant Distortions in the Economy of People’s Republic of China for the Purposes of Trade Defence Investigations, SWD (2017) 483 final (Dec., 20, 2017).

  36. 36.

    Appellate Body Report, European Union—Anti-Dumping Measures on Biodiesel from Argentina, WTO Doc. WT/DS473/AB/R (adopted Oct., 6, 2016).

  37. 37.

    Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 14.

  38. 38.

    See generally Julia Ya Qin, WTO Regulation of Subsidies to State-Owned Enterprises (SOEs) – A Critical Appraisal of the China Accession Protocol 7(4) J. Int’l Eco. L. 863–919 (2004).

  39. 39.

    See generally Chinese Accession Protocol, supra note 1, arts. 5.1, 6.1, 9.1, 10.2 and 11.3; Working Party Report, supra note 18, ¶¶ 42, 62, 324–336. For a detailed discussion of the WTO-plus obligations, see Julia Ya Qin, ‘WTO-Plus’ Obligations and Their Implications for the World Trade Organisation Legal System 37(3) J. World Trade 483–522 (2003).

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  1. Centre for Trade and Investment Law, Indian Institute of Foreign Trade, New Delhi, India

    James J. Nedumpara

  2. Faculty of Law, University of New South Wales, Sydney, Australia

    Weihuan Zhou

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  1. Centre for Trade and Investment Law, Indian Institute of Foreign Trade, New Delhi, Delhi, India

    James J. Nedumpara

  2. Faculty of Law, UNSW Australia, Sydney, NSW, Australia

    Weihuan Zhou

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Nedumpara, J.J., Zhou, W. (2018). Introduction: Non-market Economies in the Global Trading System—The Special Case of China. In: Nedumpara, J., Zhou, W. (eds) Non-market Economies in the Global Trading System. Springer, Singapore. https://doi.org/10.1007/978-981-13-1331-8_1

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