A bi-partisan group of senators led by John Rockefeller (Democrat-West Virginia) urged the Department of Commerce on 24 January to abandon a proposal that could extend market-economy treatment to individual respondents in anti-dumping proceedings involving China. The group includes 10 members of the prestigious Finance Committee (Sens. Rockefeller, Snowe, Schumer, Bunning, Conrad, Stabenow, Lincoln, Salazar, Kerry and Bingaman), which has jurisdiction over trade matters, but does not include the two more powerful members of the committee (Sens. Baucus and Grassley).

The DOC has been considering a number of changes to its non-market economy methodology in AD duty proceedings. One of these changes would open the way for mainland Chinese companies to benefit from market economy status in certain specific circumstances, which would result in significantly lower dumping margins. While DOC officials still believe that the limits the Chinese government has placed on the role of market forces are still not consistent with the recognition of China as a market economy under U.S. AD law, they have also acknowledged that it is now possible to determine whether the state has bestowed a benefit upon a Chinese producer (i.e., a subsidy can be identified and measured) and whether any such benefit is specific.

In light of this, the DOC sought comments from interested parties twice last year on whether it should consider granting market-economy treatment to individual respondents in AD proceedings involving China as well as the conditions under which individual firms should be granted such treatment and how it might affect AD calculations for qualifying respondents. The latest round of comments focused on such issues as the legal basis for a market-oriented enterprise test, ways in which the DOC could identify an MOE operating within a broader non-market economy environment, the extent and conditions under which the DOC should rely on an MOE's prices and costs, and the extent and conditions under which an MOE finding might be limited.

In their letter to Commerce Secretary Carlos Gutierrez, the senators argued that establishing an MOE test for mainland Chinese companies would significantly weaken U.S. trade remedy laws, resulting in serious harm to U.S. companies, workers and communities. The senators essentially believe that the DOC proposal has no legal basis and should therefore be abandoned altogether. Some of the arguments presented in the letter are summarised below.

The DOC has consistently found that the Chinese economy is not operating on market-based principles and is a NME for purposes of the U.S. AD statute. Indeed, when China was granted permanent normal trade relations status and joined the WTO it agreed to be subject to NME treatment in AD cases for a period of up to 15 years. The senators believe that the DOC proposal would nullify that commitment.

The continued importance of state control and direction throughout the Chinese economy makes it virtually impossible for a firm to be isolated from the effects of government control, given that neither its suppliers nor its home-market customers operate in a market-based economy. Likewise, relying on a mix of costs and prices in China in conjunction with costs and prices in a market economy country would result in a distorted AD margin calculation. The senators believe that there is no method under any potential MOE test that could result in an accurate measure of dumping, as required by law.

Applying an MOE test also would be difficult, if not impossible, to administer in practice. It would encourage all Chinese respondents to seek market-economy treatment in all current and future AD investigations and reviews, forcing the DOC to weigh the merits of hundreds of company-specific claims. That practice would create high administrative burdens and a legal quagmire, while substantially increasing the costs of bringing trade cases for U.S. companies and workers.

This tussle between Congress and the executive branch over the treatment of mainland China in U.S. trade remedy actions should be viewed within the larger context of bi-lateral economic relations. In general, the Bush administration has pursued a far more amenable and accommodating stance toward China than Congress, which has been sharply critical in many areas. The administration took a step favoured by many in Congress when it decided to extend the application of countervailing duty law to imports from NMEs. However, while both the White House and Congress support a robust U.S. trade remedy regime, there are distinct differences between these two branches of government on several specific issues. For example, DOC officials oppose legislation currently before Congress that would make currency manipulation a countervailable subsidy (see related story this issue). Likewise, the DOC is considering the possibility of opening a window for a relatively small number of Chinese companies to benefit from lower market economy dumping margins, which could perhaps serve as the starting point on a long road that could ultimately lead to the extension of market economy treatment to the entire mainland. Yet, many in Congress believe that window should be kept shut for the foreseeable future.

14 Feb 2008

Source: www.tdctrade.com