Looks like there’s quite a development in US-China trade relations this week, as we continue to learn more about how the WTO ruled in an anti-dumping case that has a history all the way back to 2007 bottom line, the news is not so good for the US. Ultimately, this anti-dumping ruling could be another hit to the US economy amidst what is seen by many as a broken trade system.
The WTO’s appellate body, composed of the seven people who hear appeals from reports issued by panels in member-country disputes, ruled on March 11 that the US had unlawfully imposed anti-dumping and countervailing duties on Chinese steel in 2007 namely circular welded carbon quality steel pipe (“CWP) and light-walled rectangular pipe and tube (“LWR). (The US also slapped higher duties on woven sacks and car tires.) The tariffs ranged up to 20 percent on these items, and the Commerce Department’s (USDOC) case for imposing the duties rested on the fact that China operates as a non-market economy. According to the China Economic Review, China based its appeal on the claim that the US couldn’t impose “two different classes of duties – antidumping and anti-subsidy – on the same goods.
The ruling panel dissected that particular claim, calling it “double remedies, according to the dispute settlement page on WTO’s Web site:
“The Appellate Body completed the legal analysis and found that, by declining to address China’s claims concerning double remedies in the four countervailing duty investigations at issue, the USDOC had failed to fulfil [sic] its obligation to determine the “appropriate amount of countervailing duties within the meaning of Article 19.3 of the SCM [Subsidies and Countervailing Measures] and that, therefore, the United States acted inconsistently with its obligations under Article 19.3.
(To be clear, the term “double remedies doesn’t simply refer to the fact that both an anti-dumping and a countervailing duty are imposed on the same product; but instead to the circumstances in which the dual imposition results in the “offsetting of the same subsidization twice.)
But the biggest sticking point was the fact that the USDOC pursued its anti-dumping impositions based on classifying China as a non-market economy (NME). According to a Reuters piece republished by Business Day, keeping tabs on the domestic prices (of steel, for example) of a state-controlled economy such as China’s is much murkier than for regular market economies. Selecting surrogate prices, a contentious practice, is what the USDOC has been forced to do and obviously this has backfired. This treatment by the USDOC contradicts an earlier promise by the US to recognize China as a market economy (recognition that the WTO doesn’t give China until 2016).
Industrial metals are still at the center of most cases (the base metals sector accounted for the greatest percentage of new initiations and new measures applied, according to a WTO report at the end of last year). The US imposed new duties on oil country tubular goods stainless alloy products used for drillpipe, casing pipe and tubular applications in the petrol industry and prestressed concrete steel wire strand from China in the first half of 2010.
To have the WTO rule against the US in this case is certainly a blow, mostly in that it ostensibly gives credence to China’s nebulous mix of government and business or, more aptly, government-controlled business which is ever-harder for free trading economies to combat. While MetalMiner tries to avoid out-and-out China bashing, it would seem that it’s only getting tougher to level out the playing field between these two trading partners. Seems like 2016, as far as WTO equanimity is concerned, can’t get here fast enough.