China’s market economy status probed in Argentina

In a recently initiated anti-dumping investigation of Chinese ceramic sanitary ware, the Argentinian authorities decided to treat China as a market economy.

The market economy status of China has a key impact on the prices used to determine the existence of dumping for Chinese products. In the event that China is considered a market economy, the existence of dumping is determined using domestic prices in China. If China is not considered a market economy, the investigating country may disregard Chinese domestic prices and use the domestic prices of a third country.

In November 2001, China became a member of the Word Trade Organization (WTO). The terms and conditions of the accession of China to the WTO are governed by the Protocol on the Accession of the People’s Republic of China (the accession protocol). The accession protocol allowed other WTO members not to treat China as a market economy. The fact that China was not treated as a market economy under WTO anti-dumping regulations resulted in a legal drawback that Chinese manufacturers had to face in anti-dumping investigations around the world.

The general rule for the determination of dumping is provided in the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the anti-dumping agreement). Section 2.1 of the anti-dumping agreement provides that “a product is to be considered as being dumped, i.e., introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country”. Thus, under the anti-dumping agreement, the determination of the existence of dumping is made by comparing the price at which the product is exported to the investigating country with the price at which the product is sold in the country in which it is produced.