The People’s Republic of China this week requested consultations with the European Union to resolve a longstanding trade dispute over the assessment of antidumping duties on Chinese iron and steel fasteners. According to China, the EU has not complied with the July 2011 WTO Appellate Body (AB) ruling that found the EU to have violated its international trade obligations. If China and the EU do not resolve this concern by November 14, China may request a WTO panel to evaluate EU compliance and potentially authorize offsetting trade retaliation.
The EU last year claimed compliance by reducing and eliminating the antidumping duties assigned to certain Chinese shippers of fasteners. Yet China contends that the EU improperly maintained a 74.1% rate for Chinese companies that have not established independence from state control. Addressing this nonmarket economy issue, the AB rejected the EU approach, announcing that “placing the burden on NME exporters to rebut a presumption that they are related to the State and demonstrate that they are entitled to individual treatment runs counter to” the WTO Agreement. Although the AB conclusion was limited to the process and evidentiary basis through which the EU assessed whether Chinese companies were part of the NME-wide entity, one might expect efforts to expand the rationale of the AB decision to antidumping duties applied to NMEs by other countries, including the United States.
In fact, the United States is currently defending its compliance with a similarly adverse WTO ruling. The Socialist Republic of Vietnam in 2010 challenged United States determinations on the antidumping duty order on shrimp including the assignment of NME-wide rates. In July 2011, a WTO panel found that the United States did not act consistently with its international obligations. Vietnam thereafter asserted that the United States failed to comply with that panel report.
In its January 2013 request for another panel to resolve the outstanding compliance concern, Vietnam challenged the “calculation of a Vietnam-wide entity rate, which Viet Nam considers to be inconsistent, as such and as applied on a continued and ongoing basis, with the obligations of the United States under the Anti-Dumping Agreement.”
Briefing is now underway before a WTO panel that will decide whether the United States’ NME-wide duty assessments and cash deposit requirements on Vietnamese shrimp conform to international obligations. The EU may well participate in a similar panel soon on Chinese fasteners. As the United States and EU defend their NME-wide antidumping duty actions, it bears noting that both the EU and the United States employed a presumption of state control before entering into the WTO Agreements, and they have continued to do so because they do not understand themselves to have undertaken any different obligation in the WTO Agreements.
The WTO took a similar route with regard to the antidumping calculation methodology known as “zeroing” – likewise practiced by the EU, the United States, and other countries prior to the WTO Agreements and not directly prohibited in those agreements. Nonetheless, the WTO AB first announced a prohibition on “zeroing” when applied by the EU, and then eventually to the United States. The AB received a substantial amount of criticism for reading a prohibition of zeroing into the WTO Agreements, when the parties expressly chose not to include one. One can only hope that the AB is more restrained if and when these new disputes come before it.