Lester Ross and Susan Ning
Cover by Benjamin Hurd
Lester Ross is counsel in the Beijing office of Paul, Weiss, Rifkind, Wharton & Garrison.
Susan Ning is a partner in the Beijing office of King & Wood.
The authors have represented respondents from different parts of the world in several of China's antidumping actions. This article updates an earlier CBR piece by the authors, "Modern Protectionism: China's Own Antidumping Regulations," which appeared in the May-June 2000 issue.
Foreign producers of commodities must take antidumping regulations into account when exporting to China or deciding whether to export or to establish a manufacturing base in the country.
China's Antidumping and Anti-Subsidy Regulations, promulgated in 1997, have led to seven investigations as of March 1, 2001. Determinations as to whether dumping has occurred, as well as dumping margins, are first made on a preliminary basis by the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) and the State Economic and Trade Commission (SETC), respectively, followed by final determinations to be made four to nine months thereafter. Final determinations have so far been made in four investigations. The number of investigations is rising as Chinese industry has become more familiar with antidumping protection and as the investigative authorities responsible for injury determinations have become more efficient at processing applications despite thin staffing. According to foreign diplomatic sources, some 75 additional applications are awaiting action.
There have been notable improvements in administrative procedure since China's antidumping regulations first took effect. For example, in what were rare moves for Chinese regulators, first SETC and then MOFTEC promulgated regulations on evidentiary hearings in 2000, allowing interested parties to present oral testimony to the investigative authorities.
Nevertheless, experience to date indicates that serious deficiencies remain in the administration of China's antidumping regulations. In particular, respondents are not given sufficient opportunity to see all relevant information. Much information is protected by the applicant under confidentiality shields that so far have been immune to challenge. The investigative authorities also have tended to accept the allegations in the application at face value without a sufficiently detailed explanation of the rationale underlying their determinations. These deficiencies have overwhelmingly been to the advantage of domestic applicants at the expense of foreign respondents and procedural fairness, and are inconsistent with the WTO Antidumping Agreement. As such, they have made antidumping applications even more popular among domestic industries than would otherwise have been the case.
< b>Antidumping, China, and the WTO
Although antidumping actions are inevitably motivated by protectionist sentiments, unfair procedures risk impairing China's trade relations. For example, according to the WTO Antidumping Agreement, antidumping procedures must provide for administrative, arbitral, or judicial review. China has committed to institute judicial review in conjunction with its pending WTO accession, but has not yet done so, nor is it clear how independent or capable such review will be. China has, however, submitted the required action plan to the WTO's working party on China's accession that details the steps China will take to bring its antidumping laws and regulations into conformity with WTO rules as of the date of accession.
What changes will China be expected to make? First and foremost, China will have to provide for a much higher level of transparency in the application of its antidumping regulations. In other words, even though China's regulations include terms and provisions that closely resemble their international counterparts, in practice China's investigative authorities apply definitions and regulations much more loosely and without sufficient disclosure. Foreign producers and exporters are thus unable to present adequate responses to antidumping complaints.
The investigative authorities will have to make more adequate disclosures about their decisionmaking rationale after China becomes a WTO member. Subject to confidentiality conditions, Chinese authorities should be required to disclose fully to interested parties the evidence on which they determine injury and causation and the basis for calculating dumping margins. Failure to make adequate disclosures handicaps interested parties' efforts to present evidence to counter arguments. It also creates the appearance of partiality when a determination or margin does not appear justified by the evidence on the record.
China's antidumping regulations do not yet provide a forum for the review of administrative actions by the investigative authorities. Thus, there is no way to review determinations as to the existence of injury and causation or the calculation of dumping margins. The WTO Antidumping Agreement requires that an independent judicial, arbitral, or administrative tribunal be maintained for this purpose. As discussed above, China has committed to establish such a judicial tribunal, but it is unclear whether such a tribunal will have the independence, competence, and capacity to perform its review functions.
China may also have to correct a number of other shortcomings in its antidumping practices to comply with the WTO Antidumping Agreement. For example, the investigative authorities have so far tended to accept at face value the definition of "like product" (produit similaire) presented by the applicants without regard for market-recognized distinctions in quality, composition, and grade, among other criteria.
Although the WTO Antidumping Agreement requires that imports from all countries be aggregated, regardless of whether those countries are WTO members, China has so far permitted applicants to omit imports from politically inconvenient jurisdictions, most notably Taiwan. This deficiency presumably will be corrected after Taiwan joins China in the WTO, but in the interim it gravely disadvantages exporters from other countries.
Safeguard rules on the horizon?
Antidumping duties are not the only regulatory barrier to trade. The WTO Agreement on Safeguards allows for tariff increases and other measures to deter imports of products in high quantities and under other conditions that cause or threaten serious injury to a domestic industry producing competitive products. For example, Japan and South Korea recently imposed safeguard measures on Chinese exports of garlic and other agricultural products.
Although authorized under its Foreign Trade Law, China has yet to promulgate safeguard regulations. Given China's promulgation of antidumping regulations to protect domestic industry, the lack of safeguard regulations to date is somewhat surprising. China has thus far deprived itself of an internationally accepted shield against import surges. However, pre-WTO China also has been free to retaliate in a disproportionate manner when its trading partners invoke safeguards against Chine se imports--as in the spring 2000 suspension of hundreds of millions of dollars in South Korean imports in retaliation for South Korea's massive tariff increases on imported Chinese garlic--and may do so against other trading partners. After its WTO entry, however, China will be required to abide by WTO's detailed procedures governing consultations and dispute resolution with respect to safeguards. Given the problems associated with China's antidumping regulations, it is particularly important that China establish and apply fair procedures under its pending safeguard regulations.
A permanent feature for exporters to China
Foreign producers of commodities must take antidumping regulations into account when exporting to China or deciding whether to export or to establish a manufacturing base in the country. Several Chinese industries have made effective use of their country's antidumping regulations to protect and expand their share of the domestic market, even at the expense of their customers in China.
Procedures have so far unfairly favored applicants for domestic protection. China will be obligated, as a WTO member, to reform and strengthen substantially its investigative authorities and create an impartial judicial review tribunal to make its antidumping procedures fairer for all interested parties. Such a high degree of fairness should be instituted from the outset in China's pendi ng safeguard regulations.
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