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B Developing Countries Are Victims of Anti-Dumping Regime.
According to table 2 (Appendix A), products exported from the European Community or its Member States were the subject of the most anti-dumping investigations initiated during the year (32), followed by products exported from China (30), the Republic of Korea (23), Indonesia (15), Chinese Taipei (13), Thailand (12), India, Japan, and Russia (11 each), and the United States (10). 33 developing countries or regions, EC and other 4 developed countries were affected. 180 out of 236 cases were against developing countries, accounting for 76.2% of total cases. Relative to the share of world trade of developing countries, the proportion was very high. Definitely developing countries were victims of anti-dumping measures. The trend that an increasing number of large developing countries joined the anti-dumping club didn’t change the vulnerable situation of developing countries. In a sense, this made things worse than before because those new anti-dumping users mainly targeted other developing countries.(16)
Why are developing countries easily targeted?
First, export-oriented economy is easy to cause trade disputes. Because positively engaging in export is the shortcut to develop the domestic economy (Japan and South Korean are good examples)(17) , many developing countries adopted export-oriented policy. As a result, their economies are more dependent on foreign trade than developed countries and unsurprisingly there are lots of frictions between developing countries and developed countries.
Second, the prices of exports from developing countries are extremely low. Because the labour force is much cheaper than in developed countries, costs of products are understandably low. In addition, products from developing countries are usually not well decorated and designed, to some extent, which affect to raise prices. In contrast, those labour-intensive industries in developed countries are sunset industries. They are far less competitive than other knowledge-based industries. Prices of those products in domestic markets are unreasonably high. All of those elements are easy to draw domestic industries and authorities’ attention.
III NON-MARKET ECONOMY (NME) REGIME MAKES A LARGE NUMBER OF DEVELOPING COUNTRIES TARGETS OF ANTI-DUMPING.
According to WTO agreements, there are two forms of dumping. One is price dumping by which the exporter sells its products to the importing country at lower prices than in the home market. The other is cost dumping by which the exporter sells its products to the importing country at below cost prices. However, the third form of dumping de facto exists(18) . During the period of 1 January 1995 to 31 December 1998, 47 out of 141 company-specific determinations were from NME investigations in the U.S.(19) . It is clear that NME play an important role in the whole antidumping regime. WTO agreements don’t give a clear definition of “non-market economy”. The only source is the second interpretative Note to Article VI of the GATT (20)
It is recognized that in the case of imports from a country which has a complete, or substantially complete, monopoly of its trade and where all domestic prices are fixed by the State, special difficulties may exist in determining price comparability and in such cases importing contracting practices may find it necessary to take into account the possibility that a strict comparison with domestic prices in such a country may not always be appropriate.”
The purpose of this statement is to properly determine export prices and normal value of the imported products from those countries where economies are seriously planned by their states. There are two preconditions which should be satisfied if NME regime is applied:
1. The country concerned has a complete, or substantially complete, monopoly of its trade; and
2. In the country all domestic prices are fixed by the State.
However, both US law and EC legislation on this issue stretch the application of non-market economy treatment. According to US legislation(21) , there are 6 principles to determine non-market economy country: (1) convertibility of currency, (2) extent to which wage rates are set by the market, (3) extent to which foreign investment and joint ventures are permitted, (4) extent of government ownership and control of production, (5) extent of government control of resources, and (6) other factors deemed appropriate. EU has got the similar regulations.(22)
It can be clearly seen that the US legislation is not strictly consistent with the AAD 1994. Even the legislation itself gives too much leeway to the authorities. This puts almost all reforming NME countries under its jurisdiction. Countries like China are building their economies on the market-oriented base, but there are still non-market remains, for instance, currency is not completely convertible. Nevertheless, they are not well fitted into the second interpretative Note to Article VI of the GATT 1994 since the state monopoly of trade has been destroyed and the prices are basically based on the market.(23) Greg Mastel advocated for the US legislation that there are no purely nonmarket countries and that despite reforms are under way in those countries, it is still not possible to determine the prices and costs properly due to incomplete reforms.(24)
A Margins of Dumping Are Exaggerated by Reference to a Surrogate Country.
Basically if the importing country authorities want to establish the antidumping charge they will first consider if the imports are priced at less than their price in the home market.(25) If there are no sales or low volume sales in the domestic market which do not permit a proper comparison, the margin of dumping will be referred to the price in a third country where the like products are import from the exporting country in question.(26) If the above cannot be determined, the margin of dumping will be based on the gap between the import price and the cost of production.(27)
When a country is regarded as a non-market economy the importing country authorities will not consider above methods to determine the margin of dumping. They determine the normal value by reference to a surrogate country where market economy is established and its development level is similar to that of the exporting country(28) . It gives the authorities a lot of discretion to choose an appropriate country as a reference. It is not surprising that the United States has been most frequently chosen by the EC institutions as a surrogate country for the determination of the normal value of Chinese imports(29) . Because the domestic markets are highly protected and the prices of some products are extremely high, countries like India and Sri Lanka are also chosen as ideal surrogate countries. The most ridiculous case is paint brushes case(30) . Sri Lanka was chosen as the analogue country since two relative companies of complaining party were willing to cooperate with the authorities. As a matter of fact, the paint brushes in Sri Lanka were monopolised by the two companies and thus the normal value of paint brushes established for Sri Lanka was higher than the price on the EC market. In this case, the European Court of Justice annulled the anti-dumping measures imposed on imports from China on the grounds that the choice of the surrogate country was inappropriate.
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