WASHINGTON — Tensions between the U.S. and China ratcheted up a notch on Monday after China filed a complaint at the World Trade Organization, challenging the methods used in calculating antidumping measures against its exports.
China filed the case against the U.S. and European Union, asking for dispute consultations.
The case comes as friction between the U.S. and China intensifies in the wake of a series of comments and pledges made by President-elect Donald Trump that has antagonized China.
In the latest controversy, Trump was the target of a scathing editorial in China’s state-run Global Times newspaper on Monday, after he made comments on “Fox News Sunday” suggesting that the U.S. might not be bound to a “one-China policy” that considers Taiwan as part of China and proclaiming: “I don’t want China dictating to me.”
Trump has also vowed to label China a currency manipulator in his first 100 days in office and impose 45 percent tariffs on Chinese imports.
When China joined the WTO in 2001, it agreed to allow other WTO member countries to use “surrogate” prices in antidumping cases for 15 years, as part of its accession protocol agreement. In antidumping cases, that meant that member countries could use prices from a third country to determine whether China was selling its goods below market value and subsequently assess punitive dumping duties accordingly.
But the 15-year clause expired on Sunday and China is now seeking to be treated as a market economy and challenging the U.S. and EU’s continued use of “surrogate pricing.”
“According to Article 15 of the Protocol on China’s accession to the WTO, it obligates WTO members to stop using the surrogate country approach against China’s exports as scheduled,” said Shen Danyang with the Chinese Ministry of Commerce, according to translation from his appearance on CCTV. “This is clear and out of the question and it has nothing to do with China’s so-called market economy status.”
The U.S., responding to the WTO case, said China has not made the necessary reforms to operate on market principles, a key factor behind antidumping remedies.
A U.S. trade official, speaking on the condition of anonymity, said: “The United States remains concerned about serious imbalances in China’s State-directed economy, such as widespread production overcapacity, including in the steel and aluminum industries, and significant state ownership in many industries and sectors.”
“China has not made the reforms necessary to operate on market principles. China’s WTO Protocol of Accession does not require that WTO members automatically grant market economy status to China, or discontinue use of all alternative antidumping calculation methodologies on, or after, Dec. 11, 2016,” the official added. “Consistent with its WTO obligations, the United States will continue to apply alternative antidumping methodologies, as appropriate, to ensure accurate calculations in proceedings involving China.”
The official said the U.S. will defend its right at the WTO to protect American workers and firms from the “damaging effects of persistent distortions in the Chinese economy.”
“We will continue to press China to address distortions in its economy and to implement its international commitments, including at the WTO,” the official added.
David Spooner, a partner at Barnes & Thornburg LLP and a former chief textile and apparel negotiator at the U.S. Trade Representative’s Office, previously said if China is designated a market economy, it will essentially lower the punitive dumping duties that countries can impose on Chinese imports in anti-dumping cases.
“Legally, what it means is the Commerce Department would have to use China’s prices and values to calculate the tariffs,” Spooner said. “Right now, Commerce declares China a non-market economy because it [believes] it cannot trust Chinese prices, so it uses substitute prices instead to calculate the tariff.”
China values the market economy designation for “non-economic reasons” as well, he noted.
“It’s like a Good Housekeeping seal of approval,” Spooner added.