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The top appellate body for the World Trade Organization (WTO) ruled on Friday that the method the United States used to calculate punitive duties on certain Chinese goods violates WTO policies. The United States had imposed both antidumping and antisubsidy duties (i.e., countervailing duties) on certain Chinese imports of steel pipes, off-road tires and woven sacks. The United States argued that WTO policies allowed it to use the non-market economy method to set antidumping duties on goods from China to compensate for unfair pricing and government subsidies. WTO rules allow countries to impose anti-dumping duties on imports that are sold below fair market value, but in non-market economies it is more difficult to determine what a fair domestic price represents. The United States was imposing both antidumping duties based on a non-market economy and countervailing duties to offset government subsidies. China’s argument that it was inappropriately being double-penalized by the United States was upheld by the WTO. The U.S. must now remove some of the duties on the Chinese goods and change its duty calculation approach for future cases.

QUESTIONS FOR DISCUSSION:

  1. How is the WTO ruling likely to impact U.S. trade policy with China?
  2. Evaluate the extent to which China can make a justifiable case for receiving market-economy status from the U.S. and European Union. What would be the likely consequences for the U.S. and China if it did receive this status?
  3. One of the arguments for allowing China to become a member of the WTO in 2001 was that it was better to have China in the WTO than not. Many believe that China has enjoyed one-sided benefits of being a WTO member. With $1.6 trillion of exports in 2010, and a trade surplus of $184.5 billion, analyze the extent to which China’s membership in the WTO is beneficial to other countries.

SOURCE: Miller, J. (2011, March 12). Trade body rules in Beijing’s favor. Wall Street Journal, p. A11. (Retrievable online at: http://online.wsj.com/article/SB10001424052748703327404576194783274423052.html)

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