Aplicação de medidas antidumping a produtos chineses

1 December 2007

The Protocol of Accession of China to the World Trade Organization (WTO) allows other Members of the Organisation to treat it as non-market economy until 2016. Thus, a specific methodology is applied in the calculation of dumping by Chinese companies, except if otherwise provided in bilateral agreements. Accordingly, in 2004, China and Brazil signed a Memorandum of Understanding whereby the Brazil grant China market economy status. This rule, however, has not been applied in practice, forcing Chinese manufacturers to prove - case by case - the free status of the market sector in which they operate.

Access China's WTO and anti-dumping proceeding

The admission of China to the WTO implied acceptance by that country of all terms of the treaties making up the Marrakesh Agreement, including the Antidumping Agreement.

Antidumping always been a topic of great relevance to China. Before joining the WTO, it was very difficult for the country to defend itself from numerous other wrongdoings by the evaluation and implementation of barriers in importing their products. Currently, China can utilize the procedures of the WTO agreements and the dispute settlement system of the Organization to resolve trade issues with their partners and protect their interests, which is also valid for the investigative processes of dumping.

Dumping is defined as selling a product on the market of another country by a lower than normal amount actually charged on the domestic market of the country in which the product was produced without taxes, demand and price for independentes1 buyers. If this practice causes harm to the domestic industry of the buyer country, anti-dumping duties may be imposed on imports of the product to eliminate the price difference. The direct application of antidumping, however, can only be performed after an investigation that proves the actual occurrence of dumping, injury to the domestic industry and causal link between the practice of dumping and injury sofrido2.

Evidence of dumping occurs by comparing the export price for the country hampered the normal price in the domestic market of the exporting country. However, if the investigated country is not considered as a market economy, normal value will be determined based on the price of the like product in a third country, or even based on the price paid or payable for the product in the domestic market of a third country.

As production conditions differ from one country to another, there is scope for manipulating the outcome of the assessment of dumping. As a result, hardly a country considered as a planned economy will emerge victorious in a dispute involving dumping, since it will inevitably be proven when comparing prices for anything similar countries.

Market economy vs. planned economy

To differentiate one country from one that is not the market economy, it is necessary to first analyze the concepts of "market economy" and "planned economy", which is not a simple task, since the legislation itself antidumping applicable not define them.

The term "market economy" is used to conceptualize the economic system in which the production and distribution of goods and services occur via a free-market mechanism, driven in turn by a system of free prices. This means that in a market economy, businesses and consumers decide of their own volition, what to produce and what to consume. This reality is often contrasted with a planned economy, in which transactions do not follow the principles of cost structures or price and there is massive government intervention in price formation.

Although there is a conceptual distinction between the terms "market economy" and "planned economy", the determination of which countries fall into each concept is not so simple and depends on a careful analysis. Are thus numerous countries - including those with the status of a market economy - in which the state plays an important role in business regulation.

Condition for China's accession to the WTO: status of planned economy

Upon entering the WTO, China undertook to liberalize its market, in order to integrate the multilateral trading system. The Access Protocol to the WTO, however, did not recognize China as a market economy immediately. On the contrary, Article 15 (a) of the Protocol provides that States may use both the methodology applied to countries with a market economy as the methodology applied to countries that are not, in cases of dumping investigation involving Chinese products .

The same Article 15, however, in its subsection (d) provides that this power will last for 15 years from the date of accession of China to the Organization, which runs until December 11, 2016. Another possibility allowed by the Protocol is that WTO Members alone recognize China as a market economy through domestic legislation.

Anti-dumping measures imposed on Chinese goods: the case of Brazil

On November 12, 2004, Brazil granted China the status of market economy - which is speculated to have been a consideration for investments made in Brazil and privileges of access to the Chinese market. Article 1 of the Memorandum of Understanding signed between the two countries declared: "Brazil recognize the market economy status to China." Indeed, such recognition occurred in the political sphere but, operationally, nothing has changed. The Brazilian government requires that China fulfills all commitments made in the Memorandum for sos then regulate the recognition of the country as a market economy.

Although there understandings against the need for regulation of the Memorandum, the government argues that this should first be reviewed and approved by the Foreign Trade Chamber (CAMEX) 3 to produce any effect on the application of trade defense measures. Still, for such effects to be produced at the WTO after the processing of internal legal validation of the decision, it should be notified to this organization.

When recognition is formalized, Brazil will be barred from claiming that China has a controlled economy. This fact, however, does not deprive the country's entitlement to file complaints against any unfair or illegal trade practices committed by Chinese producers.

Under Article 15 (d) of the Access Protocol China's OMC4 when said Memorandum is regulated, the methodology for determining normal value applied to countries not considered market economies investigations of dumping can not be applied to China, which will impact directly on the form of application of trade defense mechanisms. In practice, the whole procedure for obtaining the normal value of products imported from China in antidumping proceedings will be changed, which leads to the need to use the value of products in the Chinese market.

For this methodology to be used effectively, however, it is necessary that Chinese producers and exporters manifest it in procedures dumping investigation initiated by the Department of Trade Protection (DECOM), respond to questionnaires and submit supporting documentation of prices . If DECOM understand that the values ​​are not consistent with reality, these can then be disregarded.

The problem which is the fact CAMEX have not formalized the recognition of China as a market economy. Thus, DECOM still considers the country as non-market economy and applies the methodology prescribed in Decree No. 1.602/1995 to verify the occurrence of dumping on imports of Chinese products, ie, normal value is determined based the price of the like product in a third country market economy or based on the price paid or payable for the product in the domestic market of a third country.

To evade this disadvantage status, Chinese companies must prove they operate in an industry in which market conditions prevail. SECEX Circular No. 59/2001, article 3.1.2, allows producers, exporters or their government non-market countries present evidence that the investigated sector operates according to free market rules. In this case, the normal value shall be based on the price charged in the domestic market of the country investigated, in accordance with Articles 5 and 6 of Decree 1.602/95.

To evaluate the existence of conditions of market economy, Article 3.3 of Circular SECEX No. 59/20015 has the following criteria: a) degree of government control over businesses or means of production, b) level of state control over the allocation of features, pricing and production decisions of firms c) applies in respect of the ownership, investment, taxation and bankruptcy d) extent to which wages are determined freely in negotiations between employers and employees, e) degree to which distortions persist inherited from the centralized economy system concerning, among other things, the amortization of assets, other deductions from active, direct exchange of goods and payments in the form of clearing debts and f) level of state intervention on foreign exchange transactions.

However, as the burden of proof is the producers, exporters and foreign government if these fail to clearly demonstrate the prevalence of conditions of a market economy in its industry, the analysis of the normal price for investigation of dumping will not be performed with Based on the price in your market, but, subrogation of a third country, which usually has no similarity with China.

For a reassessment of market conditions is performed, producers should respond to questionnaires sent by DECOM and forward information to enable obtaining the normal value and export price practiced in China. Once obtained complete responses, the information may be subject to spot check, depending on the provisions of art. 30 of Decree 1.602/95. Where information is considered incomplete, determinations based on "best available information" may be made.

Final Thoughts

Although China is a WTO Member, it is not considered a market economy (NME). Although Brazil was the 23rd country to grant China market economy status, the Brazilian government argues that this award has no effect because there is no regulation of CAMEX this direction. The only way to escape the Chinese companies that prove disadvantageous treatment is operating in an industry in which market conditions prevail.

Given this context, it can be concluded that although China's accession to the WTO has not guaranteed full equality of treatment between that country and the other Members of the Organisation in relation to the application of antidumping measures, Access Protocol itself enables Chinese companies require the application of the same treatment granted to firms from market economies.

For Brazil, however, the effective grant more favorable treatment to Chinese companies is questionable due to possible bureaucratic obstacles imposed on these by the Brazilian authorities.

Anelize Slomp Aguiar's lawyer, holds a Law Degree UNICURITIBA, Bachelor in Business Administration and Foreign Trade UFPR and specialist Business Contracts UFPR.

1 Goyos JUNIOR, Durval de Noronha. The WTO and the Uruguay Round Treaties. Sao Paulo: Legal Observer Publishing, 1995, p. 77.

2 Goyos JUNIOR, Durval de Noronha, Goyos. Treaty of Trade Protection: antidumpingdumping, countervailing and safeguards. Sao Paulo: Legal Observer, 2003, p. 6.

3 Decree No. 4,732, of 10.06.2003.

WT/L/432 4, p. 10. (WTO).

5 SECEX Circular No. 59, dated 28.11.2001, art. 3.3.

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