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2 Global Trade & Cust. J. 265 (2007)
EU Treatment of Non-Market Economy Countries in Anti-Dumping Proceedings, The

handle is hein.kluwer/glotcuj0002 and id is 287 raw text is: ARTICLE The EU Treatment of Non-Market Economy Countries in Anti-dumping Proceedings Helena Detlof* and Hilda Fidh* This article first looks at the system of differential treat- ment of so-called non-market economies (NMEs) in anti-dumping proceedings. It finds that apart from questionable idea that NMEs are fundamentally different from 'market economies' as concerns the amount of hidden subsidies (publicly financed goods and services) present in those markets, there is no coherent theory of what the problem with 'non- market economies' is in international trade. Neither is there a coherent idea as to how the system of dis- criminating against them in anti-dumping proceeding alleviates this problem. Second, the article examines empirically the EU treatment of NMEs in a number of recent cases. We find that on average, anti-dumping duties against those companies granted market economy treatment (MET) is 28 percentage points less than for those companies not granted MET. State interference and carry-overs from the NME system are the most common reasons for the EU not to grant MET to the applicant. When a company is found to benefit from some kind of carry-over from the NME system, no quantification of the size of the benefit (or 'subsidy') is made. Third, the article briefly discusses novel methods to assign anti-dumping duties to companies in NMEs used by the EU in two recent cases involving leather shoes and plastic bags. I. INTRODUCTION In April 2006 anti-dumping duties on imports of leather footwear from China and Vietnam were intro- duced in the EU. According to the official press release from the European Commission, 'The measures follow a preliminary Commission investigation that has identified clear evidence of disguised subsidies and unfair state intervention to the leather footwear sector in China and Vietnam'. Cheap finance, tax holidays, non-market land rents, improper asset valuation and export incentives where listed as examples of unfair state intervention. The press release caused confusion among media and the public. Nowhere was it explained how 'subsi- dization' is supposed to cause dumping. Dumping was being portrayed as a matter not of 'unfair trade' but of 'unfair subsidization'. A plain explanation of the system of non-market economy treatment would have helped greatly. The general confusion in the reporting of the recent shoe case clearly illustrates the lack of a coherent understanding of the concepts of 'non-market eco- nomies', dumping and subsidization, and the inter- relationship between these concepts. In the light of this, this study seeks to explore the origins of the non-market economy treatment of certain countries in anti-dumping proceedings. In this study, we take a deeper look into the area of special conditions regard- ing non-market economies (NMEs) in anti-dumping investigations and analyse to what extent the pro- blems that NMEs are believed to cause in world trade, are successfully tackled by the system of NME treatment in anti-dumping proceedings. The GATT foresees that there could be difficulties in conducting anti-dumping investigations involving a 'country which has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State'. The origin of this provision is of course the situation of 'state trading' common in Soviet-bloc economies. Even though practically no countries today can be defined as state trading countries some users of the anti-dumping instrument still apply special rules for exporters in countries classified as non-market economies. The article is concerned with the way dumping is defined for exports from countries classified as non- market economies. The first section of this article pro- vides an economic and historical background to the system of non-market economy treatment of certain Global Trade and Customs Joumal Volume 2, Issue 7/8 C 2007 Kluwer Law Intemational * Analysts, National Board of Trade, Sweden. Comments and errors are the sole responsibility of the authors. This article is a short version of a previous National Board of Trade paper. Comments are welcome; please contact hilda.fridh@foreign.ministry.se 265

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