China's New Anti-dumping Rules: Battleground for A New Protectionism?

By Patrick Norton & Kermit Almstedt, O'Melveny & Myers

On January 1 2002, China began to reduce its tariff duties in accordance with its WTO entry commitments.  On the same day China's new PRC Anti-dumping Regulations(中华人民共和国反倾销条例) ¹ (the New AD Regulations) entered into force.  These two events promise to create one of the more interesting battlegrounds on which the practical implications of China's WTO entry will be fought out.

Many Chinese industries will be unable to compete with imported products when the protective barriers of pre-WTO tariffs are lowered and other WTO requirements facilitate the entry of foreign competitors into the Chinese market.  Anti-dumping measures are among the few defences available to injured domestic industries under WTO rules, and domestic industries in other WTO member countries have, accordingly, seized on those rules to try to protect themselves.  It is only reasonable to expect that China's industries will do the same. 

The resulting battles will be fought on two levels.  First, Chinese industries will petition the Chinese government to investigate alleged dumping by their foreign competitors.  China's New AD Regulations define the terrain on which these battles will be fought.  Second, China's anti-dumping rules and practices must now conform to China's obligations under the WTO Anti-dumping Agreement.2  If foreign governments believe China has failed to meet those obligations, they may take China to compulsory WTO dispute resolution procedures in Geneva.

CHINA'S ANTI-DUMPING PRACTICE TO DATE

China initiated an anti-dumping programme in its 1994 PRC Foreign Trade Law (中华人民共和国对外贸易法),³ which authorized Chinese governmental authorities to impose "counter-measures" against foreign products imported at less than their "normal value" if those imports "substantially injured" a domestic industry.  The 1997 PRC Anti-dumping and Anti-subsidy Regulations ⁴ (the Old AD Regulations) supplemented the Foreign Trade Law.  The terminology of both the Foreign Trade Law and the Old AD Regulations tracked the WTO Anti-dumping Agreement quite closely in many respects in anticipation of China's accession to the WTO. 

As of January 1 2002, Chinese authorities had initiated 12 investigations under the Old AD Regulations.  Final determinations had been rendered in six cases, a preliminary determination had been rendered in a seventh case and the remaining five cases were at preliminary stages.  Eight investigations involved chemical imports, two involved steel imports, one newsprint and one polyester.  Each investigation was typically addressed to imports from more than one country.  Nine of the 12 involved imports from Korea, four each imports from Japan or the United States, and a broad range of European and Southeast Asian countries were involved in one or more. 

Chinese authorities have imposed anti-dumping duties on foreign importers in five of the six cases decided to date.  The sixth case, decided in early December 2001, was dismissed because the Chinese industry had failed to prove that its injuries were being caused by the imports.5  Preliminary duties have been imposed in a seventh case.  The duties imposed have varied widely, from a determination of no dumping by one Russian steel importer to rates of 70% or more for foreign companies in other cases.