In a detailed judgement, a WTO disputes panel has upheld most complaints made by the USA that China had ignored the 2013 ruling, breaching the trade body’s anti-dumping agreement and its subsidies and countervailing measures agreement. If China does not comply with this latest ruling, the US will be able to request that it can impose WTO-approved retaliatory duties on Chinese exports, compensating it for the loss of poultry sales caused by these unfair trade practices.
This dispute has been ongoing since 2011, and the USA – with China – had earlier agreed that the instructions from the 2013 ruling would be implemented by 2014. However, Washington later complained that China had used creative technical ploys to evade reducing its protective duties. This led to a second compliance dispute and a panel has been examining the US claims since 2016.
“The panel… upheld most of the US claims,” said a WTO note. It found against China, for instance, for failing to explain why it used a complicated methodology for valuing chickens – using different systems for different parts of the bird. Under WTO rules, while such complex systems are allowed, an importing country has to explain clearly why it is doing this. That did not happen in this case.
China’s ‘flawed analysis’
Another problem was that China also continued to use a flawed system for assessing whether American exporters were selling poultry into China at below cost price – a key prerequisite for imposing anti-dumping duties. Beijing had compared import prices and those for domestically produced chicken. However, it used different product mixes for these calculations “without taking any steps to control for differences in physical characteristics affecting price comparability or making necessary adjustments”, said the WTO. Rather than overhauling this system, China simply made more calculations based on different companies – so the problem persisted: “Its price suppression analysis was undermined by a flawed analysis of price undercutting,” said the WTO ruling. China’s Ministry of Commerce also broke WTO rules by failing to supply the US with sufficient information about these new calculations.
That said, US claims were rejected: for instance, the US argued that China should have allowed American exporters that had not registered for the original investigation to participate in new Chinese anti-dumping and countervailing assessments. The WTO disagreed with that, but having upheld the bulk of the American claims, it will be tough for Beijing to avoid retaliatory duties if it does not lower its chicken market protection.