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New Legislation Would Require Congress to Approve any Changes to Mainland China’s NME Status

Legislation recently introduced in the House of Representatives by Rep. Rosa DeLauro (Democrat-Connecticut ) and in the Senate by Sen. Al Franken (Democrat-Minnesota) would require Congress to consider and approve any action by the U.S. Department of Commerce to grant market economy status to mainland China within the context of U.S. AD and CV duty investigations. If the legislation is approved and signed into law by the president, any future determination by the DOC that mainland China no longer meets the requirements of a non-market economy would have to be green-light by Congress by means of a joint resolution issued within 45 days from the date of receipt of any such determination. Such a process would make it much more difficult for mainland China to gain market economy status in the United States anytime soon because any lawmakers voting in favour would likely be portrayed as being soft on trade enforcement and unsympathetic to the concerns of domestic manufacturers and workers.

As previously reported, a provision in mainland China’s protocol of accession to the WTO allows members of that organisation to use calculations in AD proceedings that are not based on the actual costs of mainland Chinese producers if the producers cannot demonstrate that market economy conditions prevail in their industry. The United States and others have used that provision to automatically assign NME status to goods imported from mainland China, which typically results in higher AD duties than would otherwise be the case. However, the protocol of accession provides for the expiration on 11 December 2016 of a WTO country’s ability to “use a methodology that is not based on a strict comparison with domestic prices or costs in mainland China if the producers under investigation cannot clearly show that market economy conditions prevail in the industry producing the like product with regard to manufacture, production and sale of that product.”

Mainland China contends that as of 11 December 2016 WTO members will have to stop using NME-type methodologies altogether with respect to mainland Chinese goods. However, the United States and others maintain that they will be able to continue to be allowed to use such methodologies after 11 December 2016 if the petitioners can clearly show that market economy conditions do not prevail in the industry at issue.

Rep. DeLauro stated in a 14 April press release that according to the bi-partisan U.S.-China Economic Security and Review Commission the mainland Chinese government continues to use non-market tactics to create barriers to investment and subsidise state-owned enterprises. She added that intellectual property theft and cyber-theft of trade secrets continues largely unabated in the mainland and argued that a change in mainland China’s NME status would have a “devastating impact” on domestic manufacturers because it would give “numerous benefits” to mainland China while “muting critical antidumping and countervailing duty defences designed to offset China’s unfair practices.”

Content provided by Picture: HKTDC Research
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