WTO Chokes China’s Chicken (Import Duties)

August 4, 2013

The post title, lame as it is, represents the sum total of all levity I can bring to this topic. This issue is about as dry and tasteless as . . . well, you can see where I’m going with this.

Let’s get the facts out here as quickly as possible, then I just have a couple general comments. The panel ruling in this case seems fairly cut and dried, and the US Trade Representative’s office came out with a useful press release that is straightforward, relatively free of spin, and quotable.

To wit:

On September 27, 2009, China’s Ministry of Commerce (MOFCOM) initiated antidumping and countervailing investigations of imports of so-called “broiler products” from the United States.  Broiler products include most chicken products, with the exception of live chickens and a few other chicken products such as cooked and canned chicken.  MOFCOM imposed antidumping and countervailing duties on these products on September 26, 2010 and August 30, 2010, respectively.

In the CVD investigation, MOFCOM imposed countervailing duties ranging between 4.0 percent and 12.5 percent for the participating U.S. producers and an “all others” rate of 30.3 percent.

Side note: the obvious lesson to anyone finding themselves subject to these types of duties is to get involved. Yes, it’s expensive, but sitting back passively results in much higher penalties.

So, the result? The U.S. pretty much won on its points across the board, with the panel finding that China violated WTO rules by:

  • Levying countervailing duties on U.S. producers in excess of the amount of subsidization;
  • Relying on flawed price comparisons for its determination that China’s domestic industry had suffered injury;
  • Unjustifiably declining to use the books and records of two major U.S. producers in calculating their costs of production; failing to consider any of the alternative allocation methodologies presented by U.S. producers and instead using a weight-based methodology resulting in high dumping margins; improperly allocating distinct processing costs to other products inflating dumping margins; and allocating one producer’s costs in producing non-exported products to exported products creating an inflated dumping margin;
  • Improperly calculating the “all others” dumping margin and subsidy rates;
  • Denying a hearing request during the investigation;
  • Failing to require the Chinese industry to provide non-confidential summaries of information it provided to MOFCOM; and
  • Failing to disclose essential facts to U.S. companies including how their dumping margins were calculated.

Comments: I’m happy to see any ruling that hits back against anti-dumping, which is frequently protectionism in disguise. This is also further evidence of the “normalization” of US-China trade relations and China’s integration into the global trade system.

What I mean by that is that most countries screw around with anti-dumping, and the WTO is supposed to be the forum to deal with excesses, and such rulings (provided that the specific ruling is justified of course) suggest that the system is working. {and there was much rejoicing}

Moreover, this isn’t the first ruling against China’s anti-dumping system that touches on transparency and methodology. One would think that eventually MOFCOM will get the hint and make some changes. If it does, it’s further evidence that the system works; if MOFCOM fails to make any changes in the face of several adverse rulings, on the other hand, this would tell us something about how Beijing views WTO and China’s role in the international trading system.

Finally, I should point out that this is one of many chicken-related trade disputes between China and the U.S. I’ve written on several of them (a keyword search of China Hearsay will take you to several posts), the most interesting being the ones related to Bird Flu and import bans.

This dispute was a big one; after China’s imposed these duties (some say in retaliation for U.S. tire duties), U.S. exporters experienced an 80% drop. That’s a lot of chicken parts, folks. Just keep in mind that there is a lot more going on behind the scenes with respect to chicken, and overall bilateral trade activity, than this case represents, and that could have an effect on the ultimate resolution of this dispute.