EUROPEAN UNION – MEASURES RELATED TO PRICE COMPARISON METHODOLOGIES REQUEST FOR CONSULTATIONS BY CHINA
Document: REQUEST FOR CONSULTATIONS BY
Date: 15 December 2016
Document codes: WT/DS516/1; G/L/1170; G/ADP/D116/1
Complainant: China
Respondent: EU
Third parties: Australia, Bahrain, Brazil, Canada, Colombia, Ecuador, India, Indonesia, Japan, Kazakhstan, South Korea, Mexico, Norway, Russia, Saudi Arabia, Taiwan, Tajikistan, Turkey, UAE, U.S.
Dispute stage: Panel
Agreements cited: Art. I:1  GATT 1994Art. 2.1, 2.2  Anti-dumpingArt. VI:1  GATT 1994

EUROPEAN UNION – MEASURES RELATED TO PRICE COMPARISON METHODOLOGIES
REQUEST FOR CONSULTATIONS BY CHINA
The following communication, dated 12 December 2016 , from the delegation of China to the
delegation of the European Union and to the Chairperson of the Dispute Settlement Body, is
circulated in accordance with Article 4.4 of the DSU.

Settlement of Disputes ("DSU"), Article XXII of the General Agreement on Tariffs and Trade 1994
("GATT 1994"), and Article 17 of the Agreement on Implementation of Article VI of the GATT 1994
("Anti-Dumping Agreement").
2. This request identifies the measures at issue in Section A, and indicates the legal basis for
China's complaint in Section B.
A. Measures at issue
3. The measures at issue in this request include Articles 2(1) to 2(7) of Regulation (EU)
2016/1036 ("the Basic Regulation ").1 Articles 2(1) to 2(6) of the Basic Regulation set out rules in
EU law for determining normal value in anti -dumping proceedings. Article 2(7) of the Basic
Regulation sets out a different regime that applies to the calculation of normal value for import s
from so-called "non-market economy" countries. Article 2(7)(b), which expressly names China,
provides that the rules set forth in Articles 2(1) to 2(6) for calculating normal value for a specific
producer shall apply only if that producer is able to sub stantiate that so-called "market economy"
conditions prevail in respect of the manufacture and sale by that producer of the like product
concerned. To do so, the producer must establish that it meets the criteria set out in
Article 2(7)(c). Article 2(7)(b) provides that, for all producers unable to make this showing, the
normal value calculation rules set forth in Article 2(7)(a) shall apply. Under Article 2(7)(a), normal
value shall be determined on the basis of prices or constructed value in a surrogate
"market-economy" third country.
B. Legal basis of the complaint
4. When China acceded to the WTO, China and other WTO Members agreed that, for a
transitional period of fifteen years, China -specific treaty provisions would apply to the
determination by other Membe rs of certain elements of "price comparability" in anti -dumping
proceedings involving Chinese imports. Specifically, under paragraph 15(a)(ii) of the Protocol on
the Accession of the People 's Republic of China ("Accession Protocol"), importing WTO Members
were, subject to certain conditions, exceptionally permitted to use a methodology not based on a
strict comparison with domestic prices or costs in China. Paragraph 15(d) provides that "[i]n any

1 The full title of the Basic Regulation is: Regulation (EU) 2016/1036 of the European Parliament and of
the Council of 8 June 2016 on protection against dumped imports from countries not members of the European
Union, published in the Official Journal of the European Union, L 176, 30.6.2016, p. 21. The Basic Regulation
was preceded by Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped
imports from countries not members of the European Community, published in the Official Journal of the
European Union, L 343, 22.12.2009, p. 51.
WT/DS516/1 • G/L/1170 • G/ADP/D116/1

event, the provisions of subparagraph (a)(ii) shall expire 1 5 years after the date of accession ",
namely, on 11 December 2016. Accordingly, from that date, the WTO rules that govern the
determination by WTO Members of all elements of price comparability now apply to imports from
China. However, the European Union continues to determine normal value on the basis of a
special calculation methodology unless the producer establishes that it meets certain criteria, as
set forth below. Thus, the European Union is in violation of its international obligations.
5. Specifically, following the expiry of paragraph 15(a)(ii), China i s concerned that:
(i) Articles 2(1) to 2(7) of the Basic Regulation are inconsistent with Article I:1 of the GATT 1994,
and (ii) Article 2(7) is inconsistent with Articles 2.1 and 2.2 of the Anti-Dumping Agreement ,
Article VI:1 of the GATT 1994, and the second paragraph of the Ad Note to Article VI:1 of the
GATT 1994 (the "Ad Note").
6. Articles 2(1) to 2(7) of the Basic Regulation provide for differential treatment of Chinese
imports, as compared to imp orts from other WTO Members. Specifically, in contrast to the
treatment afforded imports from other WTO Members, Chinese imports are denied the advantage
of the rules set forth in Articles 2(1) to 2(6) regarding the determination of normal value, and
instead face the less favourable rules set forth in Article 2(7), unless Chinese producers satisfy a
requirement in Article 2(7)(b) to demonstrate that "market economy" conditions prevail. As a
result, the European Union denies Chinese imports an advantage tha t is enjoyed by imports from
other WTO Members, contrary to Article I:1 of the GATT 1994. This differential treatment ceased
to be justifiable when paragraph 15(a)(ii) of China 's Accession Protocol expired on
11 December 2016.
7. Article VI:1 of the GATT 1994 provides that normal value is normally to be determined
based on domestic prices of the like product or, in the absence of such prices, prices for export to
a third country or prices constructed from the costs of production in the country of origin.
Likewise, Article 2.1 of the Anti-Dumping Agreement provides that normal value is normally the
price for the like product when sold, in the ordinary course of trade, in the home market of the
producer/exporter; Article 2.2 of the Agreement provides for departu re from home market prices
in certain circumstances. Articles 2.1 and 2.2 of the Anti-Dumping Agreement and Article VI:1 of
the GATT 1994 prohibit the determination of normal value on the basis of third country prices
and/or costs; doing so is inconsisten t with the obligation under these provisions to, inter alia ,
determine normal value on the basis of domestic prices or on the basis of a producer 's costs of
production in the country of origin. Article 2(7) of the Basic Regulation is inconsistent with
Articles 2.1 and 2.2 of the Anti-Dumping Agreement and Article VI:1 of the GATT 1994 because,
when a producer does not satisfy the requirement in Article 2(7)(b) to demonstrate that "market
economy" conditions prevail pursuant to the criteria in Article 2(7)( c), Article 2(7) improperly
requires the EU investigating authority to reject Chinese market prices and costs when calculating
normal value in favour of third country prices and costs.
8. The only exception to the rule in Articles 2.1 and 2.2 of the Anti-Dumping Agreement and
Article VI:1 of the GATT 1994 is found in the Ad Note, which permits a Member to depart from a
strict comparison with domestic prices if the Member satisfies the two conditions set forth in the
Ad Note. Article 2(7) of the Basic Regulati on, however, requires the European Union, in defined
circumstances, to depart from such a strict comparison without satisfying the relevant conditions
in the Ad Note. In particular, Article 2(7) does so when a producer does not satisfy the
requirement in Article 2(7)(b) to demonstrate that "market economy" conditions prevail.
9. The treatment afforded Chinese imports under Article 2(7) of the Basic Regulation ceased to
be justifiable when paragraph 15(a)(ii) of China's Accession Protocol expired on 11 December 2016
and is inconsistent with the WTO covered agreements.
10. As a result of the foregoing, the measures at issue appear to nullify or impair benefits
accruing to China directly or indirectly under the cited agreements.
11. This request for consultations also concerns any modification, replacement or amendment to
the measure identified above, and any closely connected, subsequent measures.2

2 At present, China is aware of two legislative processes implicating potential changes to relevant
provisions of the Basic Regulation: (i) the legislative process initiated by the European Commission's Proposal
WT/DS516/1 • G/L/1170 • G/ADP/D116/1

12. China looks forward to receiving a reply from the European Union to this request, and to
fixing a mutually convenient date for consultations.

for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1036 on
protection against dumped imports from countries not members of the European Union, dated 9 November
2016 (COM(2016) 721 final); and, (ii) the legislative process initiated by the European Commission's Proposal
for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No
1225/2009 on protection against dumped imports from countries not members of the European Community
and Council Regulation (EC) No 597/2009 on protection against subsidised imports from countries not
members of the European Community (COM(2013) 192 final). This request includes any changes made to the
Basic Regulation pursuant to the legislative processes initiated by these proposals.