Testing the Limits of Trade Law Rationality: The GPX Case and Subsidies in Non Market Economies
Year: 2013

INTRODUCTIONChinese merchandise has been the subject of most international trade disputes, all over the world, for several years. All of China's principal trading partners, including the United States, Japan, and the European Union, treat China as a non market economy1 (NME) applying special methodologies for determining whether Chinese enterprises are exporting merchandise at less than fair value. However, until 2006 the recognition of China as an NME meant that unfair trade allegations were based on pricing theories for antidumping, never government programs or actions unfairly subsidizing exported merchandise. The general rule was that government subsidies are countervailable only when they distort markets, and NMEs have no markets to distort.The United States began launching simultaneous antidumping duty (AD) and countervailing duty (CVD) investigations of Chinese merchandise after the November 2006 congressional elections. This change in practice inevitably triggered legal disputes that collectivized under the banner of GPX, an American importer of off the road tires (OTR Tires) from China. The U.S. Court of International Trade (CIT) and the U.S. Court of Appeals for the Federal Circuit (CAFC) were asked to decide whether CVD investigations into merchandise from NMEs were in accordance with law and, if they were, whether they could be conducted simultaneously with antidumping investigations. The United States Congress, unhappy with the decisions of the appellate court, swiftly rewrote the law. The constitutionality of the revised statute then was challenged in the same courts. SUBSIDIES, TRADE LAW, AND NON MARKET ECONOMIESA. Why GPX?This Article is about a single line of cases (identified collectively as GPX) that arose from investigations at the U.S. Department of Commerce (Commerce) were appealed to the CIT, and on to the CAFC. Decisions of those courts led to an act of Congress that was introduced and passed in record time, despite congressional paralysis on virtually all other issues, only to have the new law brought before the same courts on complaints that it is not constitutional. The CIT recently found the new law constitutional, but that decision, at the time of this writing, is not yet final and could be appealed to the CAFC. While United States courts grapple with the new law, the People's Republic of China (PRC) has taken the matter before the World Trade Organization (WTO) requesting an application of international law to the actions in the United States.The GPX cases arise from CVD and AD petitions filed simultaneously in 2006 against OTR Tires from the PRC. The United States treats the PRC as an NME, which means that the United States analyzes allegations of unfair trade in the PRC differently from the way in which it treats almost every other country in the world.2 The PRC wants to be treated by the United States as a market economy, and in 2016 the United States will be required to accord it that treatment pursuant to the protocol on the PRC's accession to the WTO in 2001.3The analysis that the United States currently applies to the PRC as an NME increases the likelihood of finding dumping when investigating allegations of unfair trade, and tends to increase the amount of alleged dumping (the "margins" when dumping is found at all.4 However, until 2006, the PRC was exempt from CVD investigations because, as Commerce periodically indicated, what makes a government subsidy countervailable is its market distorting effects.5 Without a market, subsidies cannot distort.The GPX cases are about application of CVD law to the PRC.6 They are also about simultaneous dumping and subsidy investigations of imports from the PRC and consequent measurement problems.7 In these cases, the PRC itself attempted to intervene, which it had previously elected not to do,8 reserving its legal actions entirely for the international body of the WTO rather than United States courts.