The Origins of the ‘Nonmarket Economy’: Ideas, Pluralism & Power in EC Anti‐dumping Law about China

• DOI: http://doi.org/10.1111/1468-0386.00135
• Date: 01 December 2001
• Author: Francis Snyder
• Published date: 01 December 2001

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The Origins of the `Nonmarket Economy':

Ideas, Pluralism and Power in EC

Anti-dumping Law about China

Francis Snyder*

Abstract: `Market' and `market economy' exercise a powerful, even magnetic grip on our

collective imagination. But what do we mean by `market economy'? Does it make sense to

speak of a `nonmarket economy', and if so, what does it mean? How are the ideas of

`market economy' and `nonmarket economy' related? Focusing on EC anti-dumping law,

this article seeks to answer these questions. It argues that the legal concept of `nonmarket

economy' in EC anti-dumping law has been socially constructed, by means of relations

among a plurality of institutional and normative sites, as part of a changing con®guration

of legal ideas in speci®c historical circumstances, and in contexts of political, economic,

social, and symbolic power. This argument is articulated in three parts. First, the concept

of `nonmarket economy' in EC anti-dumping law, though drawing on earlier elements,

had its main roots in the early Cold War. Second, starting in the 1960s, the GATT

multilateral negotiating rounds began to de®ne more speci®c international rules of the

game, but a variety of more localised processes played essential roles as forces of change.

Of special importance were, ®rst, the tension between legislative rules and administrative

discretion in the United States, and, second, the Europeanisation of foreign trade law in

the course of European integration. Third, the EC law concept of `nonmarket economy'

was born in the late 1970s. The main reasons were changes in the international anti-

dumping law repertoire, speci®c ideas in Europe about comparative economic systems,

and the perceived emergence of new economic threats, including exports from China.

I Introduction

A Legal Ideas and Legal Practice

`Market' and `market economy' exercise a powerful, even magnetic grip on our

collective imagination.

1

These two ideas are intimately related in popular discourse,

European Law Journal, Vol. 7, No. 4, December 2001, pp. 369±434.

#Blackwell Publishers Ltd. 2001, 108 Cowley Road, Oxford OX4 1JK, UK

and 350 Main Street, Malden, MA 02148, USA

* Centennial Professor, London School of Economics; Professeur associe

Â, Universite

Âd'Aix-Marseille III;

Fellow, Wissenschaftskolleg zu Berlin (Institute for Advanced Study, Berlin), 2000±2001.

1

Early versions of parts of this article were presented at the London School of Economics, College of

Europe (Bruges), Wissenschaftskolleg zu Berlin, Centre d'Etudes et de Recherches Internationales et

Communautaires (CERIC) of the Universite

Âd'Aix-Marseille III, College of Europe (Natolin), Zentrum

fu

Èr Europa

Èische Sozialforschung of the Universita

Èt Mannheim, Joint Meeting of the Law and Society

Association and the Research Committee on Sociology of Law (Budapest, July 2001), EU-China Higher

Education Cooperation Programme International Conference on `New Trends and Perspectives of

European Studies' (Beijing, July 2001); and the Academy of International Trade Law (Macau, July 2001).

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politics and law. In the European Union (EU) they occupy a similar and indeed

constitutional place. Within the EU, they constitute fundamental legal principles of

the internal market and competition law.

2

In EU external relations, they are also

extremely signi®cant, for example concerning international trade and anti-dumping

law.

3

But what do we mean by `market' and `market economy'? When is an economy a

`market economy', and when is it not? Does it make sense to speak of a `nonmarket

economy', and if so, what does it mean? How are the ideas of `market economy' and

`nonmarket economy' related? This article, focusing on EC anti-dumping law, seeks to

answer these questions.

The distinction between `market economy' and `non-market economy' is part of the

received wisdom of contemporary EC anti-dumping law. It runs like a red thread

through EC anti-dumping actions against China and other so-called state-trading

countries. Its signi®cance stems from the very concept of dumping. In legal terms,

dumping is based on the notion of price discrimination on two dierent markets.

4

To

adopt anti-dumping measures, the EC authorities must make an armative deter-

mination that dumping exists, that it has caused injury, and that the adoption of anti-

dumping measures is in the EU's interest.

5

A determination of dumping consists in a

comparison between the price of the product exported to the EU and the `normal

value' of the identical or like product.

6

But how is `normal value', or market price, to

be determined for exports from state-trading countries, where by de®nition the

`market' does not exist? Historically, the classi®cation of an exporting country as a

`non-market economy' (NME) rather than a `market economy' (ME) has provided a

way of resolving this dilemma, which posed a host of real economic and legal

problems, at least in the past.

European Law Journal Volume 7

370 #Blackwell Publishers Ltd. 2001

I am grateful for comments on these occasions. For their contributions to this article, I wish to express

special thanks to Peter Bernholz, Carol Bernstein, Richard Bernstein, Partha Chatterjee, Mariona

Ferrar-i-Fons, Dorothea Frede, Candido Garcia Molyneux, Christian Joerges, Deborah Klimburg-

Salter, Beate Kohler-Koch, Stephen Krasner, Federico Ortino, Sabrina Regent, Hans-Eckhart Scharrer,

Silvana Sciarra, Song Ying, Patricia Springborg, Anne-Lise Strahtmann, Sanjay Subrahmanyam,

Katherine Verdery, Robert Wade, Wang Hui, Andreas Wimmer and Zhang Naigen. The article would

not have been possible without the help of the sta of the libraries of the London School of Economics

and the Wissenschaftskolleg zu Berlin, and it is a pleasure to express my immense gratitude to them. The

usual disclaimer applies.

2

See eg Articles 4, 14, 81, 82, 87 EC.

3

See eg Articles 131, 133 EC. In this article, EU is used to refer generally to the European Union; the EU

as such has no anti-dumping legislation. EC and ECSC are used to refer speci®cally to the European

(Economic) Community and the European Coal and Steel Community, respectively; both have anti-

dumping legislation.

4

See Jacob Viner, Dumping: A Problem in International Trade (Chicago University Press, 1923) [hereafter

Viner] p. 3; Jackson, `Dumping in International Trade: Its Meaning and Context', in John H. Jackson

and Edwin A. Vermulst (eds), Antidumping Law and Practice: A Comparative Study (Harvester

Wheatsheaf, 1990) pp. 1±22 at 2±3. See also Case 157/87, Electroimpex and Others v Council, [1990]

ECR I-3021. It is therefore often argued that competition law should replace anti-dumping law. See for

example Rainer W. Bierwagen, GATT Article VI and the Protectionist Bias in Anti-Dumping Laws

(Kluwer, 1990); Hoekman and Mavroidis, `Dumping, Antidumping and Antitrust', (1996) 30 Journal of

World Trade 27. For a contrary view, see Weiss, `From World Trade Law to World Competition Law',

(2000) 23 Fordham International Law Journal S250±S273. For the middle ground, see Trebilcock,

`Competition Policy and Trade Policy: Mediating the Interface', (1996) 30 Journal of World Trade

71±106.

5

Articles 1(1), 7(1) and 9(4) Council Regulation (EC) 384/96, OJ 6.3.96 L56/1; See also Articles 1(1), 12(1)

and 15(1) of Council Regulation (EC) 2026/97, OJ 21.10.97 L288/1.

6

Article 1(2) and 1(4) Council Regulation (EC) 384/96, OJ 6.3.96 L56/1.

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Since 1979 the EC has initiated more than 80 anti-dumping actions against China.

7

The number has grown in conjunction with China's opening up and marketisation. In

fact, the increase has tended to correspond statistically with the main periods of

Chinese economic reform. Until 1998 EC anti-dumping law always treated China as a

`non-market economy'.

8

This followed from a long line of EC anti-dumping legisla-

tion.

The classi®cation of China as a `nonmarket economy' in EC anti-dumping law has

two important consequences. First, the normal value of exports from China is

calculated according to the so-called analogue or surrogate market-economy

method. This means that normal value (or `fair value' in United States terminology)

is not calculated on the basic of domestic information available in China concerning

either prices or costs of production, because these are considered not to re¯ect supply

and demand. Instead, it is established by reference to prices and production costs in a

comparable market-economy third country. Second, all export transactions of the

same product by all exporters from China during the investigation period are

considered together, and a single anti-dumping margin is calculated. This is the

`single duty rule'. Hence, a single anti-dumping duty applies to all exports of the

same product from China.

9

The sole exception is the case in which an exporter is

granted individual treatment. Then the dumping margin is calculated using normal

value from a surrogate country, but the exporter's own export prices to the EU. This

usually results in a lower dumping margin, and hence lower anti-dumping duty. In

legal terms, the use of an analogue country and the single duty rule follow from the

fact that, until the partial legislative reform in 1998, EC anti-dumping law has always

classi®ed China as a `nonmarket economy'.

10

B Aims and Scope

This article analyses the development of the idea of `nonmarket economy' in EC anti-

dumping law.

11

It focuses on two questions. First, where did this idea come from?

Second, how have relations between legal rules and administrative discretion in¯u-

enced its development? To answer the ®rst question, the article analyses the origins,

emergence, and development of the EC law concept of `nonmarket economy', mainly

December 2001 The Origins of `Nonmarket Economy'

#Blackwell Publishers Ltd. 2001 371

7

The present article is part of a larger research project on EU [EC, ECSC] anti-dumping actions against

China from 1979 to the present. For a survey up to 1990, see Vermulst and Graafsma, `A Decade of

European Community Anti-Dumping Law and Practice Applicable to Imports from China', (1992) 26

Journal of World Trade Law 5±60. See also Hu Yuanxiang, Legal and Policy Issues of the Trade and

Economic Relations between China and the EEC: A Comparative Study (Kluwer, 1991), pp. 231±289. For

criticisms of EC law and practice, see e.g. Lei Wang, `China's Diculties and Concerns as a Respondent

to Antidumping Proceedings', (1996) 19 World Competition, 55±58; Jianyu Wang, `A Critique of the

Application to China of the Non-market Economy Rules of Antidumping Legislation and Practice of the

European Union', Journal of World Trade (1999) 33, 117±145.

8

The 1998 reform of EC anti-dumping law allowed Chinese companies to try to prove that they operated

on a market economy basis. See Council Regulation 905/98, OJ 30.4.98 L128/18. See also Francis Snyder,

International Trade and Customs Law of the European Union (Butterworths, 1998), pp. 221±22.

9

See Wolfgang Mu

Èller, Nicholas Khan and Hans-Adolf Neumann, EC Antidumping LawÐA Commentary

on Regulation 384/96 (John Wiley & Sons, 1998) at 152; Francis Snyder, International Trade and Customs

Law of the European Union (Butterworths, 1998) at 219, 228.

10

See Council Regulation 905/98, OJ 30.4.98 L128/18.

11

See Michael Foucault The Archaeology of Knowledge, trans. A.M. Sheridan Smith (Routledge, 1972).