GAO Reports on Challenges in Applying CV Duties to China
The Government Accountability Office (GAO) has issued a report to Congressional requestors entitled, U.S.-China Trade: Challenges and Choices to Apply Countervailing Duties to China. China is classified as a nonmarket economy (NME), an economy to which CV duties do not currently apply.
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Two Alternative Paths for Applying CV Duties to China
The GAO states that there are two alternative paths for applying CV duties to China, as follows: Commerce could either determine that China is no longer a NME and apply CV duties against China as a market economy, or it could reverse its 1984 position and apply CV duties to China without changing its NME status. In the first path, China is unlikely to satisfy the criteria for a market economy in the near term, and in the second, without a clear congressional grant of authority, a decision to apply CV duties without changing China's status could be challenged in court.
The GAO further states that employing third-country information of "facts available" in order to create benchmarks for measuring subsidy benefits may help but would not eliminate the potential problems. Commerce lacks clear authority to fully implement China's WTO commitment on the use of this information in CV duty cases.
CV Duties on China Products May Not Afford More Protection Than AD Duties
While making CV duties available against China would give U.S. producers an import relief measure against unfair government subsidies, applying CV duties may not provide greater protection than U.S. producers already obtain from antidumping (AD) duties.
If China does receive market economy status, AD duties would be reduced for some companies (especially those Chinese companies receiving the China-wide entity rate), and it is unclear whether, on a net basis, CV duties would compensate for these reductions. Also, regardless of China's status, some duties might need to be reduced to avoid double counting of subsidies, and Commerce lacks authority to make such corrections when domestic subsidies are involved.
GAO Contact - Loren Yager (202) 512-4347
GAO Report (GAO-06-608T, dated April 2006) available at http://www.gao.gov/new.items/d06608t.pdf