Countervailing Duty against China: Opening a Pandora’s Box in the WTO System?

In this paper, we trace the jurisprudential history of the applicability of US countervailing duty (CVD) law to non-market economies (NMEs). We describe how, since the United States reversed its long standing policy of not imposing CVDs on NMEs, concurrent application of antidumping (AD) and countervailing duties has become the country’s major trade remedy action against China. Although the WTO panel rejected China’s claim of WTO-inconsistency regarding the current US practices, the US Court of International Trade firmly ruled that the Department of Commerce’s double counting of AD and CVD against China violates domestic regulation. Finally, the WTO Appellate Body ruled that this ‘double remedy’ violates the rule to levy CVDs ‘in the appropriate amounts’ under Article 19.3 of the SCM Agreement. We will argue that, although the Appellate Body’s ruling is praiseworthy in preventing an illogical practice, its legal reasoning may give rise to some doubts and controversy when the negotiating history of Article 19 is examined. We will also analyze key features of current double remedy practices in the United States and Canada.