The Principle of Effectiveness in the

Interpretation of the Protocol of Accession of

China to the World Trade Organization:
Market Economy Considerations in
Anti-Dumping Investigations

Roberto SOPRANO*

China’s requests for consultations with the European Union and the United States formally
initiated WTO disputes regarding certain provisions of the European Union and United States
Anti-Dumping laws pertaining to the determination of normal value for ‘non-market economy’
countries. By filing such requests, China officially requested the WTO Dispute Settlement Body to
clarify one of the most controversial and difficult to interpret ‘pieces of WTO law’. This article
addresses the interpretation of section 15 of China’s Protocol of Accession in light of the principle of
effectiveness to offer a different perspective on the ongoing dispute. It analyses whether the expiration
of paragraph (a)(ii) will automatically prohibit Member States from deviating from standard rules to
calculate normal value after 11 December 2016. It focuses particularly on section 15(d) and the
criteria to be used to assess if China is (or is not) a market economy

1 INTRODUCTION
China’s requests for consultations with the European Union and the United States
formally initiated WTO disputes regarding certain provisions of the European
Union and United States Anti-Dumping laws pertaining to the determination of
normal value for ‘non-market economy’ (NME) countries.1
Before addressing from a legal point of view the vexata questio about the effects of
the expiration of certain provisos of the Protocol on the Accession of the People’s
Republic of China (hereafter ‘the Protocol of Accession’), it is appropriate to
underline the political and economic impact of a WTO DSB decision on such a

*
Visiting Professor at the Vrije Universiteit Brussel, Bruxelles, Belgium. Email: [Link]@[Link].
1
On 12 Dec. 2016, China submitted two requests for consultation with the delegations of the European
Union and the United States: European Union – Measures Related to Price Comparison Methodologies (WT/
DS516) and United States – Measures Related to Price Comparison Methodologies (WT/DS515/15).

Soprano, Roberto, ‘The Principle of Effectiveness in the Interpretation of the Protocol of Accession of China
to the World Trade Organization: Market Economy Considerations in Anti-Dumping Investigations’. Legal
Issues of Economic Integration 46, no. 1 (2019): 29–52.
© 2019 Kluwer Law International BV, The Netherlands
30 LEGAL ISSUES OF ECONOMIC INTEGRATION

matter. In fact, the interpretation of the remaining provisions of section 15 of the

Protocol of Accession could have a huge impact on the entire WTO system.
It is difficult to deny that the main target of trade remedies is China and its cheap
exports around the world. Since its accession to the WTO, the number of trade
measures adopted against Chinese products has increased drastically. Many scholars
have accused States of using trade remedies, mainly Anti-Dumping, as an instrument
to counter cheap Chinese competition. Similarly, States have been criticized for
using trade remedies to counter social and environmental Chinese ‘advantages’ and
thus misusing such instruments that are intended for completely different purposes.
Yet others, more harshly, have accused States of employing trade remedies to protect
sectors that lack investment in innovation and/or would no longer be competitive.
From an economic point of view, the adoption of a DSB report that would
make it more difficult for WTO Members to treat Chinese producers differently
during Anti-Dumping investigations would risk depriving them of an important tool
to raise barriers against Chinese competitors. As the percentage of Anti-Dumping
measures taken by WTO Members against Chinese products is extremely high, the
impact may be considerable. In the European Union and the United States almost a
third of all the measures adopted targeted Chinese products. Some sectors such as
chemicals, article or steel would be deeply affected by changes in Anti-Dumping
legislation.
From a political point of view, such a dispute could have a severe impact on the
WTO. The Geneva-based organization is currently facing one of the most crucial
phases of its life since its creation. The outcome of the Buenos Aires Ministerial
Conference confirmed that it is still a critical time for the multilateral trade regime
and for the WTO as a forum for negotiations.
Most recently, the United States administration’s scepticism about the WTO,
which culminated with the reluctance to reappoint Appellate Body members whose
terms are expiring, has also become a major concern for its Members. The attitude of
President Trump towards the WTO reveals the changing approach of the United
States towards the multilateral trade system that could open new scenarios in the
trade diplomacy.
In such a context, the disputes relating to the recognition of China as a market
economy add fuel to the fire. The panellist and Members of the Appellate Body are
on thin ice, because the political and economic interests involved in such a decision
may undermine its outcome and, more generally, the WTO rule of law.
This article will address the interpretation of section 15 of China’s Protocol of
Accession in light of the principle of effectiveness to offer a different perspective on
the ongoing dispute. It will analyse whether the expiration of paragraph a(ii) auto-
matically prohibits Member States from deviating from standard rules to calculate
 THE PRINCIPLE OF EFFECTIVENESS 31

normal value after 11 December 2016. It will particularly focus on section 15(d) and
the criteria to be used to assess if China is (or is not) a market economy.

2 THE RELEVANCE OF THE NORMAL VALUE IN THE

CALCULATION OF DUMPING MARGINS IN THE ANTI-DUMPING
AGREEMENT AND THE IMPACT ON INVESTIGATIONS
CONCERNING IMPORTS FROM CHINA
In order to understand the issue of China and its recognition as a market economy, it
is necessary to begin the analysis from the definition of the term ‘dumping’ and, more
precisely, the calculation of the ‘normal value’ as defined by the GATT and the
Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994 (hereafter the ‘Anti-Dumping Agreement’) and interpreted by the
WTO DSB.
Although the term dumping may have different meanings, in the GATT/WTO
context it is exclusively used to indicate the practice where a product originating in
one or more targeted countries is introduced into the commerce of another country
at less than its normal value. In other words, dumping is the practice when a firm
exports a product at an export price (EXW) which is lower than its normal value (the
price of the good in the domestic market).2
This form of dumping should not be confused with other practices such as
exchange rate,3 social4 or environmental dumping.5 In fact, in economic terms
dumping could be associated with the practice of ‘monetary dumping’; that is, the
manipulation of currency rates in order to serve the interests of commercial objec-
tives. This is typically the case of competitive devaluation to incentivize exports. The
term dumping is also associated with the practice of producing goods in countries
with weak or poorly enforced labour or environmental standards (social dumping)
and thus where production costs are artificially lower than those of competitors that
are located in countries with higher standards. Trade in those goods also represents an
unfair advantage in international trade. However, despite their huge relevance in
international trade, the WTO Anti-Dumping Agreement is not supposed to provide
remedies to those concerns.6

2
Edwin Vermulst, The WTO Antidumping Agreement (Oxford University Press 2005).
3
Vera Thorstensen, Carolina Müller & Daniel Ramos, Exchange Rate Measures: Who Judges the Issue – IMF
or WTO?, 18 J. Int’l. Econ. L. 117 (2015).
4
Jagdeep Bhandari & Alan O. Sykes, Economic Dimensions in International Law: Comparative and Empirical
Perspectives, 185 (Cambridge University Press 1996).
5
Jagdish Bhagwati, Trade Liberalization and ‘Fair Trade’ Demands: Addressing the Environmental and Labour
Standards Issues, 18 World Econ. 745 (1995); Francis Macmillan, WTO and the Environment, 12 (Sweet &
Maxwell 2001).
6
See the Second Supplementary Provision to paras 2 and 3 of Art. VI in Annex I to GATT 1994.
32 LEGAL ISSUES OF ECONOMIC INTEGRATION

Economists have argued that the rationale of dumping is manifold and they have
defined different categories of dumping.7 In fact a company may practice dumping
for different reasons such as, inter alia, with a predatory intent to push competitors
out of markets and establish a monopoly, or to sell stocks caused by over-capacity or
increase their market share. However, according to scholars Anti-Dumping mea-
sures have been supported by economic motivations in only a few circumstances (i.e.
predatory dumping). In all other cases these remedies have been accused of advan-
cing industrial interests whilst impacting negatively on consumers and competition.8
Despite such economic considerations, dumping is a lawful pricing strategy set
by foreign companies, without any government intervention, but it is generally
considered unfair as it could harm the domestic industry of the importing country. In
fact, companies located in importing countries that are producing a product similar
to the dumped product have often requested the intervention of their States against
dumped competition affecting their business activities. To protect their domestic
producers, importing States have historically reacted by adopting Anti-Dumping
measures (e.g. duties).
Although Anti-Dumping measures were created without protectionist intent,
their increasing abuse and misuse has become a source of concern. As Zanardi noted,
when in 1923 Jacob Viner wrote his master piece ‘Dumping: A Problem in
International Trade’, he did not imagine that, almost a century later, the remedies
envisaged to alter dumping would become a cause for concern for international
trade.9
To limit the misuse of Anti-Dumping measures for protectionist intent, States
negotiated the adoption of international rules with the twofold aim of, on the one
hand, allowing a State to adopt such measures and, on the other hand, drawing the
boundaries for their use. The results of negotiations were GATT Article VI and the
Anti-Dumping Agreement that currently set out the requirements and limits that
must be observed by WTO investigating authorities prior to the adoption of an Anti-
Dumping measure.10 Generally speaking, they set the basic rules governing an
investigation and WTO Members are free to adopt their internal legislation on
Anti-Dumping provided that they are not in conflict with GATT and Anti-
Dumping Agreement rules.
An investigation usually starts following the filing of a complaint by the domes-
tic industry of the importing Member State allegedly injured by the dumped imports.

7
Douglas R. Nelson & Hylke Vandenbussche, The WTO and Anti-Dumping Critical Perspectives on the
Global Trading System and the WTO (Edward Elgar 2005).
8
Maurizio Zanardi, Anti-Dumping: A Problem in International Trade, 22 Eur. J. Pol. Econ. 591 (2005).
9
Ibid., at 592.
10
Judith Czako, Johann Human & Jorge Miranda, A Handbook on Anti-Dumping Investigations (Cambridge
University Press 2003).
 THE PRINCIPLE OF EFFECTIVENESS 33

The domestic Anti-Dumping authority carries out a careful investigation in order to

evaluate the existence of the three conditions required by GATT and the Anti-
Dumping Agreement: dumping, injury and causal link.11 Once the authority has
determined the existence of these elements, the importing Member decides on the
possible imposition of Anti-Dumping measures. This article will focus merely on the
definition of dumping.
As briefly described above, under Article 2 of the Anti-Dumping Agreement,
dumping is defined as the ‘introduction of a good in a foreign market at a price which
is lower than its normal value’. Whereas the EXW is the value that the good has at the
time it arrives at the border of the import market; the ‘normal value’ is, instead, the
price at which the product is sold in the domestic market of the producer. For
example, the firm ‘Dumping Ltd.’ located in Patria sells the good A in its domestic
market at USD 5 but exports it to country Xandia at USD 2. In order to see whether
dumping exists, the normal value of the good A (USD 5) needs to be compared with
its EXW (USD 2). If the EXW is lower than the normal value then, there is dumping
(2−5=−3).
To calculate the normal value, the investigating authority must gather data from
the accounting records of foreign companies and assess the price charged in their
market of production. For example, during an hypothetical investigation opened by
the European Commission (i.e. the European Union investigating authority) with
respect to imports of footwear with uppers of leather from the United States, the
European Commission would gather data about the EXW towards the European
Union set by the exporting United States producer for the product under investiga-
tion and compare it with the normal value (i.e. the price – EXW – set by the same
manufacturer in the US market).
Once an investigating authority has calculated the normal value and the EXW of
the product subject to investigation, it is necessary that the results obtained are
compared with each other in order to determine the existence (or absence) of
dumping and, more importantly, its margin; that is, the amount of the difference
between the normal value and the EXW.12
The comparison between the two elements is one of the most crucial steps of the
Anti-Dumping investigation and is one of the main reasons for disputes before the
DSB.13 In fact, the calculation of the dumping margin is extremely important as the
amount of the margin calculated is used to set the ceiling of the Anti-Dumping
11
Vermulst, supra n. 2, at 15.
12
Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from
India, WT/DS141/R, para. 6.118 (adopted 12 Mar. 2001) and Appellate Body Report, European
Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/AB/
R, para. 51 (adopted 12 Mar. 2001).
13
Appellate Body Report, United States – Laws, Regulations and Methodology for Calculating Dumping
Margins (‘Zeroing’), WT/DS294/AB/R, para. 139 (adopted 9 May 2006).
34 LEGAL ISSUES OF ECONOMIC INTEGRATION

measure (e.g. the duty) that could be adopted on a specific firm. More precisely, the
Anti-Dumping measure cannot be higher than the margin of dumping calculated for
a specific firm. Consequently, the higher the normal value of a product (and the
lower its EXW), the greater the chance for the importing country to justify the
existence of dumping and the imposition of a (higher) Anti-Dumping measure.
From what has been described above, it is not difficult to appreciate that there
are conflicting interests when it comes to calculation methods. Domestic producers
(and investigating authorities) prefer calculation methods that can justify a ‘high’
normal value that would lead to a greater chance of finding dumping and to higher
margins. However, importers and foreign exporters prefer the opposite, favouring a
calculation method that would result in a ‘low’ normal value thereby making it more
difficult for the investigating authority in the importing country to justify the
existence of dumping.

3 SPECIAL METHODOLOGY TO CALCULATE THE NORMAL VALUE

FOR NME COUNTRIES
In certain particular situations concerning investigations involving producers located in
States whose economic systems are not governed by market forces, it may be argued
that the prices to which an investigating authority should refer in order to calculate
normal value are unreliable as they are directly imposed or influenced by the State.14
WTO law tackles this situation in two different ways: the Second
Supplementary Provision to paragraph 1 of Article VI in Annex I to GATT 1994
(hereafter the ‘Second AD Note to Article VI:1ʹ) or the Protocol of Accession of a
country to the WTO.
The Second AD Note to Article VI:1 has partially but not at all completely
addressed the calculation of normal value for those countries that have an absolute
or substantially complete monopoly of trade and where all domestic prices are fixed
by the State.15 In such circumstances, it could be argued that a comparison between
EXW and normal value is not appropriate because of State influence.
The AD Note is an integral part of the GATT and WTO rules on Anti-
Dumping and it has also been directly incorporated into the Anti-Dumping
Agreement by Article 2.7 thereof that states that ‘this Article is without prejudice
to the second Supplementary Provision to paragraph 1 of Article VI in Annex I to
GATT 1994’.16 The Appellate Body recognized that it provides the legal basis for the

14
John H. Jackson, William J. Davey & Alan O. Sykes, Legal Problems of International Economic Relations:
Cases, Materials and Text 721 (4th ed., West Group 2002).
15
Appellate Body Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel
Fasteners from China, WT/DS397/AB/R, fn. 460 to para. 285 (adopted 28 July 2011).
16
Ibid., para. 284.
 THE PRINCIPLE OF EFFECTIVENESS 35

use of surrogate values for NME countries in Anti-Dumping investigations and

authorizes recourse to exceptional methods for the calculation of normal value in
investigations of imports from NMEs.17
However, the text of the Second AD Note to Article VI:1 is very general and does
not provide any support for its interpretation. It has been often criticized for its
ambiguity and it has been argued that its inclusion in the GATT has not been subject
to a thorough review by negotiators.18
As described in the Report of the Review Working Party on ‘Other Barriers to
Trade’, the Working Party that adopted the text had to consider a proposal submitted
by Czechoslovakia19 aimed at amending the rules to deal with the specific issue of
finding comparable prices for the application of normal value in countries where all,
or substantially all, of trade is operated by a State monopoly. The Working Party ‘was
not prepared to recommend the amendment of the Article in this respect, but agreed
to an interpretative note to meet the case’.20 Highly likely, the negotiators did not
foresee the importance of this interpretative note in the years to come. In fact, the
Second AD Note to Article VI:1 sets only very vague requirements to be fulfilled.
The Appellate Body observed that the Second AD Note to Article VI:1 refers to a
‘country which has a complete or substantially complete monopoly of its trade’ and
‘where all domestic prices are fixed by the State’. Such a paragraph describes a specific
type of NME where the State monopolizes trade and sets all domestic prices. Thus, it
would not on the face of it be applicable to lesser forms of NMEs that do not fulfil
both conditions; that is, the complete or substantially complete monopoly of trade
and the fixing of all prices by the State.21
To assess if a country can be considered an NME within the meaning of the
mentioned provision is not an easy task. In fact, the Second AD Note to Article VI:1
does not provide a definition based on narrow criteria that can be easily interpreted
and fulfilled. In the absence of a proper definition, it is very difficult, if not
impossible, to prove that a State satisfies both criteria.
As mentioned above, a further possibility to deviate from the general rules for
the calculation of the normal value is given by the introduction of special, ad hoc, rules
in the protocol of accession of the exporting country to the WTO.
The protocol of accession is a text that contains inter alia ‘WTO-plus’ obligations
for the country wishing to join the WTO. Such provisions are very often more
stringent than WTO rules and go beyond the commitments generally undertaken by
17
WTO Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on
Certain Products from China, WT/DS379/AB/R, para. 565 (adopted 25 Mar. 2011).
18
World Trade Organization, Analytical Index: Guide to GATT Law and Practice 228 (World Trade
Organization 1995).
19
GATT document, W.9/86, 9 Dec. 1954.
20
GATT document L/334, 1 Mar. 1955 para 6.
21
Appellate Body Report, supra n. 15, at fn. 460.
36 LEGAL ISSUES OF ECONOMIC INTEGRATION

the WTO membership.22 Broadly speaking it is a tool that could be used by countries
that are already Members of the WTO to request a new joiner makes extra efforts to
join the club.
First examples of the use of special provisions for the calculation of the normal
value in NMEs through the protocols of accession were adopted when Poland,
Romania23 and Hungary acceded to the GATT.24 At the time of conducting
negotiations for their accessions to the GATT, these nations were under a socialist
economic system with deep interference of the Government in their national
economy.25 In order to avoid State influence over the economy and in particular
the control of prices from altering the calculation of the dumping margin, the
GATT Contracting Parties negotiated special provisions allowing importing
Members to depart from the Anti-Dumping rules in force for the calculation of
normal value. In that respect, the relevant reports of the Working Group for the
accession of the new States to the GATT contained an explicit provision that
created the possibility for the investigating country to depart from normal GATT
rules and to calculate the normal value on the basis of the price charged in its own
market or on a constructed price calculated on prices collected in a third market.26
Similarly, the Protocols of Accession of China, Vietnam and Tajikistan also include
an analogous provision.27
Despite having no reference made to the Second AD Note to Article VI:1, the
Protocols grant to importing Member States the possibility to adopt a method for
calculating the normal value that differs from the general methodology envisaged by
the WTO rules. In particular, it allows Member States to depart from normal value
provisions without having (temporarily) to prove that the exporting Member State is
an NME.
In order to benefit from the special rules, some WTO Members (including the
European Union and the United States) introduced in their domestic laws special
provisions for investigations on goods imported from countries considered NMEs.
Such provisions gave investigating authorities the possibility to calculate normal
value based on prices calculated in third markets.

22
Elisa Baroncini, An Impossible Relationship? Article XX GATT and China’s Accession Protocol in the
China – Raw Materials Case, 6 BIORES 19 (2012).
23
GATT document L/3557, circulated on 5 Aug. 1971, para. 13.
24
GATT document L/3889, 20 July 1973, para. 18.
25
Jorge Miranda, Interpreting Paragraph 15 of China’s Protocol of Accession, 9(3) Global Trade & Cust. J. 94,
96 (2014).
26
GATT document L/2806, circulated on 23 June 1967, para 13.
27
Report of the Working Party on the Accession of the Republic of Tajikistan to the WTO, WT/ACC/
TJK/30, para. 164 (6 Nov. 2012) and Report of the Working Party Report on Viet Nam’s Accession,
WT/ACC/VNM/48, para. 255 (27 Oct. 2006).
 THE PRINCIPLE OF EFFECTIVENESS 37

Under the United States Anti-Dumping law,28 for example, the Department of
Commerce (hereafter ‘DOC’) uses information on prices sourced from third ‘surro-
gate’ countries to construct the normal value.29
United States law gives high discretion to the DOC on considering (or not) a
nation as a market economy.30 In fact, the DOC decides whether a country may be
recognized as an NME and its decision remains in force until revoked by the
competent authorities. The decision to consider a Member State as a market
economy can also be revoked at any time but exporting Member States have the
right to prove the contrary. In other words, a nation may be considered to be an
NME by the DOC until shown proof to the contrary.31 The criteria for determining
whether a State can obtain recognition as a market economy are established in
United States law and evaluated by the DOC.32
Before the 2017 reform, the European Union legislation differentiated among
NME countries depending on their WTO membership at the time of the opening of
the investigation.33 If the NME country was a WTO Member, a special methodol-
ogy was followed by the European Union Commission and the normal value had to
be determined on the basis of the price or the constructed value in a third (market
economy) country, or the price from such a third country to other countries,
including the European Union.34 Alternatively, where such alternatives were not
possible, it was calculated on any other reasonable basis, including the price actually
paid or payable in the Union for a like product, duly adjusted if necessary to include a
reasonable profit margin. The European Union adopted a list-based approach and
considered that certain countries were to be considered NMEs. Any request from a
country to be recognized as a market economy was evaluated on the basis of five
listed criteria.35
Another possibility was offered to undertakings to prove that market conditions
prevailed in their company. In fact, the alternative methodology was followed only
if, as a result of justified requests filed by one or more producers subject to the
investigation and in accordance with the principles set out in the former European

28
19 US Code Ch. 4 – TARIFF ACT OF 1930.
29
US Government Accountability Office, Report to Congressional Committees, ‘US – China Trade:
Eliminating Nonmarket Economy Methodology Would Lower Antidumping Duties for Some Chinese Companies
9 (2006).
30
For the definition of the term ‘nonmarket economy country’ see 19 US Code s. 1677(18)(A).
31
19 US Code s. 1677(18)(C)(i).
32
19 US Code s. 1677(18).
33
Francis Snyder, The Origins of the Nonmarket Economy: Ideas, Pluralism & Power in EC Anti-Dumping Law
about China, 7(4) Eur. L. J. 369 (2001).
34
Art. 2.7 (a) 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 (OJEU L 176, 30 June 2016, at 21).
35
Ibid., Commission Staff Working Document on Progress by the People’s Republic of China towards
Graduation to Market Economy Status in Trade Defence Investigations (SEC 2503 19 Sept. 2008).
38 LEGAL ISSUES OF ECONOMIC INTEGRATION

Union Basic Regulation, market economy conditions demonstrated predominance

for these producers in relation to the manufacture and sale of the like product.
Accordingly, if a foreign producer in an NME filed a specific request, the
European Union Commission had to assess whether or not producers operated
under ‘market economy condition’. If the conditions were not met, the European
Union Commission was entitled to adopt the special methodology (so called Market
Economy Treatment) for NME producers.
In December 2017, the European Union adopted an amendment to the
Basic Regulation that was the result of a long debate among the EU institutions
and stakeholders.36 The proposal of the Commission was aimed at finding new
ground, other than the market economy approach and the interpretation of the
Protocol of Accession, to continue to justify the adoption of a special metho-
dology to calculate normal value for certain WTO Members as, for example,
China. It was thus decided to allow the EU Commission to depart from the
general methodology in cases where, based on findings contained in a report
adopted by the Commission, State interference significantly distorted prices and
costs (e.g. export restrictions on raw materials or non-respect of minimum
wages) and would affect price comparability. In such cases, the Commission
will use undistorted benchmarks to determine the normal value of the product
under investigation.
According to the European Union, the repeal of Article 2(7) of the EU
Basic Anti-Dumping Regulation renders both of China’s claims devoid of
purpose.37 In reality, the EU amendment, as such and as applied so far, raises
concerns of WTO compatibility related to both the WTO Anti-Dumping
Agreement as well as the MFN principle. In fact, the new amendment might
be found in violation of the Anti-Dumping Agreement as it introduces new
possibilities to depart from WTO methodologies to calculate normal value
other than those set in Article 2 and that might have no grounds on WTO
rules. In addition, despite such rule apply to all WTO Members where sig-
nificant market distortions are found, reports have been (or are being) prepared

36
Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 Dec. 2017 amending
Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the
European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from
countries not members of the European Union (OJEU L 338, 12 Dec. 2017). More recently, the EU
introduced further amendments to Reg. 2016/1036 by adopting the Regulation (EU) 2018/825 of the
European Parliament and of the Council of 30 May 2018 (OJEU L 143, 7 June 2018).
37
European Union – Measures Relating to Price Comparison Methodologies (DS516), European Union’s
Responses to the Questions from the Panel after the Second Substantive Meeting, 15 June 2018,
para. 7. See also Andrei Suse, Old Wine in a New Bottle: The European Union’s Response to the Expiry of
Section 15(a)(ii) of China’s WTO Protocol of Accession, 4(20) J. Int’l Econ. L. 951–977 (2017).
 THE PRINCIPLE OF EFFECTIVENESS 39

so far only on China and Russia,38 which raises concerns of ‘as applied’
discriminations that could potentially conflict with the MFN principle.39
In both the European Union and the United States approaches, the choice of the
analogue country has been decisive for the determination of dumping and assessment
of the measure. In fact, importing countries might choose analogue countries where
the costs of production are higher in order to prove a higher normal value and thus
more easily justify the existence of dumping.

4 THE PROTOCOL OF ACCESSION OF CHINA TO THE WTO:

BURDEN OF PROOF AND MARKET ECONOMY CONDITIONS
AND CRITERIA AFTER 12 DECEMBER 2016
China’s accession to the WTO in 2001 has been noteworthy and considered to be a
milestone in WTO history. As a large and growing country, China’s accession has
challenged the structure and functioning of the WTO. Members had no experience
in negotiating accession with a country that had extraordinary economic perfor-
mance but was only partially integrated into the world economy.40 As noted by
Lardy, China adopted high tariffs and several nontariff barriers in critical sectors of
the Chinese economy; imposed inspection and safety licensing requirements on
imports; and discriminated against foreign goods in government procurement,
imposing high local content requirements on foreign and joint venture firms.
Certain sectors of the economy, such as distribution, telecommunications and
financial services, remained entirely or largely closed to foreign direct investment.
In that respect, WTO accession has been a key component in the restructuring of the
Chinese economy.41
For China, accession to the WTO brought legislative reforms and market
liberalization but also provided a vehicle to further its strategy to grow its influence
worldwide. For WTO Members, China represented both an opportunity as well as a
threat. While they saw an opportunity to join a growing market, they have also seen
the threat of cheap goods flooding into their domestic markets. Consequently,
Member States relied increasingly on trade remedies and in particular on Anti-
Dumping to protect their markets from Chinese competition.
38
Commission Staff Working Document on Significant Distortions in the Economy of the People’s
Republic of China for the Purposes of Trade Defence Investigations, Brussels, 20 Dec. 2017 SWD
(2017) 483 final/2.
39
Despite the EC-Footwear panel report, the possibility for antidumping measures to be reviewed under
the MFN principle is still under discussion.
40
Nicholas R. Lardy, Integrating China into the Global Economy 5 (Brookings Institution Press 2002); David
M. Blumental, Applying GATT to Marketizing Economies: The Dilemma of WTO Accession and Reform of
China’s State-Owned Enterprises (SOEs), 1(2) J. Int’l Econ. L. 113 (1999).
41
China and the WTO: Accession, Policy Reform, and Poverty Reduction Strategies 1 (Deepak Bhattasali,
Shantong Li & William J. Martin eds, Oxford University Press and World Bank Publications 2004).
40 LEGAL ISSUES OF ECONOMIC INTEGRATION

During fifteen years of negotiations, predominantly led by the United States, the
WTO Members and China agreed to include special rules for the calculation of the
normal value in the Protocol of Accession. As confirmed in the Working Party
Report the text is definitely a compromise solution between negotiators. The
negotiations highlighted the diverging positions of China and the United States
and other WTO Members. On the one hand, WTO Members underlined that
China was not (yet) a market economy and therefore special difficulties could exist in
determining cost and price comparability in the context of Anti-Dumping investiga-
tions. They were advocating for the introduction of special rules that could deviate
from the general methodology for the calculation of normal value. Although no clear
reference to the Second AD Note to Article VI:1 can be found in their proposals,
negotiators used certain words which reflect the interpretative note as they consid-
ered that a country might find it ‘necessary to take into account the possibility that a
strict comparison with domestic costs and prices in China might not always be
appropriate’.42 On the other hand, China criticized the Anti-Dumping measures
adopted by certain WTO Members for having treated China as an NME ‘without
identifying or publishing the criteria used, without giving Chinese companies
sufficient opportunity to present evidence and defend their interests in a fair manner,
and without explaining the rationale underlying their determinations, including with
respect to the method of price comparison in the determinations’.43
As a compromise, China and WTO Members agreed on a text that was adopted
in the Protocol of Accession and that allowed the importing Member to deviate from
general methodology to calculate normal value, upon certain conditions and until
proof was shown to the contrary.44
It is important to note that the adoption of a special methodology for calculating
normal value of Chinese goods is not mandatory. China negotiated market economy
recognition with its trade partners in particular during the negotiating phases of free
trade agreements. Some Member States have already recognized China as a market
economy (For example, Australia, New Zealand, Vietnam and Russia). However,
other WTO Member States consider that China is not yet a market economy and
therefore its exports should be subject to a special treatment during Anti-Dumping
investigations. Some countries such as Brazil, Argentina and South Africa have
concluded a Memorandum of Understanding that shows political willingness toward
recognition but that has no legal effects without implementation in national law. 45

42
Report of the Working Party on the Accession of China, WT/ACC/CHN/49, 1 Oct. 2001, para. 150.
43
Ibid., para. 151.
44
Ibid.
45
European Parliamentary Research Service, Granting Market Economy Status to China. An Analysis of
WTO Law and of Selected WTO Members’ Policy, PE 571.325, 8–12.
 THE PRINCIPLE OF EFFECTIVENESS 41

This recognition issue is still under discussion at the WTO as well as in academia
as a result of the statements on the (alleged) obligatory (direct or indirect)46 recogni-
tion of China as a market economy.47 The interpretation of section 15 has not been
completely clarified, with particular reference to the reversal of the burden of proof
and the criteria on which WTO Members should assess the prevalence in China of
market economy conditions. The text of the Protocol is in fact quite sibylline and
leaves room for different interpretations.
Section 15 of the Protocol entitled price comparability in determining subsidies and
dumping establishes the link between the GATT 1994, the Anti-Dumping
Agreement and the Protocol of Accession. In fact, as stressed by the Appellate
Body, paragraph 1.2 of China’s Accession Protocol serves to build a bridge between
the package of protocol provisions and the existing package of rights and obligations
under the WTO legal framework. Accordingly, the Marrakesh Agreement, the
Multilateral Trade Agreements and China’s Protocol of Accession together form
one package of rights and obligations that must be read in conjunction in order to
understand how specific provisions within this package relate to one another.48 The
WTO Agreement to which China accedes shall be the WTO Agreement as rectified,
amended or otherwise modified by such legal instruments as may have entered into
force before the date of accession. This Protocol, which shall include the commit-
ments referred to in paragraph 342 of the Working Party Report, shall be an ‘integral
part’ of the WTO Agreement. 49
The Protocol of Accession sets, on the one hand, the possibility to deviate from
general GATT and WTO rules on the calculation of the normal value. On the other
hand, it sets the limits to such deviation.

46
Christian Tietje & Karsten Nowrot, Myth or Reality? China’s Market Economy Status Under WTO Anti-
Dumping Law After 2016, Transnational Economic Law Research Center Policy Papers No. 34, 9
(2011); Brian Gatta, Between ‘Automatic Market Economy Status’ and ‘Status Quo’: A Commentary on
‘Interpreting Paragraph 15 of China’s Protocol of Accession’, 9(4) Global Trade & Cust. J. 165, 172 (2014).
47
Yong-Shik Lee, Should China Be Granted Market Economy Status in View of Recent Development?, 3(2)
China & WTO Rev. 319 (2017); Weihuan Zhou & Delei Peng, EU – Price Comparison Methodologies
(DS516): Challenging the Non-Market Economy Methodology in Light of the Negotiating History of Article 15 of
China’s WTO Accession Protocol, 52(3) J. World Trade 505 (2018). See also the United States submission,
European Union – Measures Related to Price Comparison Methodologies (DS516), Legal
Interpretation – Article VI:1 of the General Agreement on Tariffs and Trade 1994, the Second Note
Ad GATT 1994 Article VI:1, the Practice of the GATT Contracting Parties in the Application of
GATT 1994 Article VI:1, the Accessions of Poland, Romania, and Hungary to the GATT, Art. 2 of the
Agreement on Implementation of Art. VI of the General Agreement on Tariffs and Trade 1994, and s.
15 of the Protocol of Accession of China to the WTO.
48
Appellate Body Reports, China – Measures Related to the Exportation of Rare Earths, Tungsten, and
Molybdenum, WT/DS431/AB/R / WT/DS432/AB/R / WT/DS433/AB/R, adopted 29 Aug.
2014, para. 5.52.
49
Appellate Body Reports, China – Measures Related to the Exportation of Various Raw Materials, WT/
DS394/AB/R / WT/DS395/AB/R / WT/DS398/AB/R, para. 278 (adopted 22 Feb. 2012).
42 LEGAL ISSUES OF ECONOMIC INTEGRATION

Under paragraph 15(a), the importing State can choose to calculate normal value
on the basis of either Chinese prices or costs for the industry under investigation or
on a special methodology that is not based on a strict comparison with domestic
prices or costs in China. In the latter case, the importing WTO Member is limited by
the two following conditions: paragraphs (a)(i) and (a)(ii).
The first paragraph states that Chinese producers bear the burden of proving
that, at industry level and with reference to the like product, they meet market
economy conditions. If they succeed, the importing WTO Member is obliged to
calculate normal value for that product on the basis of the Chinese price and costs and
therefore cannot deviate from GATT/WTO rules. In other words, such a paragraph
establishes that Chinese producers under investigation must prove that market
economy conditions prevail and, if that is the case, the importing member is obliged
(shall) to calculate normal value on the basis of Chinese costs.
The second paragraph states that the importing WTO Member can deviate from
GATT/WTO rules if Chinese producers cannot prove that they meet market
economy conditions in the industry producing the like product with regard to
manufacture, production and sale of that product. By reversing the onus probandi,
the importing Member does not have to prove that market conditions do not prevail
in the Chinese industry under investigation. In other words, the importing State may,
by default, deviate from normal value rules to the extent that the Chinese producers
have not been able to show proof to the contrary.
In addition, section 15(d) then sets out three further rules. The first one grants the
possibility (and the burden of proof) to China to demonstrate, based on the national
law of the importing Member, that it is a market economy. Despite the fact that there is
no general definition of the term ‘market economy’ and that every country can set its
own criteria, it is important to note that market economy refers to a broader, national
level definition that is not limited to a specific product or industry as the market
economy conditions. If market economy is proven at a national level, any industry or
sector would be considered as meeting any market economy conditions.
It is also important to know that, if China succeeds in demonstrating it is a market
economy, the whole of paragraph (a) and not only a part of it, would be terminated.
This statement is of foremost importance in interpreting the whole of section 15 and to
differentiate the termination effects following the occurrence of the conditions
described in paragraph (d) first sentence to those described in the second sentence.
The second rule sets forth that, in any event, on 11 December 2016 (i.e. fifteen
years after the date of accession) the provisions of subparagraph (a)(ii) expired. It is of
utmost importance to stress that, on that date, only section 15(a)(ii) expired whereas
the other provisions of the same section remained in force.50 In particular, section 15

50
Appellate Body Report, supra n. 15, para. 290.
 THE PRINCIPLE OF EFFECTIVENESS 43

(a)(i) and section 15(d) continue to exist. The rest of the section 15 continues to
remain in force and should be read together with the provisions of Article 2.7 Anti-
Dumping Agreement and the GATT, including the Second AD Note to Article VI:1.
The third rule grants China the possibility to demonstrate that, based on the
national law of the importing WTO Member, market economy conditions prevail in
a particular industry or sector. This basically gives the possibility (and the burden of
proof) to China to demonstrate, at sector or industry level, that economic conditions
prevail. Similarly to what has been described before with reference to the demon-
stration of the fulfilment of the market economy criteria, if China can prove the
prevalence of market conditions in a sector or industry, the application of subpara-
graph (a), in its entirety, would forever be terminated (with respect to that industry or
sector).
Therefore, in conclusion, firstly, the provisions contained in the whole para-
graph (a) are no longer in force as soon China proves to be a market economy
according to the requirements set by the domestic legislation of the importing State.
Secondly, in any case, the provisions of section 15(a)(ii) on market economy condi-
tions – and only those provisions – ceased to have effect fifteen years after the date of
accession of China to the WTO (11 December 2016). Thirdly, the special provisions
concerning methodologies for the calculation of the normal value set forth in
paragraph (a) of section 15 can no longer be applied in respect of a given industry
or of a particular product if China has demonstrated the prevalence of market
economy conditions for that industry or sector under investigation.
Hence, before 11 December 2016, a Member State could freely deviate from
general rules to calculate normal value only to the extent that either Chinese
producers under investigation (or China) were unable to demonstrate that they
met market economy conditions in a specific sector or China could not prove to
be a market economy in accordance with the criteria set by the national legislation of
the importing State.
The effects of the expiration of section 15(a)(ii), and its consequences over the
possibility to deviate from the general methodology for the calculation of normal
value for imports from China, has been subject to debate in academia and more
recently before the WTO DSB.51
According to China, after 11 December 2016, such a presumption disappeared
due to the expiration of section 15(a)(ii) by operation of law.52 In fact, China
considers that it negotiated and agreed on a temporary derogation to the special

51
Michelle Q. Zang, EC – Fasteners: Opening the Pandora’s Box of Non-Market Economy Treatment, 14(4) J.
Int’l Econ. L. 869 (2011).
52
European Union – Measures Related to Price Comparison Methodologies, REQ G/ADP/D116/1, G/L/1170,
WT/DS516/1 and European Union – Measures Related to Price Comparison Methodologies – Request for
consultations by China, WT/DS516/1, G/L/1170, G/ADP/D116/1 15 Dec. 2016.
44 LEGAL ISSUES OF ECONOMIC INTEGRATION

methodology that would expire fifteen years after its accession to the WTO.53 The
European Union and United States do not share such a similar interpretation. It is
therefore necessary to analyse the different interpretations on the direct and indirect
effects of the expiration of the mentioned provision.

5 SECTION 15 OF THE PROTOCOL OF ACCESSION AND THE

PRINCIPLE OF EFFECTIVENESS IN THE INTERPRETATION OF
TREATIES
According to a first interpretation, more favourable to China, an investigating
authority may continue to treat China as an NME after December 2016, solely by
referring to the Second AD Note to Article VI:1.54
China considers that, when it acceded to the WTO, it agreed with WTO
Members that, for a transitional period of fifteen years, China-specific treaty provi-
sions would apply to the determination by other Members of certain elements of
‘price comparability’ in Anti-Dumping proceedings involving Chinese imports.55
The occurrence of such temporary conditions would eliminate the presumption
based on 15(a)(ii) that Chinese producers do not operate in market economy
conditions. As a consequence, in order to deviate from general rules for the calcula-
tion of normal value, there is no other option than to prove that China is an NME
under the criteria set by the Second AD Note to Article VI:1.56 Only in that case, would
it be possible to deviate from the general rules applicable to the calculation of normal
value. By a (re)reversal of the onus probandi, the importing Member shall prove that
that the conditions set in the Second AD Note to Article VI:1 are fulfilled. In such a
case, section 15(a)(i) could be used by the Chinese producers (or section 15(d) third
line by China) to claim the prevalence of market economy conditions.

53
Folkert Graafsma & Elena Kumashova, In re China’s Protocol of Accession and the Anti-Dumping Agreement:
Temporary Derogation or Permanent Modification?, 9(4) Global Trade & Cust. J. 154, 159 (2014); Zhenghao
Li, Interpreting Paragraph 15 of China’s Accession Protocol in Light of the Working Party Report, 11(5) Global
Trade & Cust. J. 229, 237 (2016).
54
European Union – Measures Related to Price Comparison Methodologies – Request for consultations by China
(n. 52) para. 4.
55
According to a White House statement: ‘This provision will remain in force for fifteen years after
China’s accession to the WTO’. Summary of US–China Bilateral WTO Agreement, [Link]
[Link]/WH/New/WTO-Conf-1999/factsheets/[Link] (accessed 4 July 2018). The European
Union stated, ‘The EU’s present legislation [ … ] will remain available for up to fifteen years after China
enters the WTO’. Explanatory Memorandum to the Council Decision Establishing the Community
Position on China’s Accession to the WTO, para. 55.
56
European Union – Measures Related to Price Comparison Methodologies – Request for Consultations by
China (n. 57) para. 8; Fernando Gonzalez-Rojas, All Parts Should Have Meaning: A Proposal on the Correct
Interpretation of Section 15(a) & (d) of China’s Protocol of Accession, 12(9) Global Trade & Cust. J. 328, 343
(2017).
 THE PRINCIPLE OF EFFECTIVENESS 45

In other words, the termination of paragraph (a)(ii) would eliminate the possi-
bility for an importing Member to presume, without proving it, that Chinese
producers do not operate under market economy conditions.57 It would thus shift
the burden of proof and require the importing State to prove that, under the Second
AD Note to Article VI:1, China is an NME.
It is evident that the demonstration of the situation envisaged by the Second AD
Note to Article VI:1 and, then, the fulfilment of the abovementioned evidential
burden could be extremely difficult if not impossible in the case of China. In fact,
the Second AD Note to Article VI:1 requires proof that China has the complete or
substantially complete monopoly of trade. In addition, the importing Member State has
to demonstrate that all domestic prices are fixed by the State.58 The importing WTO
Member must necessarily prove that, in China, both conditions are fulfilled. Despite
the large influence of the State in the Chinese economy, in practice it would be
difficult if not impossible to demonstrate the existence of both these criteria.
In sum, according to this interpretation, since 12 December 2016, the presump-
tion that Chinese players do not operate under market economy conditions dis-
appeared and therefore the importing WTO Member must prove the existence of
the criteria described in the Second AD Note to Article VI:1. If the importing State
succeeds in such an almost probatio diabolica, China could rebut this determination on
the basis of the Second AD Note to Article VI:1 section 15(d). Chinese producers could
still refer to the stricter rules of section 15(a)(i).
By following an opposite interpretation, more advantageous to importing
Members, it could be argued that the expiration of the section 15(a)(ii) would not
indirectly force States to look at Second AD Note to Article VI:1 in order to deviate
from the general methodology for calculating normal value.
A responding country could argue that despite the expiration of the mentioned
paragraph, the criteria on which the decision to treat China as an NME are those
described in the domestic law of the importing member and not the Second AD Note
to Article VI:1. It is in fact possible to interpret the remaining text of the protocol to
mean that a Member State is allowed to consider China as an NME until China has
shown proof of the contrary based on the national law of the importing country.
The termination of the presumption that Chinese producers do not operate
under market economy conditions based on the protocol of accession, is completely
separate from the possibility to treat China as an NME. Sections 15(a) and (d) deal

57
Miranda, supra n. 25, at 103; Theodore R. Posner, A Comment on Interpreting Paragraph 15 of China’s
Protocol of Accession by Jorge Miranda, 9(4) Global Trade & Cust. J. 146, 153 (2014). See also Terence P.
Stewart, William A. Fennell, Stephanie M. Bell & Nicholas J. Birch, The Special Case of China: Why the
Use of a Special Methodology Remains Applicable to China after 2016, 9(6) Global Trade & Cust. J. 272, 279
(2014).
58
Appellate Body Report, supra n. 15, para. 285, fn. 460.
46 LEGAL ISSUES OF ECONOMIC INTEGRATION

with two different situations. Whereas paragraph (a) is referring to market economy
conditions of producers and the burden of proof to demonstrate the prevalence of
market economy conditions, section (d) first line deals with market economy criteria
to be met by China based on the national legislation of the importing State. In other
words, Sections 15(a)(i) and (ii) only deal with market economy conditions but do
not affect market economy considerations based on the provisions in paragraph 15
(d). As section 15(d) continues to operate even after 11 December 2016, it allows
WTO Members to have domestic rules setting market economy criteria that shall be
fulfilled by China in order to qualify as a market economy.
Therefore, the remaining text of section 15 will allow Members to continue to
treat China as an NME and therefore use a methodology that is not based on a strict
comparison with domestic prices or costs in China (15(a)) unless producers under
investigation can prove prevalence of market economy conditions (15(a)(i)) or China
proves market economy conditions (section 15(d) third paragraph) or market econ-
omy criteria (section 15 (d) first paragraph).
It follows that importing WTO Members may continue to treat China as an
NME to the extent that China or Chinese producers under investigation are unable
to prove that they fulfil market economy conditions (or criteria).
Such an interpretation would allow a consistent and harmonious reading of all
the GATT, WTO and Protocol of Accession provisions. Conversely, an interpreta-
tion that would deny the effects of paragraph (d) would not be in line with principles
of interpretation of international law.
In fact, a WTO Member could argue that the analysis described above, and that
is more favourable to China, is in conflict with the principles of interpretation of
international law and, in particular, the principle of effectiveness. As pointed out in
settled case law, the WTO law cannot be interpreted in ‘clinical isolation’ with
respect to the general international law. The continuous recall of jurisprudence in
WTO DSB Reports of judgments of international courts (and vice versa) proves that
WTO law is to be considered an integral part of the international legal order. As
underlined by eminent scholars, the ‘chimera of “self-contained regime” remains a
phantom with no legal basis in international law, a notion which, despite its persistent
appearance in jurisprudential debate, is best confined to the lively world of myth and
fable’.59
For the express provision of Article 3.2 of the Dispute Settlement
Understanding, the interpretation of WTO law takes place in accordance with the
customary principles of international law. As recognized by scholars and the DSB,
certain provisions of the Vienna Convention on the Law of Treaties (VCLT) and in

59
Anja Lindroos & Michael Mehling, Dispelling the Chimera of ‘Self-Contained Regimes’ International Law
and WTO, 16(5) Eur. J. Int’l L. 857, 877 (2005).
 THE PRINCIPLE OF EFFECTIVENESS 47

particular the rules on the interpretation of the treaties, may be regarded as general
principles of international law.60 By virtue of Article 31 thereof, the interpretation of
the rules dictated by the WTO agreements must be carried out in good faith in
accordance with the ordinary meaning to be attributed to the terms of the treaty in
their context and in the light of its object and purpose. The WTO rules are therefore
part and parcel of international legislation and as such subject to the rules on the
interpretation of the treaties. Furthermore, it is not disputed that China’s Accession
Protocol has to be interpreted in accordance with the customary rules of treaty
interpretation as codified in Articles 31 and 32 of the VCLT.61
A fundamental rule for the interpretation of international standards is the
principle of effectiveness (c.d. effet utile). This is a principle of interpretation that
finds its roots in Roman Law and described by the Latin maxim ut res magis valeat
quam pereat. Although the principle of effet utile is not mentioned directly in the
VCLT, it is recognized by jurisprudence62 and by scholars63 as a fundamental
principle of international law.64 As described by Phillimore, the mentioned principle
means that
when a provision or a clause in a treaty is capable of two significations, it should be
understood in that one which will allow it to operate, rather than in that which will deny
to it effect. Furthermore when the same provision or sentence expresses two meanings, that
one which must conduces to carry into effect the end and object of the convention should be
adopted.65

60
Thomas Cottier & Matthias Oesch, International Trade Regulation – Law and Policy in the WTO, the
European Union and Switzerland 118 (Staempfli Publishers 2005). See in particular, WTO Appellate Body
Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, 17 (adopted
20 May 1996) and WTO Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, 10 (adopted 1 Nov. 1996) and WTO Appellate Body Report,
United States – Continued Existence and Application of Zeroing Methodology, WT/DS350/AB/R, para. 268
(adopted 19 Feb. 2009).
61
WTO Appellate Body Report, China – Measures Related to the Exportation of Rare Earths, Tungsten, and
Molybdenum, WT/DS431/AB/R, WT/DS432/AB/R, WT/DS433/AB/R, para. 5.19.
62
Corfu Channel case, Judgment of 9 Apr. 1949: ICJ Reports 1949, at 24. See also Territorial Dispute
(Libyan Arab Jamahiriya/Chad), Judgment, 1. C. J. Reports 1994, at 23; Legal Consequences for States
of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security
Council Resolution 276 (1970), Advisory Opinion, ICJ Reports 1971, at 35. Appellate Body Report,
supra n. 60, para. 106.
63
Isabelle Van Damme, Treaty Interpretation by the WTO Appellate Body 152 (Oxford University Press
2009); Robert Kolb, Interprétation et création du droit international. Esquisses d’une herméneutique juridique
moderne pour le droit international public 583–600 (Bruylant 2006); Richard K. Gardiner, Treaty
Interpretation 179–180 (Oxford University Press 2015); Hersch Lauterpacht, Restrictive Interpretations
and the Principle of Effectiveness in the Interpretation of Treaties, 48 Brit. Y.B. Int’l L. 74 (1949).
64
Mustafa Kamil Yasseen, L’interprétation des traités d’après la convention de Vienne sur le droit des traités, in
Collected Courses of the Hague Academy of International Law vol. 151, 71–75 (Martinus Nijhoff Publishers
1976).
65
Robert Phillimore, Commentaries upon International Law vol. II, 77 (T& J W Johnson, Law Booksellers
1855).
48 LEGAL ISSUES OF ECONOMIC INTEGRATION

The principle of effectiveness can generally be divided into two possible manifesta-
tions. The first one is to ensure that none of the provisions in the treaty is deprived of
meaning. The other is to secure that the treaty is effective in achieving its object.66
The principle of effectiveness combines both those characteristics.67 It is therefore a
general principle under which an interpreter cannot interpret a provision in such a
way as to deprive of sense any provisions of a treaty. It is necessary that the
interpretation gives meaning and effect to any provision of the treaty.68 Conversely,
an interpretation which has as the effect of depriving the sense of treaty provisions is
not compatible with international law. An attempt at ineffective interpretation of a
treaty can in some circumstances be equal to a breach of the treaty, thus triggering the
remedies available to the contracting parties under article 60 of the VCLT.69
The mentioned principle has often been invoked in WTO disputes and also
recognized as a fundamental tenet70 and one of the corollaries of the general rule of
interpretation by the DSB.71 According to the Appellate Body in the US – Gasoline
case, the interpretation must give meaning and effect to all the terms of the treaty. An
interpreter is not free to adopt a reading that would result in reducing whole clauses
or paragraphs of a treaty to redundancy or inutility.72 The adoption of an interpreta-
tion that would deprive of effet utile any provisions of the treaty is therefore not
compatible with the rules of interpretation of international law.73 Therefore, it is an
obligation for the reader to search and find that interpretation that would give a
meaning to all the provisions of a treaty.
The principle also calls for the harmonious interpretation and application of both
rights and obligations. In light of the interpretive principle of effectiveness, it is the
duty of any treaty interpreter to ‘read all applicable provisions of a treaty in a way that
gives meaning to all of them, harmoniously’.74 In Argentina – Footwear (EC), the
66
Hersch Lauterpacht, The Development of International Law by the International Court 227–230 (reprinted,
Cambridge University Press 1982 – originally published by Stevens & Sons Limited in 1958).
67
Alexander Orakhelashvili, The Interpretation of Acts and Rules in Public International Law 394 (Oxford
University Press 2008).
68
Appellate Body Report, supra n. 60, para. 21; Appellate Body Report, Canada – Measures Affecting the
Importation of Milk and the Exportation of Dairy Products, WT/DS103/AB/R, WT/DS113/AB/R, and
Corr.1, para. 133 (adopted 27 Oct. 1999); Appellate Body Report, Korea – Definitive Safeguard Measure
on Imports of Certain Dairy Products, WT/DS98/AB/R, para. 81 (adopted 12 Jan. 2000); Appellate Body
Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R, para. 549 (adopted 21 Mar.
2005).
69
Orakhelashvili, supra n. 67, at 393.
70
Appellate Body Report, supra n. 65, para. 106 and WTO Appellate Body Report, United
States – Restrictions on Imports of Cotton and Man-made Fibre Underwear, WT/DS24/AB/R, para. 24
(adopted 25 Feb. 1997).
71
Appellate Body Report, supra n. 60, para. 21.
72
Ibid., para. 23.
73
Appellate Body Report, United States – s. 211 Omnibus Appropriations Act of 1998, WT/DS176/AB/R,
para. 338 (adopted 1 Feb. 2002); Appellate Body Report, United States – Continued Dumping and Subsidy
Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R (adopted 27 Jan. 2003).
74
Appellate Body Report, supra n. 68, para. 81.
 THE PRINCIPLE OF EFFECTIVENESS 49

Appellate Body pointed out that an appropriate reading of this ‘inseparable package
of rights and disciplines’ must, accordingly, be one that gives meaning to all the
relevant provisions of these two equally binding agreements.75 All of the WTO
treaties are interrelated and ought to be interpreted harmoniously to preserve the
presumption against conflict between international treaties.76 The harmonious
interpretation of international treaties is of utmost importance for the sake of creating
a symphonic WTO whole.77
However, it needs to be pointed out that the principle of effectiveness is not
limitless and should not be used by the interpreter to add what is not included in the
text of a treaty. As emphasized by the International Law Commission, a too extensive
interpretation would risk undermining the treaty itself. It is therefore not possible to
adopt an interpretation which runs counter to the clear meaning of the terms as this
would be considered a revision of the treaty rather than an interpretation.78 As
underlined by Lennard, the risk of applying the principle of effectiveness too broadly
or extensively is higher in the WTO context as the textual interpretation has been
preferred to other methods of interpretation. It is undisputed that the WTO DSB
prefers literal interpretation over the teleological.79 The Appellate Body has repeat-
edly argued this by stating that the object and purpose of the WTO Agreement must
be taken into account to determine the meaning of a term and cannot be used as a
standalone tool of interpretation.80 Lennard stressed that if the principle is given too
large of a scope it can amount to a broad teleological approach, reading things into
the treaty that lend an air of neatness and regularity in pursuit of a perceived object
and purpose but do not flow from its terms and do not represent a good faith,
fundamentally textual, interpretation.81 Similarly, Lauterpacht considered that the
principle of effectiveness is one of the standards of interpretation and therefore shall
be used only to support the interpreter in its efforts to give effect to the intention of
the parties.82

75
WTO Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/
R, paras 81 and 95 (adopted 12 Jan. 2000).
76
Susy Frankel, The WTO’s Application of ‘The Customary Rules of Interpretation of Public International Law’ to
Intellectual Property, Victoria University of Wellington Legal Research Papers Paper No 2/2014 http://
[Link]/sites/default/files/microsites/kernochan/08-wto-application-of-the-custom
[Link] (accessed 4 July 2018).
77
Joost Pauwelyn, Conflict of Norms in Public International Law: How WTO Law Relates to Other Rules of
International Law 240–244, 247 (Cambridge University Press 2003).
78
Interpretation of Peace Treaties (Second Phase), Advisory Opinion, 1950 ICJ at 229.
79
Michael Lennard, Navigating by the Stars: Interpreting the WTO Agreements, 5(1) J. Int’l Econ. L. 17, 25
(2002); Claus-Dieter Ehlermann, Six Years on the Bench of the ‘World Trade Court’. Some Personal
Experiences as Member of the Appellate Body of the World Trade Organization’ 36(4) J. World Trade 605,
616 (2002).
80
Appellate Body Report, supra n. 60, para. 20.
81
Lennard, supra n. 79, at 60.
82
Lauterpacht, supra n. 66, at 283.
50 LEGAL ISSUES OF ECONOMIC INTEGRATION

With reference to the interpretation of the Protocol of Accession of China, a

WTO Member may argue that the interpretation described above and that is more
favourable to China conflicts with the principle of effet utile because it would reduce
the first line of section 15(d) to redundancy or in utility. As stated by O’Connor, the
expiry of (a)(ii) cannot be interpreted to mean that an investigating authority must
use the methodology for market economy producers as that would be to render
paragraph (d) ‘inutile or without sense’. Therefore, if the interpreter considers that,
following the expiration of section 15(a)(ii), a Member State may only deviate from
general rules on normal value by proving that China is an NME by relying on the
Second AD Note to Article VI:1, it will then deprive of any meaning section 15(d).83
Furthermore, section 15(d) shall be read together with section 15 (a) as the former
set the conditions that should be fulfilled to justify the deviation from the general
methodology. More precisely, the market economy criteria serve the purpose of
defining, in practice, how to assess the existence of the special difficulties mentioned
by the Working Party Report that affect the determination of cost and price compar-
ability in the context of Anti-Dumping investigations and justify the departure from
the general methodology. In such cases, the importing WTO Member might adopt a
special methodology as a strict comparison with domestic costs and prices in China
might not be appropriate. The result of the assessment on its market economy criteria
determines whether the importing member is (or is not) obliged to use Chinese prices
or costs when determining the normal value of the products in Anti-Dumping
investigations. If the result of the assessment is negative, China can be treated as an
NME and the importing Member may adopt an alternative methodology such as the
use of surrogate prices in a third market economy country.
According to the first line of paragraph (d), the importing Member State may
refer to the criteria laid down in national legislation (and therefore not to the AD
notes) to evaluate if China can be regarded as a market economy. Such an inter-
pretation would harmoniously give meaning to the GATT, the Anti-Dumping
Agreement as well as to the remaining part of section 15. It will also not deprive
the AD Note of any meaning so that it could continue to be applicable in all the cases
where WTO Members did not adopt market economy criteria.84
Any other construction would be contrary to the actual terms of section 15 and
would render completely ineffective the reference to the GATT and WTO Anti-
Dumping Agreement.
83
Appellate Body Reports, Canada – Certain Measures Affecting the Renewable Energy Generation Sector/
Canada – Measures Relating to the Feed-in Tariff Program, WT/DS412/AB/R / WT/DS426/AB/R, paras
5.26 and 5. 28 (adopted 24 May 2013).
84
Bernard O’Connor, Much Ado About ‘Nothing’: 2016, China and Market Economy Status, 10(5) Global
Trade & Cust. J. 176, 178 (2015). See also Edwin Vermulst, Juhi Dion Sud & Simon Evenett, Normal
Value in Anti-Dumping Proceedings Against China Post-2016: Are Some Animals Less Equal Than Others?, 5
(11) Global Trade & Cust. J. 212, 219 (2016).
 THE PRINCIPLE OF EFFECTIVENESS 51

To corroborate this interpretation, an interpreter can also emphasize the different

approach taken by WTO Members with respect to section 16 of the Protocol of
Accession. In this Section in fact, twelve years from the accession of China led to the
complete repeal of the whole Section and not of a single paragraph. In section 15,
instead, the expiration of the fifteen year period will produce effects merely on a
paragraph of the Section.85 That different approach may be used as an additional element
to understand the intention of the drafters of the text who intended to maintain in force
the other paragraphs of section 15 and in particular, paragraphs (a), (a)(i) and (d) thereof.

6 FINAL REMARKS
In the eyes of a historian, the dispute described in this article might seem paradoxical.
The opening of China to international trade in the nineteenth century was obtained
by the use of force and as a consequence of the Opium Wars. The United Kingdom,
and France in particular, forced China to open its market and to trade with them.
Two centuries later, China is facing exactly the opposite problem as WTO Members
seek to limit Chinese exports to their markets, particularly in sectors heavily hit by
the economic and financial crisis and affected by overproduction.
China’s fast climb up the rankings of worldwide exporters was likely predictable
long before its accession to the WTO. WTO Members had considerable time to
address such an issue during the fifteen years of negotiations at the WTO. However,
negotiators could not find a clear deal on such an important matter.
As described in this article, the drafting of the section 15 text is somewhat
controversial and leaves room for considerable debate. Scholars have interpreted the
rules in different manners and international law offers different arguments to support
diverging interpretations. This article has demonstrated that the principle of effec-
tiveness may guide the interpreter towards an interpretation of the remaining part of
the Protocol of Accession that remained in force after 12 December 2016 in
harmony with WTO and GATT rules. However, this article also suggests that
lawmakers have to avoid drafting complicated text as legal certainty is a fundamental
principle of WTO law and the possibility to rely on clear rules is of utmost
importance for investigating authorities and, more importantly, economic operators.
The dispute on the recognition of China as a market economy is a remarkable
case in WTO history. The outcome of the dispute, if any, might have a great impact
on the use of Anti-Dumping measures against China. The relevance is not purely

85
Contrary to this interpretation Rao stated that: ‘the expiry of subparagraph 15(a)(ii) has the same effects
as the expiry of paragraph 15(a) as a whole’. Weijia Rao, China’s Market Economy Status under WTO
Antidumping Laws after 2016, 5 Tsinghua China L. Rev. 152, 167 (2013).
52 LEGAL ISSUES OF ECONOMIC INTEGRATION

legal as economic and political concerns may affect the decisions taken by panellist
and members of the Appellate Body.
It should be considered that political evaluations may play an important role in the
settlement of the dispute. In fact, China, Member States and in particular the WTO itself
may be deeply affected by the ‘ruling’ of the DSB. It is not by chance that, in order not to
exacerbate the frictions with China and at the same time accommodate the request of
lobbyists, the European Union found a compromised solution and decided to abandon
the NME approach and move to a special methodology which is not based on the
China’s Protocol of Accession and raises questions about its WTO compatibility.86 The
European Union tried to preserve its relationship with China – one of its main trade and
investment partners – while still listening to the proclamations of the steel, solar panel and
ceramic industries, among others, that are accusing China of destroying the industrial
sector of the European Union. Such a compromised solution shifted the burden onto the
WTO to take such a complicated and politically sensitive decision.
The importance of such a dispute for the whole WTO system needs to be
analysed in light of its context. In fact, the outcome of the Buenos Aires Ministerial
Conference confirmed that it is still a critical time for the multilateral trade regime
and for the WTO as a forum for negotiations. Emerging economies and developed
countries continue to have diverging opinions on NAMA (Non-Agricultural
Market Access) and agricultural reforms that would be necessary to update current
WTO legislation and tariff concessions. Such an impasse risks jeopardizing the
multilateral system and may lead States to find bilateral, plurilateral or sectorial
solutions to achieve further trade liberalization and to create new standards and
rules for the world trade. In addition, more recently, the DSB has also been accused
of being very politicized by the United States and going beyond its mandate by
creating new rules for Members. The United States administration is blocking the
appointment of new members of the Appellate Body with a view of paralysing its
activities and possibly undermining the whole DSB.
Accordingly, a decision that would conflict with United States policy and that
would block the United States from defending its industry from Chinese competi-
tors, risks worsening commercial frictions among States.
In such a context, the disputes relating to the recognition of China as a Market
Economy pose serious threats to the WTO as it could exacerbate the discussion
about its role and limits and it risks undermining the entire trade legal system.

86
Weihuan Zhou & Andrew Percival, Debunking the Myth of ‘Particular Market Situation’ in WTO Anti-
Dumping Law, 19(4) J. Int’l Econ. L. 863 (2016); Weihuan Zhou, Appellate Body Report on
EU − Biodiesel: The Future of China’s State Capitalism under the WTO Anti-Dumping Agreement World
Trade Rev. 1 (2018); Sherzod Shadikhodjaev, Input Cost Adjustments and WTO Anti-Dumping Law: A
Closer Look at the EU Practice World Trade Rev. 1 (2018).