Dumping is defined as the setting of export prices below domestic prices, thus causing harm to industries in the importing country. Any investigation method yielding increased domestic prices increases the likelihood of affirmative dumping determinations. As tariff and non-tariff barriers are reduced to comply with World Trade Organisation (WTO) rules, anti-dumping (AD) cases have been increasingly used to protect domestic industries.

The anti-dumping investigation methodologies of the United States (US) and European Union (EU) are characterised by vague and ambiguous definitions. They lack detailed guidelines for use in practice, for example how to establish that dumping is causing material injury to domestic industry. Calculation methods are flawed and even WTO-incompatible. The result is overestimation of exporting country domestic prices, affirmative dumping determinations and inflated dumping margins. In addition, discretion is a structural feature of AD regulations. Since AD cases are handled in national courts, this discretion results in politically motivated rather than technical determinations of AD findings.

These methods apply to all countries. Non-market economies (NMEs) face an additional burden through the use of the surrogate country approach. This method emerged out of negotiations over how to determine domestic prices in state trading countries in the 1960s and has been retained in WTO regulations. The approach allows petitioners to select a market economy as a surrogate for the NME. Prices in the surrogate country proxy for domestic prices in the NME. Discretion in the selection process and comparison of dissimilar products between countries are common. Calculation of normal value is often abused. Overvaluation of the factors of production is nearly universal, particularly for labour costs since this method ignores these differences between countries. This disregards the primary reason that exports from poorer countries are cheaper and leads to biased findings. In addition, the use of adverse facts available allows the US to use questionable data in calculating normal value. The surrogate country method allows petitioners to manipulate calculations and manufacture affirmative determinations and inflated dumping margins.

In recognition of market oriented reforms in NMEs, the US and EU provide additional procedures for some NMEs. Firms in industries under investigation can attempt to qualify for special treatment predicated on the demonstration of market conditions for the firm and often the entire industry. These additional approaches are an improvement over the pure surrogate country method as they allow for the use of actual domestic prices and separate duty rates for qualifying firms. However, these firms remain subject to the flawed ‘normal’ AD methods. Many firms are excluded because the criteria for qualification are ambiguous and applied in a discretionary manner.

The criteria for classification of NMEs is also characterised by ambiguity and subject to the discretion of the administration. The EU simply has a list that it periodically updates but no published selection criteria. The US has a provision allowing it to make designations based on ‘other factors considered appropriate’. These are not defined. This amount of discretion yields classifications based on political considerations rather than empirical results. It is unclear when a country can or should change status. The ability to generate whatever findings are desired through use of the surrogate country method makes this a critical issue for NMEs.

Case studies of AD investigations in Viet Nam involving catfish, shrimp, bicycles and footwear reveal the extent of discretion applied in practice by both the US and EU. The entire array of distorting methods were employed to arrive at the desired results. The US refused to abide by its WTO commitments and defended this by stating that WTO rulings are not binding. NME status was the consistent factor resulting in affirmative determinations and exaggerated anti-dumping duties. This gave the US and EU increased scope to influence investigation outcomes through use of the surrogate country method. The shrimp case indicates that Viet Nam can contest some aspects of these calculations and reduce final AD duties. Although Viet Nam can reduce the scale of damage from AD investigations, NME status will continue to result in affirmative determinations and inflated dumping margins.

The dispute settlement mechanism (DSM) of WTO will not provide an avenue for contesting discriminatory AD determinations. National AD laws for the most part comply with the WTO Anti-dumping Agreement. The problem is that WTO validates the surrogate country approach. It is therefore not possible to challenge this mechanism. The benefit to Viet Nam of joining WTO is not access to the DSM. It is the inclusion of an expiry date on NME status in its accession agreements. That this date is negotiated indicates the political rather than technical meaning of NME designation. Until NME status is revoked, Viet Nam will continue to be vulnerable to discretionary AD claims.