A WTO dispute resolution panel has ruled that China did not meet its WTO commitments when it imposed anti-dumping (AD) duties and countervailing duties (CVD) on U.S. chicken exports to China in 2010. China has 60 days to appeal the ruling. If the ruling is not reversed by the WTO Appellate Body, it should impact more than just chicken meat trade with China.

The chicken meat dispute actually began in September of 2009 when the U.S. imposed a 35 percent AD tariff on imported Chinese automobile tires. The Chinese governments general approach on trade issues at that time was to immediately retaliate against imports of any country that challenged Chinas export policies. Two days after the U.S. decision on the tariff for tires, the Chinese announced an investigation on the dumping of U.S. chicken meat and paws which totaled $670 million of imports in 2009. Later China announced an investigation of subsidies for U.S. chicken production, which were actually subsidies for corn fed to chickens. In 2010 Argentina faced a similar situation with China over retaliation against soybean oil imports after Argentina imposed AD tariffs on footwear and textiles from China.

After a yearlong investigation, Chinas Ministry of Commerce imposed CVD on August 30, 2010 and AD duties on September 26. CVD ranged between 4.0 percent and 12.5 percent for U.S. producers who participated in the investigation and an all others rate of 30.3 percent.The AD duties ranged from 50.3 per cent a 53.4 percent for the U.S. producers who responded to the investigation and an all others rate of 105.4 percent. Total poultry meat exports from the U.S. to China, mostly broiler meat, declined from $442 million in calendar year 2008 i $402 million in 2009 per $102 million in 210. Projections of lost sales for the last four years are over $1 mIL mILIONS.

The most important part of the decision relates to China’s use of an average cost of production methodology. China estimated the average cost of producing a chicken in the U.S. and then calculated the cost of producing the parts of the chicken. If a part accounted for one-third of the chicken’s weight, it was assigned a production cost of one-third of the whole chicken cost. That approach under-estimated the cost of high-value products, like breast, and over-estimated costs of low-value products like legs and thighs. It resulted in a gross distortion of costs for products with almost no value in the U.S., like chicken paws, that have high-value in China. Chinese officials chose to use this approach even though they had actual costs submitted by two U.S. companies.

This ruling should also apply to trade with Mexico. The U.S. has been repeatedly accused of dumping dark chicken meat in Mexico with the Mexican government using a similar calculation. The WTO panel was careful to point out that the weight issue applied to the specifics of this cause and is not a general rule. The U.S. may need to file a similar case with Mexico if the issue is raised again. According to Inside U.S. comerç, USTR lawyers will raise the issue with other countries.

Els EUA. also won on so-called transparency issues. Procedures to assess market impacts and remedy issues should be so transparent that defendant can clearly understand the implied market impacts. China failed to disclose facts to U.S. companies and explain calculations of margins.

This positive ruling in favor of the U.S. is not an indication that more cases should be filed against China and that the U.S. will easily win those cases. Chinas need to immediately retaliate against the U.S. for the tariff on auto tires led them to file a case they might not have chosen if they had a more thoughtful decision making process. Chicken imports were increasing rapidly and the case was good domestic politics even though it was bad economics and worse trade policy.

This ruling also does not offset the $1 billion in lost chicken meat sales that was precipitated by the tire tariffs. The U.S. had the right to impose the tire tariffs, but tariffs generally do not lead to good trade policies in the long term. They usually result in the knee-jerk reaction that the Chinese employed. When a trade policy decision is contemplated, the question of what happens next should be asked.

Assuming the ruling is upheld, the important point for now is how U.S. chicken meat will again fit into the Chinese market. Chicken meat production in 2013 in China is forecast by the Foreign Agricultural Service (FAS) of USDA at 14.1 milions de tones mètriques (MMT), fins 400,000 MT and 2.9 percent from last year. Consumption is estimated at 13.92 MMT, fins 380,000 MT and 2.8 percent increase. Exports are forecast at 400,000 Montana, down marginally from 411,000 MT last year, and imports are forecast at 270,000 Montana, up slightly from 254,000 MT last year.

Els EUA. Agricultural Attach in Beijing reports that poultry is substituted as a meat protein when pork prices are high. The current slowdown in growth for the Chinese economy may result in more demand for chicken meat over pork. Pork accounts for 60 percent of Chinas meat protein consumption and prices have been reasonable in recent months. South American suppliers of chicken meat have raised selling prices since the U.S. supply is restricted. At times during the last year U.S. chicken prices with the AD duty and the CVD were low enough for Chinese traders to pay for high quality U.S. chicken meat.

According to FAS export data, U.S. chicken meat exports to China declined from 331,000 MT en 2009 per 55,000 MT in 2010. By 2012, exports had moved back to 95,000 MT. Removal of the tariffs should lead to an increase in U.S. chicken meat exports to China replacing lower quality South American supplies.

It is in the best interest of U.S. chicken meat producers and Chinese consumers to put this brush with trade policy behind them. As the worlds second largest producer of broiler chicken meat, after the U.S., and the largest consumer, it is logical for China to be an exporter and importer of chicken meat to even out production and consumption. Importing a high quality product from the U.S. also sets a standard for domestic producers and other importers. With the importance that the Chinese government places on a stable food supply, it should choose non-food items when it has a need to react to U.S. trade policy.

Ross Korves és analista de política comercial i econòmica amb veritat sobre Comerç & tecnologia (http://www.truthabouttrade.org). Segueix-nos: @TruthAboutTrade en refilo | Veritat sobre el Comerç & tecnologia de Facebook.