In a recent High Court decision, the court questioned the market economy status of China. In terms of this case, tyre manufacturers complained that Chinese tyres were being dumped in the South African Customs Union. The South African manufactures alleged that the Chinese economy is not an open-market economy and that due to government intervention the prices of products are artificially low and therefore the International Trade Administration Commission (?ITAC?) should not recognise China as having market economy status for purposes of conducting the anti-dumping investigation.

After ITAC investigated the anti-dumping complaint it verified the Chinese exporters' information and concluded that no dumping occurred and thus terminated the anti-dumping investigation. The South African tyre manufacturers thus took ITAC's decision on review in the High Court.

In the instance where ITAC finds that there is government intervention in a country or industry in a country, in other words the country or industry should not have market economy status, ITAC may use the a surrogate or third country to determine the normal value (the price at which the goods are sold in the exporting country). Thus if a China does not have market economy status, ITAC will not verify the normal value of Chinese manufacturers but may use the normal value of a surrogate or third country. This third country normal value should increase the normal value and thus make a finding of dumping more likely. In the present instance the South African tyre manufacturers alleged that Chinese Taipei should be used as the third country for purposes of determining the normal value of the Chinese exporters as they alleged that China does not have market economy status.

The case also deals with the Record of Understanding. This is a political accord signed between the Republic of South African and the People's Republic of China in which South Africa recognises China's market economy status for purposes of anti-dumping investigation. The court finds that the Record of Understanding does not constitute an international treaty and that it does not give legislative recognition of China's market economy status. South Africa is therefore not bound to adhere to the Record of Understanding, and in fact ITAC is acting contrary to national law if it does follow the Record of Understanding.

The court thus finds that ITAC had a duty to investigate China's market economy status. ITAC's decision to terminate the anti-dumping investigation was thus set aside and ITAC was ordered to re-investigate the anti-dumping complaint with specific reference to China's alleged non-market economy status.

The judgement leaves two open questions:

1. Does the decision open doors for other determinations made by ITAC in which it accepted China's  ,market economy status?
2. What are the implications for the political relations between South Africa and China should South Africa proceed to ignore the bilateral Record of Understanding?