The World Trade Organization’s top court upheld some Chinese objections to a ruling that had backed the right of the United States to impose extra duties on Chinese goods that Washington said were unfairly priced and subsidized.

In particular, the appellate body supported China’s argument—rejected by the original dispute panel—that the imposition of such a double penalty broke WTO trade rules.

The case turned on the treatment of goods from a country that is not a market economy and where the state influences prices.

China hailed the ruling and called on the United States to end the way it calculated anti-dumping duties on unfairly priced goods and countervailing duties on subsidized products.

“The WTO has conclusively established that the United States acts unlawfully in the methods by which it calculates and imposes countervailing duties on imports from China,” a Chinese government statement said.

It said the ruling confirmed its argument that the use of a non-market economy method to calculate anti-dumping duties resulted in an illegal double penalty when applied together with countervailing duties on subsidies.

U.S. Trade Representative Ron Kirk said he was disappointed with the appeal court’s verdict.

“I am deeply troubled by this report,” Kirk said in a statement. “It appears to be a clear case of overreaching by the Appellate Body. We are reviewing the findings closely in order to understand fully their implications.”

Trade-Distrorting Effects
U.S. lawmakers also criticized the ruling, which they said would make it harder for the United States to fight the trade-distorting effects of China’s “state capitalism.”

“The WTO is an extremely important international institution. But Appellate Body overreach will only undermine confidence in the WTO as an institution—and will only make it more difficult to reach new agreements to liberalize trade,” said Representative Jim McDermott, a Democrat.

The original ruling published on Oct. 22 had backed the right of an importer to set duties on goods from non-market economies to compensate for unfair pricing and subsidies—something previously struck down by a U.S. court.

The appeal court did not back all the points raised in China’s appeal, but where, in its 241-page ruling, it found that the United States had acted unlawfully it called on Washington to bring its practices into line with international trade rules.

The appeal demonstrated the growing assertiveness of China, the world’s biggest exporter, in the global trading system.

The dispute, launched by China in September 2008, involved U.S. duties on imports of Chinese steel pipes, off-road tyres and woven sacks.

WTO rules allow countries to impose anti-dumping duties on imports that are dumped, or sold for less than they cost at home.

But in a non-market economy it is unclear what a fair domestic price is, or how far it has been undercut. So the normal rules do not apply and importers have some discretion in calculating the duties for goods from non-market economies. (Reuters)