Markets have long been used as benchmarks for economic value in various areas of law. However, a crucial question has received less than adequate attention: what type of market should be used in the market benchmark? More specifically, given all the imperfections one typically finds in day-to-day markets, how perfect does a market have to be in order to qualify as a benchmark for economic value? This Article discusses this question using countervailing duty law as a case study. Countervailing duty law allows the United States to impose countervailing duties on imported merchandise to offset subsidies conferred by foreign governments upon such merchandise. In identifying and measuring subsidies, countervailing duty law utilizes a market benchmark, i.e., whether the government action under investigation is on terms more favorable than those available in the market. After tracing the evolution of the market benchmark analysis in countervailing duty law, I demonstrate that the market benchmark analysis, as currently formulated in countervailing duty law, envisions a perfect or near-perfect market, i.e., a market that is undistorted by the government action under investigation. I further demonstrate the pitfalls of this perfect-market approach by critiquing the basis on which a market is rejected as distorted, the manner in which alternative benchmarks are selected, and the fundamental disconnect between the perfect-market approach and the purpose of countervailing duty law.
Wentong Zheng, The Pitfalls of the (Perfect) Market Benchmark: The Case of Countervailing Duty Law, 19 Minn. J. Int'l L. 1 (2010), available at http://scholarship.law.ufl.edu/facultypub/222