Abstract
The case of China against the European Union at the World Trade Organisation on market economy treatment and the consequent use of the analogue country methodology against Chinese producers and exports in anti-dumping investigations has brought about unease in political and legal circles. The European Union, in the interim, has put forth a new methodology, which allows the European Commission to rely on third country and international benchmarks in case where “significant distortions” are found in the exporting country. While this new methodology does away with the classification of Members as market or non-market economies, it is argued that the new methodology of the European Union presents the earlier law in a new form. This chapter examines the nuances of the new anti-dumping legal framework introduced by the European Union and provides a critical analysis of the EU law vis-à-vis China.
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Notes
- 1.
Regulation (EU) 2016/1036 of the European Parliament and of the Council on Protection Against Dumped Imports from Countries Not Members of The European Union, 2016 O.J. (L176/21) (2016) [hereinafter EU Basic Regulation]. The EU Basic Regulation has been amended and repealed several times. The predecessor of Regulation (EU) 2016/1036 was Council Regulation (EC) No 1225/2009 on protection against dumped imports from countries not members of the European Community, 2009 O.J. (L343/51).
- 2.
Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1036 on Protection Against Dumped Imports from Countries Not Members Of The European Union And Regulation (EU) 2016/1037 on protection against subsidized imports from countries not members of the European Union, COM (2016) 721 final (Nov. 9, 2016).
- 3.
Treaty on the Functioning of the EU, Dec. 14, 2007, art. 294, 2008 O.J. (C 115/4)7.
- 4.
Request for consultations by China, European Union – Measures Related to Price Comparison Methodologies, WTO Doc. WT/DS516/1 (Dec. 12, 2016). The dispute involves a challenge by China to certain provisions of the Basic Regulation. China argues that pursuant to the expiry of paragraph 15 (a)(ii) of the Chinese Accession Protocol to the WTO, Chinese producers and exporters cannot be subject to special calculation methodologies and the differential treatment accorded by the Basic Regulation to Chinese producers and exporters is inconsistent with the WTO covered agreements.
- 5.
Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending Regulation (EU) 2016/1036 on Protection Against Dumped Imports From Countries Not Members Of The European Union and Regulation (EU) 2016/1037 On Protection Against Subsidised Imports From Countries Not Members Of The European Union, 2017 O.J., (L338/1). [hereinafter Significant Distortion Rules].
- 6.
See Commission Staff Working Document on Significant Distortions in the Economy of People’s Republic of China for the Purposes of Trade Defence Investigations, http://trade.ec.europa.eu/doclib/docs/2017/december/tradoc_156474.pdf.
- 7.
See for detailed discussion, among others, Edwin Vermulst, Juhi Sud, Simon Evenett, Normal value in anti-dumping proceedings against China post-2016: Are some animals less equal than others? 11:5 Global Trade & Customs J., 212–228 (2016). See also Barbara Barone, One Year to Go: The Debate over China’s Market Economy Status (MES) Heats Up, Directorate-General for External Policies at the European Parliament, 1–24 (2015); Business Europe, China’s Market Economy Status, position paper (2015); Joris Cornelis, China’s Quest for Market Economy Status and Its Impact on the Use of Trade Remedies by the European Communities and the United States, 2:2 Global Trade & Customs J., 105–115 (2007); Laura Puccio, Granting Market Economy Status to China: An Analysis of WTO Law and of Selected WTO Members Policy, European Parliamentary Research Service (2015); Brian Gatta, Between ‘Automatic Market Economy Status’ and ‘Status Quo’: A Commentary on Interpreting Paragraph 15 of China’s Protocol of Accession, 9:4 Global Trade & Customs J, 165–172 (2014); Folkert Graafsma and Elena Kumashova, In re China’s Protocol of Accession and the Anti-Dumping Agreement: Temporary Derogation or Permanent Modification?, 9:4 Global Trade & Customs J., 154-159 (2014); Jorge Miranda, Interpreting Paragraph 15 of China’s Protocol of Accession, 9:3 Global Trade & Customs J., 94–103 (2014); Matthew R. Nicely, Time to Eliminate Outdated Non-Market Economy Methodologies, 9:4 Global Trade & Customs J., 160-164 (2014); Bernard O’Connor, Much Ado About ‘Nothing’: 2016, China and Market Economy Status, 10:5 Global Trade & Customs J., 176–180 (2015); Bernard O’Connor, Market-economy Status for China is Not Automatic, The Centre for Economic Policy Research (2011) as consulted on 20 December 2015, http://www.voxeu.org/article/china-market-economy; Bernard O’Connor, The Myth of China and Market Economy Status in 2016 as consulted on 20 December 2015, available at http://worldtradelaw.typepad.com/files/oconnorresponse.pdf; Bernard O’Connor, China and Market Economy Status III, International Economic Law And Policy Blog (2012) as consulted on 20 December 2015, available at http://worldtradelaw.typepad.com/ielpblog/2012/05/china-and-market-economy-status-iii.html; Theodore Posner, A Comment on Interpreting Paragraph 15 of China’s Protocol of Accession by Jorge Miranda, 9:4 Global Trade & Customs J., 146–153 (2014); Mathieu Rémond, The EU’s Refusal to Grant China ‘Market Economy Status’ (MES), 5:3 Asia Eur J., 345-356 (2007); Marie‐José Rinaldi‐Larribe, William Lightfoot and Zhongxiu Zhao, Does China Deserve the Market Economy Status?, 2:2 J. Chinese Economic & Foreign Trade Stud., 110–120 (2009); Paul Rosenthal and Jeffrey Beckington, The People’s Republic of China: A Market Economy or a Non-market Economy in Anti-Dumping Proceedings Starting on December 12, 2016? 9:7/8 Global Trade & Customs J., 352–355 (2014); Laurent Ruessmann and Jochen Beck, 2016 and the Application of an NME Methodology to Chinese Producers in Anti-Dumping Investigations, 9:10 Global Trade & Customs J., Nicholas Birch, The Special Case of China: Why the Use of a Special Methodology Remains Applicable to China after 2016, 9:6 Global Trade & Customs J., 272–279 (2014); Christian Tietje and Karsten Nowrot, Myth or Reality? China’s Market Economy Status under WTO Anti-Dumping Law after 2016, Pol’y Papers on Transnational Econ. L., No. 34, Transnational Economic Law Research Center as consulted on 20 December 2015, 1–12 (2011), http://telc.jura.uni-halle.de/sites/default/files/telc/PolicyPaper34.pdf; Lisa Toohey and Jonathan Crowe, The Illusory Reference of the Transitional State and Non-Market Economy Status, 2:2 Chinese J. Comp. L., 314–336 (2014); Yanning Yu, Rethinking China’s Market Economy Status in Trade Remedy Disputes After 2016: Concerns and Challenges, 8:1 Asian J. wto & Int’l Health L. & Poly., 77 (2013).
- 8.
Council Regulation (EC) No 905/98 of 27 April 1998 amending Regulation (EC) No 384/96 on Protection Against Dumped Imports from Countries Not Members Of The European Community, 1998 O.J. (L128/18), preamble.
- 9.
Ibid.
- 10.
Council Regulation (EC) No 2238/2000 of 9 October 2000 amending Regulation (EC) No 384/96 on Protection Against Dumped Imports from Countries Not Members of the European Community, 2000 O.J. L257/2.
- 11.
The countries listed in the Basic Regulation as NMEs were Albania, Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Mongolia, North Korea, Tajikistan, Turkmenistan and Uzbekistan.
- 12.
Regulation (EU) No 1168/2012 of the European Parliament and of the Council of 12 December 2012 amending Council Regulation (EC) No 1225/2009 on Protection Against Dumped Imports from Countries Not Members of the European Community, 2012 O.J. (L344/1).
- 13.
For a detailed discussion of the substantive and procedural aspects of the MET system and the application of the analogue country methodology, see, EDWIN VERMULST, EU ANTI-DUMPING LAW AND PRACTICE (Sweet & Maxwell, Oct. 2010).
- 14.
Case T-138/02, Nanjing Metalink International Co. Ltd v. Council, Judgment of Court of First Instance (Fourth Chamber, extended composition)., 2006 ECR., II - 4351; Case 35/01, Shanghai Teraoka Electronic Co. Ltd v. Council, Judgment of Court of First Instance (Fourth Chamber, extended composition)., 2004 ECR II – 3671.
- 15.
Case T-498/04, Zhejiang Xinan Chemical Group Industrial v. Council, Judgment of Court of First Instance (Fourth Chamber)., 2009 ECR II-01969; Case C-337/09, Council v. Zhejiang Xinan Chemical Industrial group, Judgment of Court (Grand Chamber)., 2012 ECR ECLI:471.
- 16.
See Commission Staff Working Document on Impact assessment, Possible change in the calculation methodology of dumping regarding the People’s Republic of China (and other non-market economies) accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidized imports from countries not members of the European Union, 6, COM (2016) 370 final (Nov. 9, 2016) [hereinafter Staff Working Document].
- 17.
For further discussion on this aspect, see European Parliament, Directorate-General for External Policies of the Union, Assessment of Trade Defence Policy Decisions for 2014, 23–26 (2015).
- 18.
Council Regulation (EC) No 1972/2002 of 5 November 2002 amending Regulation (EC) No 384/96 on the Protection Against Dumped Imports From Countries Not Members of the European Community, 2002 O.J (L305/1).
- 19.
Panel Report, European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WTO Doc. WT/DS397/P/R (adopted Dec. 3, 2010).
- 20.
Panel Report, European Union — Anti-Dumping Measures on Certain Footwear from China, WTO Doc. WT/DS405/P/R (adopted Oct. 28, 2011).
- 21.
Appellate Body Report, European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WTO Doc. WT/DS397/AB/R (adopted Jul. 15, 2011) [hereinafter EC — Fasteners (AB Report)].
- 22.
Id., ¶ 329.
- 23.
Id., ¶ 354.
- 24.
Amended Article 9(5) of the EU Basic Regulation states as follows:
Suppliers which are legally distinct from other suppliers or which are legally distinct from the State may nevertheless be considered as a single entity for the purpose of specifying the duty. For the application of this subparagraph, account may be taken of factors such as the existence of structural or corporate links between the suppliers and the State or between suppliers, control or material influence by the State in respect of pricing and output, or the economic structure of the supplying country.
See Regulation (EU) No 765/2012 of the European Parliament and of the Council of 13 June 2012 amending Council Regulation (EC) No 1225/2009 on Protection Against Dumped Imports From Countries Not Members of the European Community, 2012 O.J (L237/1), art. 9(5).
- 25.
For more details see, EDWIN VERMULST, EU ANTI-DUMPING LAW AND PRACTICE (Sweet & Maxwell, 2d ed., Oct. 2010).
- 26.
See Staff Working Document, supra note 16, at 13. Compare Commission Staff Document on progress by the People’s Republic of China towards graduation to Market Economy Status in Trade Defence Investigations (2008), http://trade.ec.europa.eu/doclib/docs/2009/june/tradoc_143599.pdf, at 4.
- 27.
The EU found in 2004 that China met the second criterion, see Vermulst, Sud, Evenett, Normal value in anti-dumping proceedings against China post-2016: Are some animals less equal than others? 11:5 Global Trade & Customs J., 212–228, 223 (2016). The last assessment by the EU took place in 2008. The five country-wide criteria are very similar to the five MET discussed above.
- 28.
See Karel De Gucht (then EU trade Commissioner), Modernization of trade defence: Getting the job done, Nov. 7, 2013, http://trade.ec.europa.eu/doclib/docs/2013/november/tradoc_151873.pdf; Moreover, the EU itself argued in the WTO dispute, European Communities-Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, that section 15 of China’s Accession Protocol “entitles” it to treat China as a NME, until 2016. Appellate Body Report, European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, ¶¶ 25, 361, WTO Doc. WT/DS397/AB/R (adopted Jul. 15, 2011). Additionally, in the proposal for the EU’s position on the accession of China to the WTO, the Commission stated as follows: “The EU’s present legislation which provides specific procedures for dealing with cases of alleged dumping by Chinese exporters, which may not yet be operating in normal market economy conditions, will remain available for up to fifteen years after China enters the WTO …”. Proposal for a Council Decision establishing the Community position within the Ministerial Conference set up by the Agreement establishing the World Trade Organization on the accession of the People's Republic of China to the World Trade Organization, recital 54, COM (2001) 517 final, http://trade.ec.europa.eu/doclib/docs/2016/november/tradoc_155079.pdf; See Andrei Suse, Old Wine in A New Bottle: The EU’s Response to the Expiry of Section 15(A)(II) of China’s WTO Protocol of Accession 1–31 (Leuven Centre for Global Governance Studies, Working Paper No. 186, 2017).
- 29.
See AEGIS Europe groups industry associations in various sectors such as steel (Eurofer), bicycles (EBMA), solar panels and cells (EU ProSun), metals (Eurometaux), metal alloys (Euroalliages) and ceramics (Cerame-Unie), http://www.aegiseurope.eu.
- 30.
See European Commission, Possible change in the methodology to establish dumping in trade defence investigations concerning the People’s Republic of China: Inception Impact Assessment (2016), http://ec.europa.eu/smart-regulation/roadmaps/docs/2016_trade_002_dumping_investigations_china_en.pdf.
- 31.
The inception impact assessment report states as follows on page 4: “Certain provisions in the Protocol on the accession of China to the WTO expire in 2016, and this may affect the ability of other WTO Members, such as the EU, to use the Non-Market-Economy methodology automatically.” See European Commission, Inception Impact Assessment (2016), http://ec.europa.eu/smart-regulation/roadmaps/docs/2016_trade_002_dumping_investigations_china_en.pdf.
- 32.
On April 10, 2013, the Commission published a legislative proposal aimed at modernizing the block’s trade defence instruments. The proposal introduced several protectionist elements including the initiation of ex officio investigations in case of a perceived threat of retaliation and the removal of the lesser duty rule in certain situations. See, Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1225/2009 on protection against dumped imports from countries not members of the European Community and Council Regulation (EC) No 597/2009 on protection against subsidised imports from countries not members of the European Community, COM (2013) 192 final (Apr. 10, 2013), http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_150838.pdf.
- 33.
See EU modernises its trade defence instruments, Fact Sheet, (Jan. 23, 2018), http://europa.eu/rapid/press-release_MEMO-18-396_en.htm.
- 34.
European Parliament resolution of 12 May 2016 on China’s market economy status, Parl. Euro. Doc. P8_TA 0223 (2016).
- 35.
See College Orientation Debate On The Treatment Of China In Anti-dumping Investigations (July 20, 2016), http://europa.eu/rapid/press-release_IP-16-2567_en.htm.
- 36.
See Commission Proposes Changes to the EU’s Anti-Dumping And Anti-Subsidy Legislation (Nov. 9, 2016), http://europa.eu/rapid/press-release_MEMO-16-3605_en.htm.
- 37.
Request for Consultations by China, European Union – Measures Related To Price Comparison Methodologies, WTO Doc. WT/DS516/1 (Dec. 12, 2016).
- 38.
Communication from the Panel, European Union – Measures related to price comparison methodologies, WTO Doc. WT/DS516/11 (Dec. 11, 2017).
- 39.
European Commission Press Release, Commission welcomes Agreement On New Anti-Dumping Methodology, (Oct., 3 2017), http://trade.ec.europa.eu/doclib/press/index.cfm?id=1735. See also European Parliament Press Release, EU anti-dumping measures that protect jobs: MEPs and ministers strike deal (Oct., 3, 2017), http://www.europarl.europa.eu/news/en/press-room/20171003IPR85229/eu-anti-dumping-measures-that-protect-jobs-meps-and-ministers-strike-deal.
- 40.
See Commission fact sheet, The EU is changing its anti-dumping and anti-subsidy legislation to address state induced market distortions (Oct. 5, 2017), http://trade.ec.europa.eu/doclib/press/index.cfm?id=1736.
- 41.
See Significant Distortion Rules, supra note 5.
- 42.
Such countries would be covered by the new Article 2(7) which basically replicates the thus far applicable Article 2(7)(a).
- 43.
Significant Distortion Rules, supra note 5, art. 2(6)(b).
- 44.
European Commission, Commission Staff Working Document on Significant Distortions in the Economy of People’s Republic of China for the Purposes of Trade Defence Investigations, SWD (2017) 483 final (Dec., 20, 2017) [hereinafter China Country Report].
- 45.
See Commission Fact Sheet, The EU is changing its anti-dumping and anti-subsidy legislation to address state induced market distortions (Oct. 5, 2017), http://trade.ec.europa.eu/doclib/press/index.cfm?id=1736.
- 46.
European Commission, Notice of Initiation of An Anti-Dumping Proceeding Concerning Imports of Electric Bicycles Originating in the People’s Republic of China, 2017 O.J. (C353/1).
- 47.
European Commission, Notice of Initiation of An Expiry Review of the Anti-Dumping Measures Applicable to Imports of Chamois Leather Originating in the People's Republic of China, 2017 O.J. (C416/15).
- 48.
The first MET criterion stated as follows:
“Decisions of firms regarding prices, costs and inputs, including for instance raw materials, cost of technology and labour, output, sales and investment, are made in response to market signals reflecting supply and demand, and without significant State interference in this regard, and costs of major inputs substantially reflect market values.”
EU Basic Regulation, supra note 1, art. 2(7)(c).
- 49.
European Council, Implementing Regulation of the Council (EU) No 270/2010 of 29 March 2010 amending Regulation (EC) No 452/2007 imposing a definitive anti-dumping duty on imports of ironing boards originating, inter alia, in the People’s Republic of China, 2010 O.J. (L84/13).
- 50.
Id., recitals 14-16.
- 51.
European Commission, Commission Regulation (EU) No 1035/2010 of 15 November 2010 imposing a provisional anti-dumping duty on imports of melamine originating in the People's Republic of China, 2011 O.J. (L298/10).
- 52.
Id.,¶ 21.
- 53.
Id., ¶ 22.
- 54.
Id., recitals 20–24.
- 55.
Significant Distortions Rules, supra note 5, art. 2(6a)(b).
- 56.
See for instance the following criteria in Significant Distortions Rules, supra note 5, art. 2(6a)(b). It states, “state presence in firms allowing the state to interfere with prices or costs; wage cost distortion; access to finance from institutions implementing public policy objectives; lack of/discriminatory application of bankruptcy, corporate or property laws”.
- 57.
See for instance the following criteria in Significant Distortions Rules, supra note 5, art. 2(6a)(b). It states, “the market in question is to a significant extent served by state-owned/controlled firms; public policies discriminating in favor of domestic suppliers”.
- 58.
See Significant Distortions Rules, supra note 5, art. 2(6a)(e).
- 59.
Appellate Body Report, United States — Measures Relating to Zeroing and Sunset Reviews, ¶ 111, WTO Doc. WT/DS322/AB/R (adopted Jan. 9, 2007).
- 60.
See China Country Report, supra note 44.
- 61.
Russia is supposed to be next in line with the report likely to focus on Russia’s dual pricing system for gas.
- 62.
China Country Report, supra note 44, at 346–436.
- 63.
China Country Report, supra note 44, at 3.
- 64.
In fact, China included the new methodology in its WTO dispute with the EU regarding the normal value calculation methodology brought on 12 December 2016 by means of a footnote reference.
- 65.
World Trade Organisation, Meeting of the Committee on Anti-Dumping Practices of 25 October 2017 (Oct. 25, 2017), https://www.wto.org/english/news_e/news17_e/anti_25oct17_e.htm.
- 66.
As discussed above, China successfully argued the illegality of the EU’s IT test before the WTO and recently both Argentina and Indonesia successfully challenged the ‘cost adjustment methodology’ applied by the EU in the anti-dumping investigation against Argentine and Indonesian biodiesel. See for more details, Appellate Body Report, European Union-Anti-Dumping Measures on Biodiesel from Argentina, WTO Doc. WT/DS473/AB/R (adopted Oct., 6, 2016); Panel Report European Union — Anti-Dumping Measures on Biodiesel from Indonesia, WTO Doc. WT/DS480/R (adopted Jan., 25, 2018).
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Vermulst, E., Sud, J. (2018). Treatment of China in EU Anti-dumping Investigations Post-December 2017: Plus ça change, plus c’est la même chose. In: Nedumpara, J., Zhou, W. (eds) Non-market Economies in the Global Trading System. Springer, Singapore. https://doi.org/10.1007/978-981-13-1331-8_9
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