Why Does The EU Try To Continue To Restrict China With The Standard Of "Market Distortion"

The EU has clear standards for market economy status, but China has not met these standards. If China's market economy status is recognized, it will lead to China's endless dumping to Europe, which is disastrous for European manufacturing and employment.

According to Article 15 of the Protocol on China's Accession to the WTO, the practice of WTO members using "surrogate country" data in anti-dumping investigations against Chinese exports should be terminated on December 11, 2016. Fifteen years ago, China was listed as a "non market economy country" when it joined the WTO.

As the time limit specified in Article 15 will expire, China's anti-dumping caused by its failure to obtain market economy status for many years is expected to end. Unexpectedly, on November 9 local time, the European Commission proposed a new method, the "market distortion standard", to assess whether Chinese manufacturers dumped steel and other products at unfair low prices, in response to China's request for market economy status treatment at the end of this year.

In response, Lu Kang, spokesman of the Ministry of Foreign Affairs, said on the 10th that China believed that the European Commission's proposal to cancel the list of "non market economy countries" reflected the willingness of the EU to fulfill its obligations under Article 15, and China affirmed this. However, China regrets that the new approach proposed by the European Commission replaces the concept and standard of "non market economy" with the concept and standard of so-called "market distortion", which does not fundamentally eliminate the "surrogate country" approach, but simply continues the original approach in a disguised form. This approach neither fully and thoroughly fulfills Article 15 obligations, nor is it consistent with WTO rules.

Even within the EU, there are different voices. On the 15th, the Ministry of Finance issued the Joint Statement on the Fourth China France High level Economic and Financial Dialogue, which said that France supports the EU's obligation to comply with Article 15 of the Protocol on China's Accession to the WTO.

So why does the EU try to continue to restrict China with the standard of "market distortion"? How will China EU trade and even world free trade be affected? How should China respond? How will the situation change? This topic will be analyzed in detail and presented in depth. (Xin Ling)

A pair of "little shoes" that have been worn for 15 years. It was originally agreed that they would be freed by the time, but now someone has proposed, "No, you run too fast without shoes, and I can't catch up with you. Since you must take off this old pair of shoes, take them off, but you need to prepare a new pair of" little shoes ".

This is the current situation that China's exports may face in the EU. On November 9, the European Commission formally submitted a proposal to the European Parliament and the European Council to amend the trade defense legislation, in which it proposed to use the concept and standard of "market distortion" for anti-dumping.

Zhou Xiaoming, Deputy Representative of the Permanent Mission of China to the United Nations in Geneva, pointed out that some "sunset clauses" in the Protocol on China's accession to the WTO will expire on December 11 this year and cannot be reused“ Non market economy status ”As a tool for imposing trade sanctions on China, the proposed amendment to the law is just to deal with this situation. Therefore, although the provisions of the law can be applied to any third country, it has obvious directionality.

　 Shoes worn for 15 years

Since joining the WTO 15 years ago, China has been recognized as the biggest beneficiary of this round of trade liberalization and globalization, and China's rapid development and changes have also had a profound impact on the global economy. However, on the global trade stage, Chinese enterprises have been running in sweating in the "non market economy" shoes, which are pinched and sometimes even heavy, From time to time, he will be "fined" or even whistled "suspended".

According to the Ministry of Commerce, China has always been the largest target country for trade remedy investigations. Since the establishment of the World Trade Organization in 1995, there have been a total of 1149 trade remedy investigation cases initiated by 48 members against China, accounting for 32% of the total cases.

To clarify the context of wearing these "little shoes", we must carefully review a "sunset" clause signed when China joined the WTO in 2001 - Article 15 of the Protocol on China's accession to the WTO, which contains the method of determining "price comparability" according to Article VI of the General Agreement on Tariffs and Trade and the Anti dumping Agreement.

At that time, China was listed as a "non market economy country", which meant that its trading partners were allowed to impose anti-dumping duties on China's export of too cheap products under the WTO framework.

In the normal market environment, to judge whether dumping exists, it is necessary to compare the price of imported goods with the price and cost of goods in the original export country; For non market economy countries, domestic prices cannot be used as benchmark prices to compare export prices, and regulations allow the use of data from another market economy country, the "substitute country", to calculate anti-dumping duties.

According to paragraph (a) (i) of Article 15, if a Chinese producer can prove that its industry has market economy conditions, the importing country needs to use Chinese prices or costs; According to paragraph (a) (ii) of Article 15, if the manufacturer cannot clearly prove that it has market economy conditions in manufacturing, producing and selling the product, the importing country can use the method of not strictly comparing with China's domestic price or cost.

Article 15 (d) clearly stipulates: "Once China has confirmed that it is a market economy in accordance with the domestic law of the importing WTO member, the provisions of subparagraph (a) shall be terminated, but as of the date of accession, the domestic law of the importing WTO member must include standards related to market economy.

"In any event, the provisions of subparagraph (a) (ii) shall terminate 15 years after the date of accession. In addition, if China confirms that a particular industry or sector has market economy conditions according to the domestic law of the importing WTO member, the non market economy provisions in subparagraph (a) shall no longer apply to that industry or sector. "

The above provisions mean that after December 11, 2016, those WTO members who listed China as a non market economy country will no longer be able to use the "surrogate country" method to carry out anti-dumping investigations on this ground, otherwise it would be a violation of WTO rules.

In the opinion of Dr. Cheng Shuaihua, Executive Director of the Geneva based International Trade and Sustainable Development Center (ICTSD), according to the WTO accession protocol, after the 15 year transition period, the practice of using "surrogate countries" for Chinese products will end in any case, which has nothing to do with whether China is a market economy country.

　　 european union The real dilemma of

In fact, as early as April 27, 1998, before China's accession to the WTO, the EU passed Regulation 905/98, namely, the "Amendment to the EU's Anti dumping Market Status Issue against China", which removed China from the list of countries with non market economy status, but this does not mean that the EU automatically recognized China's market economy status.

European Union Trade Commissioner Cecilia Malmstr? m) Announcing the proposal on her blog, she said that the EU's economy is the most open in the world, and its enterprises are also the most active in the international market; But "some countries are far less open than us, sometimes they act according to completely different rules, and this unfair trade has caused pressure on our producers and workers".

Malstrom particularly mentioned the problem of overcapacity in the steel industry. The European steel industry is full of complaints about cheap steel from China. The German Hardware Union claims that the dumping of steel from China has lost 330000 jobs in the EU and led to a 28% drop in the price of steel in the EU.

After the European Commission announced the proposal to amend the trade remedy legislation, all sectors of the European Union also received mixed responses. Angus Europe believes that the European Commission has deleted the five standards for non market economy adopted earlier by the European Parliament and replaced them with an imprecise new concept of "market distortion". The entire legal basis for anti-dumping measures against Chinese imports will be weakened. It is worried that after the new proposal is passed, the EU will be in a weaker position to face unfair trade.

Alessia, spokesman of the Social Democratic Party Group of the European Parliament MosCA pointed out that the proposal did not touch the most important point at all, and believed that the introduction of "market distortion", a new concept not defined in WTO rules, the discretion given to the European Commission by the formulation of country or industry reports, and the change of the burden of proof were the most serious problems in the proposal.

The People's Party and Youth League welcomed the proposal, stressed that the new legislation must be 100% in line with WTO rules, and fully considered recent precedents. Christofer, Swedish MP Fjellner further pointed out that based on the recent WTO ruling on the biodiesel trade dispute between Argentina and the EU, the space for the European Commission to adopt the price of a third country is very limited.

Due to the haste of the European Commission's proposal, it is reported that the European Parliament is expected to start detailed discussions on the proposal in December. The European Commission had hoped to push for the adoption of the proposal by the end of this year, but it is difficult to do so at present.

In addition, EU member states also expect to pass the proposal on the modernization of EU trade defense measures (TDI) before December 21 this year. The proposal was submitted in April 2013 because of disagreement among member states.

The proposal includes: notify relevant enterprises two weeks before taking anti-dumping and countervailing measures; Even if no industry makes a claim, the European Commission can start an investigation, for example, in the case of possible trade retaliation; Under certain circumstances, the "low tax principle" is not used, because the "low tax principle" usually requires that the level of anti-dumping duty rate only needs to offset the material damage to producers.

The United Kingdom has always opposed the revision of the "low tax principle", and Sweden, Denmark, Finland, Ireland, Cyprus, Malta, Latvia and the Czech Republic have also opposed it. They worry that the high anti-dumping duties attached to many imported products will instead increase the burden on upstream producers and consumers.

　　 inverse globalization Will it become the new normal?

After the introduction of the European Commission's proposal, the Chinese official said that the European Commission's proposal had cancelled the list of "non market economy countries", reflecting the willingness of the European Union to fulfill its obligations under Article 15. China affirmed this; However, China regrets that the new approach proposed by the European Commission replaces the concept and standard of "non market economy" with the concept and standard of "market distortion", which does not fundamentally eliminate the "surrogate country" approach, but simply continues the original approach in a disguised form, which is also inconsistent with WTO rules.

Van BAel and a Belgian law firm specializing in anti-dumping Bellis also pointed out that the new method of trade remedy investigation proposed by the European Commission no longer lists China separately, so it conforms to the WTO rules in form. However, the main rules of the new method are the same as those of the previous trade remedy investigation against China, and it is likely to be found to violate the WTO rules. However, on the other hand, China cannot immediately initiate a lawsuit to the WTO under the new law case, but must wait for the time when the EU uses the new method to investigate Chinese products.

VVGB Law Firm, headquartered in Brussels, believes that the new method of trade remedy investigation of the European Commission has obviously ignored the recent ruling of the WTO Appellate Body on Argentina's biodiesel case. The Appellate Body acknowledges that the investigating body can use the information exported abroad, but it must make corresponding adjustments to return it to the domestic production cost of the exporting country, which means "production cost" It must reflect the cost prevailing in the exporting country, that is, the investigation organization must return to the exporting country to determine the cost.

However, these good news may not cover up another global trend that poses a huge challenge to trade liberalization.

Hubert Ren é, Director of the Geneva Office of the Friedrich Albert Foundation, the oldest political foundation in Germany SchillinGER) has a clear judgment on this.

In his view, since the 2008 financial crisis, the western world has been undergoing tremendous anti globalization actions. Both the wave of opposition to the new trade agreement and the US presidential election are examples of this phenomenon.

In addition to the tide of anti globalization in public opinion, the world economy has also entered the stage of anti globalization. Since the financial crisis, the growth of global trade has basically decreased by half, from more than 6% per year to about 3%, which continues to lag behind the growth of global GDP. He pointed out that today's world may have entered a market driven phase of gradual anti globalization.

"Generally speaking, the world may not need more trade liberalization," Schillinger said in an interview with the 21st Century Economic Report on the 18th, "We have already obtained the most benefits that trade liberalization can bring, and the side effects that trade liberalization brings have always existed. If we want to gain efficiency gains through further trade liberalization, more redistribution is necessary."

In his view, in such a turbulent situation, potential trade conflicts between China and some major economic partners such as Europe, the United States and other countries should be resolved through pragmatism and diplomacy.

Schillinger believes that China can do two things: first, it should continue to rebalance its economy and shift from a purely export-oriented model to a stronger commitment to domestic demand; Second, at the international level, China can become a stronger and more direct role in advocating multilateralism and a rule-based international system. At the same time, pragmatism and understanding of the domestic economic and political constraints of some partners will also help to prevent a tit for tat trade war that may eventually lead to no one's benefit.