On Wednesday 9 November, the European Commission unveiled plans to settle the tricky question of how China should be treated in anti-dumping investigations in the EU when certain measures of its accession protocol to the WTO expire in December.
The new methodology it is proposing for calculating dumping margins for imports from countries where there is a severely uneven playing field, or the state greatly influences the economy, does not confer market economy status (MES) and is neutral vis-à-vis third countries (which means it can apply to all WTO members).
Under the current methodology, in normal market conditions, dumping margins are calculated by comparing export prices for a product to the EU with domestic prices or the costs of the product in the exporting country. This approach will be maintained and developed in the new method, which will not vary from one country to another. It will apply in the same way to all WTO members and will take account of serious market distortions observed in some countries due to the influence of the state. WTO members will no longer be subject to the ‘similar country method’, which will now be reserved for countries that do not have a market economy and are not part of the WTO.
Several criteria will be taken into consideration to measure distortions, such as public policies, the influence of the state, the predominance of public enterprises, discrimination in favour of national companies and independence of the financial sector.
The Commission will draw up specific reports on countries or sectors where it will be measuring distortions. As at present, companies will have to lodge a complaint, but they will be able to use Commission reports to back up their arguments.
The new methodology will apply to anti-dumping procedures launched by the EU once the amended rules come into force.
The proposal includes a transition period during which all anti-dumping measures in place and investigations under way will remain subject to the current rules.
The Commission plans to boost EU anti-subsidy legislation so that any new subsidies set up during an investigation can be examined and taken into consideration when calculating the final anti-dumping levies.
The proposal now needs to be examined by the Council and European Parliament. It is part of a wider updating of trade defence instruments (TDIs) unveiled by the Commission in April 2013, on which the Council will try to reach agreement this year after two years of deadlock (see EUROPE 11663).
"The proposal is important because it means that the EU is living up to its WTO commitments. This method is country-neutral and does not grant MES to any country. The proposal, once adopted by the European Parliament and the Council, will ensure that the EU's TDIs are adapted to face new challenges as well as our legal and economic realities. We also maintain an equivalent level of protection", said Trade Commissioner Cecilia Malmström.
At the European Parliament, there was immediate criticism from the S&D Group. "The introduction of the concept of significant distortions (not defined in WTO law), the discretion left to the Commission services in the preparation of a report describing the situation in a certain country or sector, and the reversal of the burden of proof (which following the proposal will shift to the complainant) are the most problematic issues", explained Italy’s Alessia Mosca.
"We will keep insisting on a re-industrialisation strategy, which must include modern TDIs to reinforce the global level playing field without any further concessions on social and environmental dumping", she added.
The heads of the cross-party initiative at the Eurropean Parliament against granting China market economy status, the MES Action Group – French socialists Edouard Martin and Emmanuel Maurel – criticise the proposal for not including any of the recommendations formulated by the action group together with trade unions, employers’ organisations, the Committee of the Regions and the European Economic and Social Committee (see EUROPE 11656). China is far from meeting the five criteria laid down by the EU to define a market economy, and the Commission’s proposal will shift the burden of proof to European industry, they explain. (Original version in French by Emmanuel Hagry)