Abstract

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— When China joined the WTO in 2001, its accession protocol included an
option for members to apply alternative methodologies when assessing dumping for Chinese imports. This reflected China’s special status as an economy in transition. The EU has made use of this option, normally using an alternative methodology to calculate dumping in cases involving China.
WTO rules allow for special treatment in anti-dumping (AD) investigations for so-called non-market economies on grounds that prices do not really reflect market forces and EU legislation. Typically, non-market economy treatment is associated with higher levels of protection for domestic industries.
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— Parts of the provisions in the accession protocol are set to expire in December 2016. As a result, the future approach to determine dumping in investigations concerning China in the EU has come under debate – as well
as the potential implications of any changes to the current treatment.

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— From a European perspective, there are several options on the table: They range from sticking to the status quo, i.e. continuing to provide for differential treatment, to allowing for full market economy treatment – a potential game changer for Chinese exporters in AD investigations.

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— The outcome matters for both European and Chinese industries and could have potential ramifications on China-EU trade relations. First, China is the largest source of imports for the EU with a share of 20% of extra-EU imports and the exporting country most frequently concerned by the EU’s AD activity. European industries will be affected to a varying extent depending on whether they are downstream users, export-oriented or import competing. Steel and ceramics might be particularly sensitive in the latter
category. Second, the debate will give an indication of the perceived degree of state influence in the setting of prices and costs in the Chinese economy. Third, the EU’s ruling could be indicative of the direction of the EU-China bilateral investment treaty, which is currently being negotiated.
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— The European Commission has to walk a tightrope taking into account the concerns of the different market participants affected as well as member states, which have often held divergent positions on AD in the past. Balancing the different views is not going to be easy but important for the EU to ensure future trade defence rules and practices concerning China will
be sound and robust.