Change in EU designation of Chinese economy could make anti-dumping action harder, says expert

The European Commission has launched a consultation asking whether it is time to grant China market economy status and change the EU's anti-dumping policies toward the country.

The Commission has asked whether the EU should change the treatment of China in its anti-dumping investigations after December 2016 when certain provisions in China's Protocol of Accession to the World Trade Organisation expire, and how that might work.

This is an important and politically-charged decision for the EU, said competition law expert Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com.

"At first sight, the Commission’s consultation appears rather abstract and only of minority interest. However, the consultation is on a very important issue," he said.

"Currently, China is considered not to be a market economy. Consequently, when there are EU investigations into alleged dumping in the EU of products made in China, the production costs for the goods are calculated by reference to producers in third party countries such as Turkey or India, rather than China itself. Third party producers may well have higher production costs than manufacturers in China, making it more likely that dumping of Chinese goods in the EU can be demonstrated," Lougher said.

"If the current arrangement remains in place then China will continue to be classified as a non-market economy, and in anti-dumping investigations the production costs of manufacturers in market economies outside China will continue to be used. If China is classified as a market economy, then the EU will assess whether Chinese imports are being dumped in the EU by reference to the production costs of those Chinese producers," Lougher said.

"Changing the designation of China from a non-market economy to a market economy is likely to mean that it will be harder for the Commission to demonstrate that Chinese products are being dumped in the EU. In that case, it would be harder to impose anti-dumping duties on Chinese imports. Given the current political furore about the impact on EU jobs of imports of cheaper steel from China, the Commission’s current review takes place in a politically-charged environment," he said.  

The Commission described the consultation as "part of an in-depth impact assessment that will include a careful study of the economic effects of any potential change broken down by member states, with a particular focus on jobs".

EU trade commissioner Cecilia Malmström recently asked China to reduce the overcapacity in its steel mills and said the European Commission is to open three new anti-dumping investigations in relation to steel products emanating from China.

The European steel industry and unions issued a statement in November asking MEPs to create policies to bolster the European steel industry, saying that 5,000 jobs had been lost in the previous month. Since then, further job cuts have been announced by steel producers in the EU, including more than 1,000 jobs at Tata Steel plants.