On Wednesday, the European Commission was expected to present a proposal on how to proceed with anti-dumping investigations against China after December 11th. But the only thing we saw this week was an orientation debate among the commissioners at the college meeting. After December 11th, the EU will no longer be able to apply the analogue country method in its antidumping investigations against China, according to China’s accession protocol to the WTO. If the EU does not change the basis for calculation before that day, we not only risk stepping into a trade war with China, the EU will also lose its credibility as a proponent of open and rule-based trade. Time is not on our side and Trade Commissioner Cecilia Malmström must present a proposal to ensure that the EU follows its commitments to the WTO. But she must also refrain from making all our anti-dumping rules more protectionist.
When discussing the necessary change of methodology for antidumping investigations against China, or the “Market Economy Status” (MES) for China we must firstly underline one thing: The issue at hand is not whether China is a market economy or not – it is about the EU fulfilling its legal commitments to the WTO. The term “Market Economy Status” is a sad term for describing which countries we do not use the analogue country method against. China is not a market economy – and no one is arguing that it is. According to EU rules, Russia, Cuba and Venezuela all have “Market Economy Status” – hardly countries that I would call market economies. Ideally, we should stop talk about granting China MES and start talking about how to fulfill our commitments to the WTO and at the same time preserve trade defense instruments that are effective and based on legal certainty.
As we approach the deadline this winter, the risk of a trade conflict with China dramatically increases. I do hate revenge and tit-for-tat in trade policy but after 12 years in the European Parliament’s Committee for International Trade I sadly know that is is the way things work. French wine, Swedish telecom equipment and German chemicals all risk becoming the target for Chinese retaliation – something that would definitely slow growth and kill jobs in Europe. Given the risk of a trade conflict and knowing the deadline for a long time – I only find it deplorable that the Commission still has not come forward with a proposal.
Ms Malmström’s answer to the situation has been to prepare an entirely new methodology for antidumping investigations altogether. She says it will be based on the methodology used by the United States – that makes me worried. The EU has several times criticised the US antidumping procedures and pointed out that they work as a protectionist tool. Antidumping duties imposed by the US authorities often become shockingly high – a latest example is a duty of 522 percent on cold-rolled flat steel from China. Recent EU antidumping duties have amounted to between 16 and 36 percent. But even at those rates, imports have decreased by 85 to 99 percent. US antidumping provisions have also been found incompatible with WTO rules at several occasions. The US International Trade Commission often uses a constructed price to determine the normal value in antidumping cases. If the Commission’s proposal will include a constructed value method in EU antidumping investigations – I expect the conditions to use such a method to be rare and very specific. The method must also be free from arbitrary decisions from antidumping investigators – otherwise, the method risks becoming a way to introduce protectionism from the back door.
A proposal that will allow for a new method to be used against all WTO members in well-defined and limited circumstances is worth considering. But the method should not be constructed solely to keep all duties against China at the current level, as commissioner Malmström has suggested. It should be devised to address real cases when using domestic prices in antidumping investigations cannot yield a normal value.
The time for action is now. Ms Malmström must come forward with a proposal that is compatible with WTO rules, makes antidumping investigations against China non-arbitrary and legally foreseeable, and that finally does not open up for protectionism through the back door. It would at least have spared us a trade conflict with China – a conflict for which the guilt would fall on the Commission and its inaction. But action must also mean the right action – reverting to protectionist reforms is definitely not the right thing to do in times as these. It would only hurt growth, jobs and consumers here in the EU.