CHINA: MES?
The concerns of the EU Industry
Fondation Madariaga - 22 June 2012
Inès Van Lierde - Chair of BUSINESSEUROPE TPI Working Group
China and the WTO
China became WTO member in 2001.
In the WTO Accession Protocol, a transitional period (up to 11 December 2016)
was agreed upon in respect to several topics, one of those being the potential
granting of “Market Economy Status” (MES)
WTO and MES are, de facto and de jure, two independent concepts:
• There are WTO members which were not granted MES at the time of their
accession (China)
• There are non WTO members which were granted MES (Russia)
China and the WTO
In 2016, the Accession Protocol provides for the recognition of China as a
market economy, though there is a legal debate (and uncertainty…) about the
“automaticity” of such a recognition by WTO Members.
The question (and the debate..) there is:
- Is this recognition automatically granted pursuant to the Accession legal
provisions (in particular Art. 15 of the Accession Protocol) OR
- Could WTO members unilaterally decide after 2016 that China still has to
proof MES according to their own criteria (EU, US…), by industrial sector or case
by case?
China and the WTO
Article 15(a) of the Accession Protocol provides specific measures for
comparing prices in anti-dumping actions.
i) If Chinese producers can show that ME conditions prevail in their industry in
China, then importing WTO members must use Chinese costs and prices to
determine the normal value.
ii) If Chinese producers cannot show that ME conditions prevail in their
industry, then importing Members can use methodologies not based on a strict
comparison with Chinese prices and costs.
In December 2016, this second provision (ii) expires.
China and the WTO
Article 15(d) of the Accession Protocol provides that it is China that must show
that it has MES either for the whole economy or for subsectors of the economy.
Hence, there is nothing automatic in the granting of MES.
‘Showing’ MES is not one single act valid immediately in all WTO Members.
China must show that it has achieved MES according to the criteria laid down in
the relevant law of each WTO member.
As China was not granted MES on WTO accession, some Members consider
China to have MES. Others do not.
China and the WTO
The problem facing investigating authorities (the Commission in the EU) is
what happens if the exporting producers cannot show that ME conditions
apply in their industry (or China is unable to show that it has achieved MES).
In that situation, the investigating authority is not obliged to use the
domestic Chinese prices and cost.
It is likely that the investigating authority will have to use prices that are
somehow comparable to domestic prices but not the actual prices. In other
words, prices and costs adjusted to true market conditions.
This issue still has to be resolved.
China and the WTO
The criteria for granting MES in the EU are purely technical:
-
Prices and costs are made without State interference, at market values
Accounting records are in line with international standards
Production costs and financial situation are exempted from former NME
legacy (public ownership, barter trade…)
Bankruptcy and property laws do provide legal certainty and stability
Exchange rate conversions are carried out at market rate
the criteria are technical…
and their assessment should remain technical as well!
MES and the PRACTICE
According to the Basic AD Regulation:
 A product is considered as dumped if sold in the EU, to the first independent
buyer, at less than its “normal value”. Both values (domestic price, i.e. the
normal value”) and the export price are calculated ex works.
 The “normal value” for products exported from NME countries is mainly
defined as the price in a market economy third country or its reconstructed
value.
 The “normal value” for product exported from countries with MES is
defined as their domestic price
very low in the case of China,
should China be awarded the MES.
MES /MET and the EU PRACTICE
The impact for the EU industry of the current MET practice is a quite valid
anticipation of what future MES could mean to industry.
Ferro-Molybdenum: AD investigation regarding imports from the PR China
-
-
MET requests had been received from 10 companies
Only one company did comply with the MET criteria (no State interference)
Provisional AD duty: 3,6% (other measures varying between 9,8% and 26,3%)
Between provisionals and final duties, a meeting took place under the auspices
of the China Chamber of Commerce and Minmetals (CCCMC): exports quotas
were allocated according to the lowest level of AD duty, i.e. the company with
MET…
At the definitive stage, MET was withdrawn. A country wide duty has been
imposed: 22,5%
MES/MET and the PRACTICE
Other examples:
FeSi originating from PR China: company with MET
another company (IT)
residual duty
15,6%
29%
31,2%
Silicon originating from PR China: company with MET
residual duty
16,3%
19%
MES/MET and the PRACTICE
MET: Evidence to be provided for in the current AD practice
-
-
MET questionnaire to be filled in and documented by the companies
requesting MET
Non confidential version of the replies: very poor….
Complainants not in a position to rebut or comment!
Deadlines extremely short: « a determination (…) shall be made within three
months of the initiation of the investigation (…) after the Community
Industry has been given an opportunity to comment » (Art.2 (7) c) of the Basic
ADR)
BUT: comments in practice are quite difficult if not impossible!
SOME FINAL THOUGHTS
MES: same difficulties…but at the level of the country (or industry’s sector)!
It is the industry’s opinion therefore that:
-
-
All MES criteria should be screened and checked very carefully, on TECHNICAL
grounds only!
Given the « lesser duty rule » in the EU, AD duties are already extremely low
as compared with the US.
EU industry would be very exposed to Chinese dumping practices should MES
be granted automatically or for political reasons….