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Italy-EU: Anti-dumping investigations on China

Italy-EU: Anti-dumping investigations on China – Closed on April 20, 2016, the EU open public consultation on the expiration of the provisions affecting the Non Market Economy Status of China.

Antonello Corrado – Exp Legal Italian and International Law firm

On February 10, 2016, the European Commission has launched a public consultation (http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154258.pdf) concerning the methodology used in the EU to hinder Chinese’s anti-dumping practices.

The EU open public consultation on the expiration of the provisions affecting the Non Market Economy Status of China and the anti-dumping investigations on that country closed on April 20, 2016.

The background for this consultation dates back to December 2001, when China joined the WTO and is connected to Section 15 of the Protocol on accession, under which WTO members have the possibility to not consider China as a market economy in anti-dumping proceedings.

In this latter case, domestic prices and costs verified in Non-Market Economy countries are not used to compare with export prices and costs as they are considered unreliable as twisted by the State’s influence. Anti-dumping investigations are, for these countries, based on prices and costs verified in the so-called “analogue countries” (the “Non-Market Economy methodology”).

The position of the EU has been to benefit from the possibility granted by the Protocol and include China in the Non-Market Economy countries (art. 7 (a) of the Council Regulation (EC) no. 1225/2009) and thus, automatically, give China the bargain of evidence to demonstrate its Market Economy status under EU rules and provisions by meeting the five criteria listed in Art. 7 (c) of the Council Regulation (EC) no. 1225/2009, that are:

  1. decisions of firms regarding prices, costs and inputs, including for instance raw materials, cost of technology and labour, output, sales and investment, are made in response to market signals reflecting supply and demand, and without significant State interference in this regard, and costs of major inputs substantially reflect market values;
  2. firms have one clear set of basic accounting records which are independently audited in line with international accounting standards and are applied for all purposes;
  3. the production costs and financial situation of firms are not subject to significant distortions carried over from the former non-market economy system, in particular in relation to depreciation of assets, other write-offs, barter trade and payment via compensation of debts;
  4. the firms concerned are subject to bankruptcy and property laws which guarantee legal certainty and stability for the operation of firms; and
  5. exchange rate conversions are carried out at the market rate.

The reason behind the EU launch of the consultation is represented by the convergence of TWO factors.

On one side, the EU believes that China has not met the five criteria and therefore should continue to be qualified as a Non-Market Economy country. On the other side, Section 15 of the Protocol will expire in December 2016 and this may affect the ability of WTO Members, including EU members, to use the Non-Market Economy methodology in anti-dumping proceedings.

The Public online consultation is aimed at providing the European Commission with the relevant concerns and suggestions from the stakeholders and to identify which, in their opinion, would be the consequences should China be granted the Market Economy status. The Consultation should give the stakeholders a view on how the EU should reduce the negative impacts of the status change. Results should be available in May 2016. The EU will utilize the results of the consultation to implement suitable measures to pursue the anti-dumping protection versus the Chinese export.

The debate in the EU is vibrant and shows a division between those in favor and those contrary. Among the latter, Italy has taken a strong adverse position since the opening of the debate, afraid of the negative impact on the European manufacture, with special emphasis on the iron and steel industry.