BUSINESSEUROPE participants also discuss Market Economy Status for China
The dumping margin is normally calculated on the basis of the difference between the normal value of the goods (usually the domestic price) and the price that is paid by importers (or price of the exported goods). However it is considered that for non-market economies like China there is no real possibility to determine the normal value of the goods because the domestic market does not function independently and there is State intervention.
For this reason the EU has decided to use a different method based on the “analogue country”. The “analogue country” is normally a country with similar size and level of economic development and therefore with a similar cost structure in a given industry. The main objective of the procedure is to determine if the price of the product that is being exported is not lower than its actual cost. However Chinese companies can individually prove that they comply with market economy conditions and therefore be subject to the normal calculation methods.
China’s Accession Protocol to WTO has a subparagraph that allows WTO members to use of a different method of calculation of anti-dumping duties(the EU is using the analogue country methodology). This subparagraph Art° 15subparagraph (a)(ii) is set to expire end 2016.
Many fear that if the EU is no longer able to apply this alternative methodology of calculation it will be impossible to impose Anti-Dumping duties on China and sectors that are main users of these measures (e.g. Steel, Non-Ferrous metals, Fertilisers, Bicycles) will be negatively impacted.
As a result, the debate on MES does not need to be fuelled entirely by the 2016 deadline for the expiry of subparagraph (a)(ii), but can be conducted on its own merits. The EU has strict criteria to grant MES to China and the last time these were assessed in 2011 China did not comply with them.
MES requests are evaluated on the basis of five criteria which aim to establish whether the economic conditions in the country concerned have evolved to the extent that prices and costs can reliably be used for the purpose of trade defence investigations. These five criteria are:
- A low degree of government influence over the allocation of resources and decisions of enterprises, whether directly or indirectly (e.g. public bodies), for example through the use of state-fixed prices, or discrimination in the tax, trade or currency regimes.
- An absence of state-induced distortions in the operation of enterprises linked to privatisation and the use of non-market trading or compensation system
- The existence and implementation of a transparent and non-discriminatory company law which ensures adequate corporate governance (application of international accounting standards, protection of shareholders, public availability of accurate company information).
- The existence and implementation of a coherent, effective and transparent set of laws which ensure the respect of property rights and the operation of a functioning bankruptcy regime.
- The existence of a genuine financial sector which operates independently from the state and which in law and practice is subject to sufficient guarantee provisions and adequate supervision.
China currently fulfils only the second criterion. This is the result of an assessment done in 2011. After that date China did not provide the necessary information for the EU to make a new assessment.