Change in the methodology for anti-dumping investigations concerning China



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Change in the methodology for anti-dumping investigations concerning China

Introduction


When China joined the World Trade Organisation (WTO) in December 2001, a transitional arrangement for its accession allowed for a specific methodology for calculation of dumping. This transitional arrangement was introduced in Section 15 of China's Accession Protocol.. Some of these provisions will expire in December 2016. The Commission is studying the implications of the expiry of these provisions on the EU anti-dumping and anti-subsidy legislation. This examination covers legal aspects, and possible economic and employment effects This examination is ongoing.

2. Background

Under WTO rules, the EU can impose anti-dumping duties, additional to tariffs, on products from third countries if an investigation demonstrates that these products enter the EU at dumped prices causing injury to the EU industry.

Under the standard rules, in normal market circumstances, dumping is calculated by comparing the export price of a product to the EU with the domestic prices or costs of the product in the exporting country. However, WTO rules allow investigating authorities to apply special treatment for certain countries where market conditions do not prevail. In practice, domestic prices and costs in those countries are not used as the basis to compare with export prices because they are considered unreliable owing to State influence in the economy.  Instead, investigating authorities use data from a market economy country (the so called 'analogue country') as the basis for calculating dumping margins. This is the so-called Non-Market-Economy methodology.

As a result of the many distortions in the Chinese economy, prices and costs do not reflect normal market forces. Therefore, under China's Protocol of Accession to the WTO, the Non-Market Economy methodology has so far been applied in anti-dumping proceedings concerning China. The EU legislation contains similar provisions, and as a result, in its anti-dumping investigations, the Commission uses automatically, in all cases, prices or costs from an “analogue country” to calculate the level of dumping of Chinese products, unless the concerned Chinese producers are able to show that they individually qualify for market economy treatment. The EU had also - autonomously - put in place five criteria that, if fulfilled, would have allowed treating China as a “Market Economy” for the purpose of anti-dumping investigations before 2016. China does not meet all these criteria as of yet.


3 Legal aspects

Certain provisions of Section 15 of China's Protocol of Accession to the WTO on "Price Comparability in determining Subsidies and Dumping" will expire on 11 December 2016. As a result of this expiry, the Commission is analysing possible impact on the EU anti-dumping legislation1. Should the Commission decide to put forward a proposal, amendment of the current legislation would entail adoption through ordinary legislative procedure by the Council (under a qualified majority vote) and the European Parliament.



4. Economic Importance of trade defence as regards imports from China
As of end 2015, imports from China were subject to 52 definitive anti-dumping (AD) measures. In terms of value, the share of imports from China to the EU, affected by AD measures is 1.38%2. The undertakings for solar panels account for a large part of the imports from China subject to anti-dumping measures and if these are excluded, the figure would be around 0.68% of imports in value.
Main sectors
The industries with the most measures in force are (i) chemical and allied and (ii) iron and steel with 14 and 13 definitive measures in force respectively.
The largest sectors by market value are iron and steel, with turnover ca. €29 billion, followed by ceramics, with €13 billion turnover
Please see annex 1 for a full data overview.
Employment by sector
The total employment in the EU relating to products on which there are AD measures in force, concerning imports from all origins, is ca. 250,000 in 2015. More than 90% (234,300) of those jobs relate to products on which there are measures imposed concerning Chinese imports3.
The sectors with the highest number of jobs in the manufacturing of products subject to AD measures concerning China are ceramics, iron and steel, other mechanical engineering (bicycles), and electronics (solar panels).
The ceramics sector and the iron and steel sector employ 102,600 and 55,000 people respectively, for the manufacture of products covered by AD measures. Total employment in these sectors is larger than what is directly covered by anti-dumping measures. For example, in the iron and steel sector, the total employment is ca. 350,000 people according to Eurofer4.
Employment by Member State and regions
79% of the 234,300 jobs5 in the manufacturing of products covered by the AD measures concerning Chinese imports are in Italy, Germany, Spain, France, Portugal and Poland. For two countries, Ireland and Croatia, the employment figures are not available, due to the recent accession of Croatia to the EU and the predominance of services, rather than manufacturing in Ireland's economy.

The regions manufacturing products subject to AD measures concerning Chinese imports are widely spread across the Union. (e.g. Lombardy in Italy, North Rhine-Westphalia and Saarland in Germany and Catalonia in Spain).

Please see annex 2 for a full data overview of employment per Member State for products directly affected by anti-dumping measures concerning China, broken down by sector.

5. Options
The Commission is exploring a number of possible options to follow up the expiry of the provisions in China's Protocol of Accession to the WTO. Given the slowdown of the Chinese economy coupled with the excess capacities in a number of sectors, notably in steel, such analysis is of particular importance. The Commission is currently conducting an assessment of the possible impact of each option. Work is on-going.
There are three basic options:
Option 1: Leaving the EU legislation unchanged:
This option would consist in continuing to apply the anti-dumping investigations concerning Chinese products -including to the reviews of the 52 measures currently in place, the non-market economy methodology.

There is a clear risk that this option could put the EU in breach of WTO obligations and may be challenged leading to compensation.6



Economic impact of option 1:

It is not possible to quantify at this stage the economic impact of such a scenario, which depends on a number of factors currently unknown, with potential challenges and costs including in employment terms.


Option 2: Changing the antidumping methodology for trade defence investigations against China with no mitigating measures:

EU law would be modified to reflect the expiry of the transitional arrangement by removing China from the list of non-market economy countries. It would require an ordinary legislative procedure amending the antidumping regulation.


Economic impact of option 2:

As mentioned above, at the end of 2015, there were 52 measures in place on imports originating in China. These measures affect 1.38% of EU imports from China. About 250,000 jobs in EU industries are in sectors where anti-dumping measures against China are in place.

An external study commissioned by the Commission estimates, on the basis of a representative sample of recent anti-dumping investigations concerning China, that using the market economy methodology in AD cases against China could reduce the level of the anti-dumping measures by 27 percentage points compared to application of the analogue country regime7. As a result, gross import prices on imported products from China that are subject to AD measures could fall by 19 percent after the duty is imposed. The lower anti-dumping duties on Chinese imports are estimated to result in lower Chinese prices to EU consumers and downstream industries. Chinese imports will also increase between 17 and 27 percent with respect to what they would be if the analogue country regime were applied and will substitute for sales of the EU import-competing industries (and/or imports from competing third countries)..

The external study examines the impact of lower tariffs on import levels. Then it examines the impact of these changing import levels on sectoral employment in the EU. The results are based on the observation and econometric analysis of import prices and quantities from China and employment in the related sectors in the past.

The external study indicates that the short term direct effects of removing China from the list of non-market economies in the anti-dumping regulation, in EU sectors currently affected by injurious dumping from China, could result in losses in the range of 30,400-77,000 jobs, if no mitigating measures are put in place.

This estimate is based on two assumptions, the first being that the same products as now would be affected by TDI in the short term, and the second being that the share of Chinese imports affected by TDI would be 2.5%, or the historical average, which is higher than the figure at the end of 2015.

In the long run, losses in the range of 73,300 – 188,300 jobs could be expected if no mitigating measures are imposed. This is an estimate based on potential job losses that might result from lower anti-dumping duties which may not offset the real dumping generated by the cost and price distortions in the Chines economy. This is based on the assumption of dumping in new sectors, based on cases launched by other countries concerning China. A further assumption is that the long term share of Chinese imports affected by AD measures would be 5.7%, which is a long term upper bound.

The study also looks at indirect effects on upstream and downstream sectors. Calculating upstream and downstream effects in the low range of the two estimates lead to an indirect effect that is slightly positive for job creation due to cheaper imports (+ 9,700). In the upper bound scenario leading to direct potential losses of 188,300 jobs, indirect effects are negative on balance and increase the number of overall jobs lost to 211,000, still assuming that no mitigating measures are taken.

The following table summarizes the potential long-term effects of changing the methodology for anti-dumping investigations concerning China on EU employment that the external study found:

Table : Range of potential job losses in the EU from treating China as market economy in anti-dumping investigations without mitigating measures, long-run




Lower bound

Upper bound

Direct effects on Jobs

-73,300

-188,300

Indirect upstream effects

-20,700

- 53,100

Indirect downstream effects

+30,400

+30,400

Total effect

-63,600

-211,000

Source: Assessment of the economic impact of changing the methodology for calculating normal value in trade defence investigations against China. 21 December 2015

The total employment effect in the long term, if no mitigating measures are taken, is therefore a possible employment loss, including indirect upstream and downstream effects, ranging between 63,600 and 211,000 jobs. This sharply contrasts with a recent study by EPI researchers Scott and Jiang (2015) commissioned by an EU industry consortium, AEGIS. This study forecasts that changing the methodology for anti-dumping investigations concerning China would put between 1.7 million and 3.5 million EU jobs at risk. The study assumes that MES methodology would lead to a decrease in duties for all imports from China. It should however be recalled that in reality, currently products subject to anti-dumping duties only represent 1.38% of imports from China. EPI findings should thus be read with great caution.



Option 3: Changing the antidumping methodology for China as part of a package including mitigating measures:
EU anti-dumping legislation would be modified to reflect the expiry of the transitional arrangement by removing China from the list of non-market economy countries while, at the same time, strengthening other related provisions of the legislation. These could include safeguarding the definitive anti-dumping measures in place ('grandfathering') as well as strengthening other provisions of the trade defence instruments (anti-dumping and anti-subsidies) to ensure the continued effectiveness of the instruments for future cases. The exact scope and design of such mitigating measures remains to be defined. The ultimate objective of such measures is, within the WTO and EU framework, to maintain the ability to redress any distortions that would be detected on the market of the exporting country, thereby imposing anti-dumping duties that reflect economic reality, maintaining a level playing field.

Economic impact of option 3:

Until such mitigating measures are defined, it is difficult to predict their precise impact. A first rough estimation of the effect of mitigating measures may reduce the impact by at least half of what the impact of option 2 would be.


6. next steps

The Commission has decided to conduct an in-depth Impact Assessment to inform its decision making process on the matter. In this process, possible economic and employment effects broken down by Member States will be studied carefully. The Commission will discuss the matter again in July on the basis of the Impact Assessment and the feedback from the European Parliament and the Council.


Annex 1. Economic Importance of TDI for products subject to anti-dumping measures concerning China (broken down by sector)



Sectors

Imports from China of Products under Measures (euros)

Total Imports from China (euros)

Percentage of Imports from China under Measures

Imports from rest of the world of Products under Measures (euros)

Ceramics

673,436,173

1,417,974,670

47%

-

Iron and Steel

151,518,111

10,852,462,010

1%

358,809,549

Other mechanical engineering

441,683,079

72,261,850,800

3%

59,647,071

Electronics

2,087,945,770

77,441,821,950

1%

31,422,666

Other

330,111,796

2,772,004,330

13%

17,164,719

Wood and paper

1,313,568

3,951,526,120

0%

-

Chemical and allied

279,356,031

17,020,957,590

2%

163,755,299

Other metals

14,261,920

3,083,830,890

0%

4,595,683

Textiles and allied

154,569,640

1,212,159,220

13%

-

Total

4,134,196,089

301,090,047,630

1.37%

 


Annex 2. Employment per Member State for products subject to anti-dumping measures concerning China (broken down by sector)


Member State

Ceramics

Chemical and allied

Electronics

Iron and Steel

Other

Other mechanical engineering

Other metals

Textiles and allied

Wood and paper

Grand Total

Italy

49,780

425

1,583

8,548

191

4,253

236

 

1,225

66,241

Germany

9,697

552

17,561

14,951

1,999

10,248

192

245

365

55,810

Spain

17,044

694

1,643

4,082

484

675

205

47

2,219

27,094

France

3,432

382

795

5,612

247

1,394

762

 

280

12,906

Portugal

11,149

 

 

309

93

427

 

 

87

12,065

Poland

4,128

190

11

4,948

612

728

341

 

 

10,959

United Kingdom

4,593

61

650

3,250

129

 

52

 

 

8,736

Belgium

 

299

571

1,709

2,246

141

 

41

2,860

7,866

The Netherlands

1,597

180

 

793

785

2,719

15

 

 

6,090

Sweden

 

14

 

2,555

 

3,356

41

 

 

5,965

Czech Republic

435

39

755

2,133

424

493

 

 

 

4,278

Austria

 

851

340

1,750

 

278

 

 

 

3,219

Romania

16

61

 

2,760

 

292

 

 

 

3,130

Slovakia

 

 

 

961

1,032

53

490

 

 

2,536

Greece

695

83

 

30

 

116

51

 

155

1,130

Lithuania

21

537

 

 

 

484

 

 

 

1,042

Hungary

 

 

 

135

140

744

 

 

 

1,018

Luxemburg

 

32

 

 

 

 

 

968

 

1,000

Malta

 

 

890

 

 

 

 

 

 

890

Slovenia

 

 

400

46

 

218

49

 

 

712

Finland

 

 

 

380

308

 

1

 

 

689

Bulgaria

 

 

 

 

 

581

49

 

 

630

Latvia

 

 

 

 

209

 

 

 

 

209

Denmark

 

 

 

48

 

 

18

 

 

66

Estonia

11

 

 

 

 

 

 

 

 

11

Cyprus

 

 

 

 

 

 

 

 

9

9

Grand Total

102,600

4,400

25,200

55,000

8,900

27,200

2,500

1,300

7,200

234,300

Annex 3. Overview of the Expiry of Measures
3.1. Measures expiring after 12 December 2016
Product

Country


Type

Employment

Normal expiry

Number of measures due to expire per year

Min AD duty

Max AD Duty



Seamless pipes and tubes of stainless steel

China


ad

4,000


21.12.2016

 

48,3%



71,9%

Trichloroisocyanuric acid (TCCA)

China


ad

200


31.12.2016

































2016=2
3.2%

42.6%


Stainless steel fasteners and parts thereof

China


ad

900


08.01.2017

 

11,4%



27,4%

Steel ropes and cables

China


ad

2,700


10.02.2017

60.4%


Oxalic acid

China


ad

100


19.04.2017

 

14.6%



52,2%

Tartaric acid

China


ad

200


25.04.2017
8.3%

34,9%


Lever arch mechanisms

China


ad

600


05.09.2017

 

27.1%



47.4%

Aluminium radiators

China


ad

1,500


10.11.2017
12.6%

61.4%


Chamois leather

China


ad

100


07.12.2017

































2017=7

58.9%


Aluminium foils ("household foils", end consumer rolls)

China


ad

300


14.03.2018
14.2%

35.6%


Organic coated steel products

China


ad

5,400


16.03.2018

 

0.0%



16,2%

Threaded tube or pipe cast fittings, of malleable cast iron (MTF)

China


ad

100


15.05.2018

 

24,6%



57,8%

Ceramic tableware and kitchenware

China


ad

25,100


16.05.2018
13,1%

36,1%


Bicycles

China


ad

11,800


05.06.2018

 
48.5%



Bicycles (parts)

China


ad

16,000


05.06.2018

48.5%


Tungsten electrodes

China


ad

n/a


05.06.2018

 

17.0%



63,5%

Ironing boards

China


ad

see below

24.07.2018
0.0%

42,3%


Ironing boards (Since Hardware)

China


ad

722


24.07.2018

 
35.8%



Peroxosulphates (persulphates)

China


ad

100


17.12.2018

2018 = 10

0.0%


71,8%

Ferro-silicon

China


ad

1,000


11.04.2019

 

15,6%



31,2%

Solar glass

China


ad

900


15.05.2019
0.4%

36.1%


Citrus fruits

China


ad

400


12.12.2019
361,4 EUR/tonne

531,2 EUR/tonne



Sulphanilic acid

China


ad

219


19.12.2019

 2019=4


33.7%

Citric acid

China


ad/UT

700


23.01.2020

 

15,3%



42,7%

Monosodium glutamate

China


ad

200


23.01.2020
33,8%

39,7%


Citric acid

China


ad

700


23.01.2020

 

15,3%



42,7%

Welded tubes and pipes of iron or non-alloy steel

China


ad

1,000


29.01.2020

90.6%


Fasteners, iron or steel

China


ad

20,000


28.03.2020

 

0.0%



74,1%

PSC wires and strands

China


ad

1,300


06.06.2020
0.0%

46,2%


Stainless steel cold-rolled flat products

China


ad

11,820


28.08.2020

 

24.4%



25.3%

Wire rod

China


ad

8,991


16.10.2020
7.9%

24.0%


Tube and pipe fittings, of iron or steel

China


ad

1,000


29.10.2020

 
58.6%



Grain-oriented flat-rolled products of silicon-electrical steel

China


ad

2,539


31.10.2020
21.5%

36.6%


Acesulfame Potassium (ACE-K)

China


ad

63


01.11.2020

2020 = 11

2.6%


4.6%

Employment covered by measures expiring after 12 December 2016 (2016-2020)

3.2. Ongoing investigations and expiry reviews





Product

Country

Type

Employment

Ongoing new investigations to be concluded before 12 December 2016

Aluminium foils ("converter foils")

China

ad

2,002

Aspartame

China

ad

99

Ceramic foam filters

China

ad

120

Cold-rolled flat steel products

China

ad

11,000

High fatigue performance steel concrete reinforcement bars

China

ad

1,000

Ongoing expiry reviews to be concluded before 12 December 2016

Aluminium foils ("household foils")

China

ad

781

Seamless pipes and tubes, of iron or steel

China

ad

18,000

Ring binder mechanisms

China

ad

161

Silicon metal (silicon)

China

ad

800

Sodium cyclamate

China

ad

100

Molybdenum wires

China

ad

200

Aluminium road wheels

China

ad

13,000

Sodium gluconate

China

ad

800



3.3. Measures expiring before 12 December 2016


Product

Country

Type

Employment

Status

Normal expiry

Update

Polyethylene terephthalate (PET)

China

ad

1,300

Def

18.11.2015

Initiation imminent

Polyester high tenacity filament yarn

China

ad

1,300

Def

02.12.2015

Initiation imminent

Solar panels (crystalline silicon photovoltaic modules and key components)

China

ad

25,100

Def/IR/Circumv.

07.12.2015

Expiry review initiated

Okoumé plywood

China

ad

100

Def

03.02.2016

 

filament glass fibre products

China

ad

200

Def

16.03.2016

 

Tungsten carbide and fused tungsten carbide

China

ad

600

Def

25.03.2016

 

Melamine

China

ad

1,500

Def

14.05.2016

 

Coated fine paper

China

ad

100

Def

15.05.2016

 

Open mesh fabrics of glass fibres

China

ad

6,200

Def

10.08.2016

 

Barium carbonate

China

ad

5,400

Def

20.08.2016

 

Ceramic tiles

China

ad

77,500

Def

16.09.2016

 

Hand pallet trucks and their essential parts

China

ad

25,100

Def

14.10.2016

 

Employment in manufacture of products subject to AD measures concerning China expiring before 12 December 2016 (2015-2016)




1 Council Regulation (EC) No 1225/2009

2 Including the Solar Panel undertakings.

3 Source: regulations imposing definitive anti-dumping and anti-subsidy measures following new investigations or expiry reviews

4 http://www.eurofer.be/About%20us/Eurofer%20Portrait.fhtml

5 In order to compute these percentages an internal Commission database was used.

6 See article 22 of the WTO Understanding on Settlement of Disputes (DSU).

7 This average reduction is a combination of lower AD duties in some cases (where the investigation would still conclude Chinese firms are dumping) and elimination of AD duties altogether in other cases.


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