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Mainland China Pursues WTO Case Against EU Anti-dumping Methodology

At the meeting of the WTO Dispute Settlement Body on 21 March 2017, the EU – as expected – blocked mainland China’s initial request for a WTO investigation into the manner in which the EU calculates its anti-dumping duties against Chinese exporters. Mainland China’s request for the establishment of a WTO panel against the EU had been circulated to the WTO Members on 10 March 2017.

Blocking a first request for a WTO panel is a standard operating procedure in WTO disputes. In wasting no time to get the WTO dispute against the EU started, mainland China requested a special meeting of the WTO Dispute Settlement Body on 24 March 2017. The special meeting is expected to be held in early April 2017, when it is mainland China’s intention to file its second and final request for the establishment of a WTO panel. WTO rules prevent the EU from rejecting such a second dispute request.

As for the reason for rejecting the first request made by mainland China, the EU recalled the legislative efforts that it is currently making to amend its anti-dumping legislation. The EU criticised mainland China for attacking the EU’s ongoing internal legislative processes, which seek to eliminate the EU’s current distinction between market and non-market economies (which are currently subject to the EU’s analogue country methodology). The EU stated that “[nobody] is in a position to predict what the specific outcome of those democratic processes may be”, arguing that mainland China’s request is “unnecessary, manifestly premature and incapable as a matter of principle of being fruitful”.

While mainland China, at the meeting of the WTO’s Dispute Settlement Body, clearly confirmed its determination to launch the legal challenge against the EU’s refusal to grant it market economy status, the US and Japan both rushed to the EU’s defence.

The US and Japan both intervened on the EU’s behalf, arguing that the WTO agreement, including mainland China’s WTO accession protocol, continues to permit countries to employ anti-dumping methodologies that are not based on a strict comparison with domestic costs and prices in mainland China. According to the US, mainland China’s legal argument has no legal merit because it “fails to take into account the remaining provisions of China’s protocol”. The US, moreover, stated that mainland China’s argumentation is “divorced from reality”, as “China’s government continues to intervene heavily in its economy, resulting in serious distortions to the international trading system”.

Despite the fact that mainland China filed a WTO complaint against both the EU and the US on 12 December 2016, mainland China now appears to be prioritising its challenge of the EU’s anti-dumping legislation. With respect to the legal challenge against the US, mainland China has not yet requested a separate investigation. While the US is, thus, for the time being, not yet officially targeted by mainland China, it is likely to be caught in the crossfire soon.

Some legal observers have stated that mainland China is targeting the EU first, seeing potential for an easier victory that could set a favourable precedent for a tougher case against the US.

In this respect, it should be noted that the reactions of the EU and the US, in relation to the expiry of certain provisions of the WTO accession protocol of mainland China on 11 December 2016, are fundamentally different. While the EU has already taken the initiative to modify its anti-dumping legislation, the US has refused to make any changes. President Trump has declared that mainland China is not a market economy, and labour unions, steel producers and other heavy industries have urged the US to stay strong against mainland China’s legal challenge.

In both the EU and the US’s case, Vietnam, Canada, the Russian Federation, Japan, Australia and Mexico notified the WTO of their desire to join the consultations requested by mainland China. While the EU refused these countries’ requests to join the consultations, the US accepted Canada’s, Japan’s and Mexico’s requests to do so.

Content provided by Picture: HKTDC Research
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