Marcus Sohlberg

A public consultation has been launched by the European Commission in relation to the expiration of certain provisions of China’s Accession Protocol to the World Trade Organization (WTO) concerning its status as a non-market economy (NME). The expiration of these provisions, on December 11, 2016, may have an impact on the ability and the effectiveness of the European Union to impose antidumping duties on imports from China.

Under standard WTO rules, dumping is calculated by comparing export price and normal value (either the domestic prices or the fully-absorbed cost of production, plus profit) of the product at issue in the exporting country. However, in relation to NME countries, like China, WTO rules allow the calculation of dumping by comparing the export price with a reference value in a third country that is a market economy, because domestic prices and costs in China are considered unreliable and not determined by market forces.

There is an ongoing debate regarding what the actual effect is of the expiration of the provisions of China’s WTO Accession Protocol on December 11, 2016 on the country’s NME status. Should the effect be that China graduates from an NME to a market economy country, the European Commission expects that dumping duties on imports from China would become, on average, lower and therefore render the EU’s trade defense instrument less effective in protecting affected EU industry.

As a result, the European Commission is analyzing various options, including how to limit the potential negative impact of a possible change to how dumping duties are calculated vis-à-vis China. The three options under consideration are: (i) no change to EU legislation (i.e., continue using an NME methodology in calculating anti-dumping duties); (ii) change the methodology of how the EU calculates anti-dumping duties with no mitigating measures; and (iii) change the methodology of how the EU calculates anti-dumping duties with mitigating measures (e.g., not apply the lesser duty rule to imports from China, which serves to keep the dumping duty within a limit strictly necessary to prevent injury to the EU industry, thereby increasing the duty rates and the protection for EU industry).

Stakeholders are invited to comment on the social and economic impact of each of these three options. The consultation will therefore help the European Commission to identify the main concerns of stakeholders and to find options to address any potential negative impact from a change in China’s NME status. The closing date for comments is April 20, 2016.