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欧盟与中国的反倾销战争
自中国加入世界贸易组织(WTO),2001年成为正式成员以来,它已经在世界经济舞台上发挥了重要的作用。中国近年来的进口和出口以一个令人难以置信速度增加，越来越多的国家感到来自中国的竞争威胁。许多国家设立了对中国的法律、法规、反倾销协议和安全措施，以及申请在WTO规则中针对中国应用一些规定。在这些申请国中，欧盟(EU)已经对中国设立了反倾销法(AD) ,频繁地视中国为非市场经济体之一(nm)。
自中国加入WTO以来,欧盟已经成为了中国最重要的贸易商之一,反之亦然。然而,由于欧盟的国际贸易巨额赤字,它认为其原因是中国的倾销活动已经严重损害了国内产业和企业。在中国参与WTO的10年的发展以来,它拥有世界上最多的倾销案件,而从官方统计其中三分之一都来自欧盟。这种现象可以用中国贸易部长薄熙来的一个比较来说明了:“美国生产高中档系列产品，而在中国生产中低档的产品。
The Eu China Anti Dumping War Economics Essay
Since China joined World Trade Organization (WTO) in 2001 and became a full member, it has played a significant role in world economic stage. Regarding an incredible increasing number of imports and exports of China in recent years, more and more countries feel competition threats coming from China. A lot of countries have set up laws, regulations, antidumping protocol and safeguards against China, as well as referring to some specifications applied in WTO rules aimed at China. Among these applicant states, European Union (EU) has applied anti-dumping (AD) legislation to China, regarded as one of non-market economies (NMEs), dramatically frequent.
EU has become one of the most important traders of China since China’s accession to WTO, and vice versa. However, due to a huge deficit in international trade of EU, it considers the reason is that China’s dumping activities have done severe damage to domestic industries and firms. During the 10-year development of China’s involvement in WTO, it owns the largest number of dumping cases in the world, from official statistics, one third comes from EU. Such phenomenon is well illustrated by a comparison made by China’s Trade Minister, Bo Xilai: “The United States produces high-and-medium range products while China produces low-and-medium range ones. However, while you are eating lobster, you are still worrying that China eats too much sandwiches.” Such situation just goes to the circumstances under which the EU and China as well.
Because of the EU special anti-dumping regulations, China has challenged and is stilling challenging the difficulty of its exports to EU. The main problem China now encounters is that the application of “the third country principle” in calculating “normal values”. For example, the use of domestic market prices and production costs reported by firms in market economies (MEs) instead of home market prices and production costs announced by firms in NMEs, the dumpers.
This proposal intends to set up a general hypothesis that the employability of such kind of principle is very unfair to NMEs. To an understandable extent, the dumping margins calculated are biased, because there is a huge difference in capital-labor ratio in production between China and “the third country”. The WTO clearly states that: “The agreement does not specify any criteria for determining what third country is appropriate.” Often, EU invites Korea, Singapore, etc. to be “the third country” as an analogue country (AC). China is a country abounded with labor, known as a country which owns labor-intensive industries; however, Korea and Singapore, are countries concentrating on technology-intensive industries. Therefore, capital-labor ratio in production process in such more developed countries is quite different compared to that in China. As a result, the production costs should be different, so the market prices. For such reason, the anti-dumping policy enacted by EU may be considered as an obscure measure of pure protectionist policy, to some extent. This proposal aims at investigating to what extent this general hypothesis is correct. If it is correct, it will do some contribution to the reconsideration and reforms of the EU anti-dumping policy applied to China; if it is not correct, it will be a sample to provide some ideas how to get into the prospective way.
The EU Anti-dumping Policy towards China
The General Framework of EU Anti-dumping Policy
WTO provides the rules about how a country should response to another country acts dumping activities or acts like dumping activities. EU applies its policy stated in Article VI of GATT 1994 (General Agreement on Tariffs and Trade). The general circumstances of using AD measures consist: firstly, the existence of a disparity between the price of an imported good and a normal value; and secondly, the emergence of or the mere potential emergence of an injury to a domestic industry. “A normal value is defined as a comparable consumer price in an exporting country or, if this is not available, then either ‘the highest comparable price for the like product for export to any third country in the ordinary course of trade’ or ‘the cost of production of the product in the country of origin plus a reasonable addition for selling cost and profit’”.
There are four main functional organizations and several steps in the procedure of EU commission anti-dumping investigation. Firstly, the EU domestic complainants are responsible for providing documentation for dumping cases and injury proofness to the EU commission. The EU commission subsequently investigates into the dumping cases provided and determines whether dumping action and injury is actually taking place, whether the dumping activities cause the material damage to importing economies. The EU’s consultative committee has the function of assessing the result coming from the EU commission. The EU’s Council of Ministers is responsible for the final judgment of such cases. If the EU’s Council of Ministers agrees with the case that the exporting country indeed does a dumping action towards EU countries involves damage and injury, EU economies can take measures of anti-dumping duties which last usually five years and can be extended by a namely “expiry review.” The European Court of First Instance and The European Supreme Court has the function of judicial review. Normally, the dumping investigation takes one year to reach a final decision, and the suspicious dumpers are not allowed to continue exporting until the investigation finishes. Undoubtedly, considerable time and expenses are required for a dumping investigation and it is very costly.
As far as AD duties are concerned, the set level of AD duties should be equal to the level of dumping margins or the level of injury. During the first period of investigation, a provisional duty is imposed; during the second stage of investigation, a definitive duty is imposed, which can not be higher than the provisional one. However, from many papers and statistics, the general rate of anti-dumping from EU is usually equal or higher than 87%, which is a great calamity for most exporting firms in China.
The Principles of EU Anti-dumping Policy against China
In a common sense, the EU AD legislation targets any country which is not a member of the European Union, especially focus the light on NMEs. Before the year 2002, two largest NMEs, namely Russia and China, they were the main target concentrated by EU. With the economic transition process, Russia has successfully transmitted into a member of market economy in 2002; more attention has been paid on China since then.
Because of the list of NMEs reduces, the AD rules and clauses are changing as well, and new flexible approaches have been introduced; however, the core ideas still remain the same.
For the NMEs, especially China, normal value is defined on the basis of: Firstly, a price from a market economy third country; secondly, a constructed value calculated for the third country; or thirdly, a price charged for exports from that country. If none of these circumstances are available, the anti-dumpers can apply “any other reasonable basis, including the price actually paid or payable in the community for the like product.”
Regarding the method of using “a third country”, it is known that in order to calculate the dumping margins and obtain the dumping documentation and proof, EU needs to find a third country as an analogue country. Because of the equivocal rules stated by WTO, there are no details about how to apply “a not unreasonable manner” to choose a most appropriate third country. This may results diversion in calculation.
Concerning the “like product”, Chinese firms argue that the prices of exporting commodities reflect the low level of technology and added value. EU often chooses the product in the same category from a far more development country. In comparison with EU products, Chinese producers use low quality raw materials with low capital intensive production processes. For instance, Lamps (2001) says that the Community industry produces “life-long” products with life times over 8,000 hours, compared with 6,000 hours of Chinese products. Nevertheless, none Commission has considered such factors into account of choosing the like product.
Literature Review
This proposal makes use of two types of papers. One is theoretical papers; the other is empirical papers to illustrate the relationship between the capital-labor ratio in production and the level of economic development, and whether there is a bias in choosing Korea etc. as analogue countries.
a. The relationship between products quality and economic development level
The price of exporting goods depends on the costs of factors input and the endowments the producers own. Different endowments and different costs of inputs produce different quality, and products quality has some relationship with the development level of economics in separate countries, based on academic papers.
A lot of papers hold the belief that there is a relationship between the difference of products quality and the level of economic development. However, higher quality products need higher capital-labor ratio in production. The framework for the indirect relationship between capital intensity and products quality finds its theoretical statements in Linder’s (1961) work. Linder believes that the demand for quality of consumers increases in accordance with the rise of income per head. Income per head is determined by capital intensity. In more precise words, consumers with high income prefer high quality products than consumers with low income. As Falvey (1981) says, because of comparative advantage in international trade, trade with vertically differentiated products occurs within a same product group. Labor-abundant countries such as China have comparative advantage in labor-intensive products; whereas capital-abundant countries (most of which are developed countries) have comparative advantage in capital-intensive products. Falvey and Kierszkowski (1987) suppose that all consumers have the same preference portfolio but consume different quality goods because of distinct income. The notion of vertical innovation is rooted in the paper of Grossman and Helpman (1991), and it argues that rich countries invest in Research and Development (R&D) consecutively to improve their products and upgrade the qualities; while poor countries just mimic what the rich countries’ technology at low costs. The main difference of selling point in countries with different development levels is that: For rich countries, the selling point is the quality and technology contained in products; for poor countries, the selling point is the cheaper prices and production expenses of goods. A lot of academic papers have found that there is a positive relationship between the products quality and economic development levels. Therefore, prices have been an indicator of the quality of goods.
Tortensson (1991 and 1996) finds that rich countries with high capital-labor ratio incline to export high quality goods. Nielson (2000) discusses that within the comparison of central and eastern European countries and EU, the quality level of the former one is lower than that of the latter one. Veugelers and Vandenbussche (1999) shows that the reason why exporting countries act like dumping is that their trade comparative advantage lies in the cost advantage. Wang (1999) says that the EU Commission often ignores the economic development levels between dumpers and the analogue country. Vandenbussche and Wauthy (2001) construct a duopoly model, which states the European Commission has acknowledged there is existence of products quality difference, but EU is still reluctant to adjust its domestic prices. EU Trade Commissioner, Peter Mandelson once said: “we will need to adjust because, ultimately, our responsibility is to compete and manage change and adjustment, rather than to manage trade. EU producers should pay attention on quality and value, not price.” Vandenbussche and Liu (2002) points out that the EU Commission did not take the quality differences factor into account because the Chinese exporters have not claimed that there exists quality difference between Chinese goods and EU goods in the same category. Nielsen, Jorgen Ulff-Moller, Rutkowski and Alesander (2005) made hypothesis to test whether their supposition is correct. Their assumption is that there is a positive relationship between vertically differentiated products quality and the level of economics, and such kind of relationship does contribution on the application of choosing a third country to calculate the dumping margins. There are several crucial findings in their paper: Firstly, they found that after theoretical analysis and empirical work, the EU commission indeed chooses analogue countries which have higher economic development than China; Secondly, when China (one of the NMEs) is involved in EU antidumping cases, there is a clear positive relationship between the quality of products exported to EU and the economic development level of the exporting countries; Thirdly, their investigation with respect to products quality differences and level of economic development is in accordance with other papers. Nielson et al. suggest that EU should apply a country which produces lower level of product quality that is similar to that of China. In other words, choose an analogue country with similar economic development level.
b. The assessment on the EU trade remedies against China
The application of choosing a third country and the like product
Because of the misunderstanding of the Chinese producers, the method chosen to assess the prices and quality of Chinese exporting commodities by inviting a third country and the like product is inappropriate.
Prusa (1996) proofs that there is a trade diversion from AD measures by EU, and such type of protection is less useful than their expectation. Andrea Lasagni (2000) uses empirical work to comment the AD policy by EU Commission may be linked with growing competition from low-wage or NMs’ countries. EU domestic firms obtain little benefits from AD protection. Brussels (2000) in his paper argues that even with anti-dumping measures use as a kind of protectionism, after analysis of the regression model, there is statistically significant impact of anti-dumping measures on the imports volume from other countries, which is decline; while, there shows no evidence of the statistically significant changes in the size of duties imposed on importing commodities from exporting countries. What’s more, he discusses that EU domestic firms are unlikely to gain from imposing anti-dumping duties against external suppliers and EU anti-dumping policy may lead to the decrease of domestic firms’ share. Some papers argue that the AD policy initiated by EU is a kind of political issue. Actually, when EU pockets most of the money, it still worries about the benefit that China gains. Andrea Lasagni (2000) uses empirical work to comment the AD policy by EU Commission may be linked with growing competition from low-wage or NMs’ countries. EU domestic firms obtain little benefits from AD protection. Xiang Liu and Hylke Vandenbusche (2002) get the conclusion that EU always levies a very high duty on the imports from China rather than price-undertakings. Furthermore, the duties imposed on Chinese producers are higher than other defendants, with an average duty level of 41 percent. Why EU has severe damage to domestic industry? Not only because the cheaper prices from external producers. EU should burden the responsibilities themselves, too. Firstly, it is reluctant to reevaluate and adjust for restructuring its industries in the stated 10-year period in the WTO Article. It should foresee that the damage effect on its domestic markets is substantial, massive and negative when the domestic market is full of low-price goods. Secondly, it is reluctant to make reform but continued to stick to desperate industry. John H. Jackson (2003): “if all economics is international, but politics that drives the decision-making and politics is local, there is a problem.” Leading trade economist at OECD, Raed Safari once stated: “The re-imposition of temporary quotas would cost many more jobs in the retail industry than it would same in textile production.” Ludo Cuyvers (2005) mentions that referring to the targeted countries against by EU Commission, China ranks No.1 among the top 40 targeted countries. Anti-dumping measures can be viewed a result of the restriction of tariff barriers ruled by GATT rounds, and AD is regard as the most important non-tariff barrier in international trade. The direct consequence of anti-dumping regulation is the reduction of the volumes of imports and the increase of the price of importing goods. The most focusing point is that he argues AD protocol has a more considerable effect on the total value and volume of imports than one unit value prices and the increase of the unfair prices of the dumping countries are offset by the reduction of the importing volumes. More debate and discussion should be made to the inappropriate use of AD measure. Thomas J. Prusa (2005) makes his comments that EU is one of the traditional proponents for AD measures and strong opponents for the reform of AD protection. However, in the long-run, EU will weaken its use of AD for it will realize that AD is a failed policy. Consequently, because of threat of retaliation, AD measures are so rare for every country is afraid to use AD activity in order to main its exports and to avoid AD by importing countries. In the work of Xingzheng Hong and Rongmin Ren (2006), it gets a conclusion that the trade policies initiated by EU actually and eventually will do harm to its long-term interest as well. If there is retaliation, it is a vicious circle that will never end. It is lose-lose round.
Research Methodology and Data
In order to evaluate whether the EU anti-dumping policy against China is appropriate, it requires certain methodology and data from official statistics.
a. methodology
In this proposal, several methods are used to illustrate the evaluation. One is econometric theories, in precise words, regression model construction; the other is narration. We construct general hypothesis to investigate whether EU builds a discriminatory structure. This general hypothesis can be divided into several partial hypotheses:
Firstly, : To test whether there is a positive relationship between the products quality and economic development level;
Secondly, : To test whether there is a positive relationship between the price of products and capital-labor ratio, in other words, the price of products and the costs of inputs;
Finally, : To test whether the third country chosen by EU has a higher economic development level than China.
After all these three hypotheses tested, we can decide whether EU’s AD policy against China is appropriate.
In the first case, the unit value of goods is used to denote the quality of certain goods; GDP can be used to indicate the economic development level. Therefore, the following regression model can be constructed:
Where denotes the unit value of exporting goods from China in the year;
denotes the unit value of goods produced in EU, compared with those of China in the year;
denotes the gross domestic products in China in the year;
denotes the gross domestic products in EU in the year;
denotes the constant term in this regression model;
denotes the disturbance term in this regression model.
Make the null hypothesis. If can not be rejected by data, it means that there is a positive relationship between the products quality and economic development level.
In the second case, we construct the regression model:
Where denotes the price of exporting goods from China in the year;
denotes the price of goods produced in EU in the year;
denotes the capital-labor ratio of producing the exporting goods from China in the year;
denotes the capital-labor ratio of producing the goods in EU in the year;
denotes the constant term in this regression model;
denotes the error term in this regression model.
In the same story, construct the null hypothesis. If cannot be rejected, it indicates that there is a positive relationship between the price of products and the costs of inputs in production process.
Referring to the third hypothesis, it can be seen from a number of cases in historical accounts. When calculating the dumping margin, EU often chooses an analogue country with relatively higher economic development level. Apply the terms GDP in China compared with that in the third countries, as well as the Purchasing Power Parity (PPP) conditions.
In order to do the regression work more efficiently, certain econometric software, for example, Eviews, PcGive, needed to undertake the construction, calculation and test summary.
Data collection
Because this proposal aims at test whether the general hypothesis is rejected or not, it needs to collect data account to regress the simple regression model. Data from statistical office, data from public official websites, data from company accounts, data from certain public database, data from limited DataStream, as well as data from calculation can be used to illustrate the problem. Not only apply the data, but also the use of tables, diagrams, which can facilitate the work.
In order to make the analysis more updated, we use the data from the period from 1979 (the year of China’s open and reform policy initiated) until the year 2009, both China and EU’s comparable data.
The constructed model can not only evaluate the appropriation of EU anti-dumping policy against China, but can also provide a better way how to direct EU to regulate the protection rules.
Qualifications
When tackle the research proposal, a lot of qualifications needed to help. I need requiring a good training in economic theories and econometric techniques and skills. Furthermore, I need to specialize and develop my specific skills in applying such techniques and illustration. Supports from my academic tutors, my lecturers, my classmates and my friends are also very important.
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