China Export is “Non Standard”, EU Parliament Passes Resolution
EU parliamentarians approved a
non-legislative resolution last week calling for treating China’s exports to
the 28-nation bloc in a “non-standard” way until the Asian economic giant meets
EU requirements for being deemed a market economy.
The 12 May vote had 546 lawmakers in favour, 28 against, and
77 abstentions.
The text of the resolution highlights the importance of
the bilateral EU-China trade and investment relationship, while “stress[ing]
that China is not a market economy and that the five criteria established by
the EU to define market economies have not yet been fulfilled.”
These five criteria specifically involve the level of
government intervention in company decision-making and resource allocation;
lack of government distortions in “the operation of enterprises linked to
privatisation;” the use of non-discriminatory, transparent company laws; an
effective, transparent legal system protecting property rights; and a “genuine
financial sector which operates independently from the state.”
Furthermore, the resolution says that the European Parliament
“is convinced that, until China meets all five EU criteria required to qualify
as a market economy, the EU should use a non-standard methodology in
anti-dumping and anti-subsidy investigations into Chinese imports in
determining price comparability.”
This provision cites Section 15 of China’s WTO accession
protocol, which the resolution says allows for applying this “non-standard
methodology,” and asks that the European Commission prepare a proposal in this
context.
While the current resolution is not a legislative one, the
Parliament will have to vote on the Commission’s future proposal, as part of
the co-decision process that also includes the Council.
At
the time, it agreed to terms regarding how to address price comparability when
determining subsidies and dumping, among others. Outlined in Section 15 of the
document for accession, these terms allow for China’s fellow WTO members to
treat the country as a non-market economy in anti-dumping probes, specifically
as it relates to determining price comparability under Article VI of the
General Agreement on Tariffs and Trade (GATT) 1994 and the WTO’s Anti-Dumping
Agreement.
While WTO members are to use Chinese prices or costs if the
producers being investigated can demonstrate that market economy conditions
“prevail” in their industry, according to subparagraph (a)(i) of that section,
the following subparagraph provides for an alternative methodology if this is
not the case, allowing for an importing member to deviate from using a “strict
comparison” with Chinese domestic prices or costs.
This must occur if those producers are unable to prove the
existence of market economy conditions in their industry. However, a later
subparagraph notes that these terms “shall be terminated” once Beijing has
established under an importing member’s domestic laws “that it is a market
economy.”
It then notes that, “In any event, the provisions of
subparagraph (a)(ii) shall expire 15 years after the date of accession. In
addition, should China establish, pursuant to the national law of the importing
WTO Member, that market economy conditions prevail in a particular industry or
sector, the non market economy provisions of subparagraph (a) shall no longer
apply to that industry or sector.”
Whether such a change would be automatic, however, has
fuelled debate in trade circles, particularly in light of the global steel
crisis and China’s role as a major trader.