Europe to award China ‘holy grail’ with tariff-rules revamp

Bloomberg

European industries from steel to solar are bracing for a new set of tariff rules that may make
it harder to fend off low-cost
imports from China and other foreign countries.
European Union governments were due on Monday to rubber-stamp the biggest revamp of the bloc’s method for calculating duties aimed at countering below-cost—or “dumped”—imports. The move is a response to longstanding Chinese government demands for more favourable treatment while stopping short of saying those shipments are fairly priced.
The overhaul will end an EU presumption that Chinese exporters and those in nine other members of the World Trade Organisation operate in non-market conditions. That approach, which has allowed for higher European anti-dumping duties, is being replaced by a more opaque procedure for determining whether imports unfairly undercut domestic producers.
“There’s going to be much more work for European industries to make their dumping cases,’’ said Laurent Ruessmann, a partner and trade expert in law firm Fieldfisher LLP. “There’s a lot of discretion for EU trade authorities in the new system. The question is how that discretion is used and what the political influence will be.’’

Economic Rewards
The EU carrot to China comes as both seek to claim a global leadership role in trade amid US President Donald Trump’s protectionist stance, which has shaken the post-World War II commercial order. The US has taken a different tack from the EU, rejecting China’s claim of market-economy status and refusing to alter how it calculates anti-dumping duties.
Europe is offering political and economic rewards to Beijing by removing China from the European list of non-market-economy countries in dumping investigations. While being the EU’s No 2 trade partner behind the US, China is grouped with the likes of Belarus and North Korea in lacking market-economy designation by Europe and faces more European anti-dumping duties than any other country.
Such EU levies cover billions of euros of Chinese exports such as reinforcing steel, solar panels, aluminum foil, bicycles, screws, paper, kitchenware and ironing boards, curbing competition for producers across the 28-nation bloc. “China has coveted market-economy status as the ultimate recognition from the West,” said Hosuk Lee-Makiyama, director of the European Centre of International Political Economy in Brussels. “It’s their holy grail.”
The EU has traditionally used other nations’ figures to calculate anti-dumping levies against China on the grounds that Chinese state intervention artificially lowers domestic prices and makes them an unreliable indicator of a good’s “normal value.” This practice, known as the analogue-country model, has resulted in higher EU duty rates against Chinese exporters and— by extension—more protection for European manufacturers.
China’s agreement on joining the WTO 16 years ago made it harder for the EU to justify using the analogue-country model against Chinese exporters after a specific provision expired in December 2016. To drive home the point, Beijing filed a complaint the same month against the EU at the Geneva-based global trade arbiter, hastening European deliberations over an overhaul of anti-dumping rules.
EU legislators negotiated a deal in October and the full European Parliament offered its endorsement the following month, leaving national governments to give their final approval on December 4. The legislation, due to be published on December 18, features elements of compromise between free-trade governments in northern Europe allied with China and more protectionist member countries in the south.
In a sign of the balance that the new system strikes, the Chinese government is sending out skeptical signals on the EU changes.