By Sylvain Plasschaert, Honorary Professor at the University of Antwerp and at the Catholic University of Leuven
China is a major trading partner of the European Union (EU), the destination of much Foreign Direct Investment (FDI) by EU firms – and by far the most targeted country of anti-dumping investigations by the EU (and other economies like the US). In the spring of 2012, the European Union and China got embroiled in a tense dispute about trade in the novel but rapidly growing solar energy field. The surge in EU imports of such goods from China – especially of solar panels used in the last stage in the production sequence of photovoltaic energy – prompted a group of EU-located producers of solar equipment to request trade defense measures from the European Commission. After conducting investigations the Commission imposed a provisional anti-dumping duty on such imports in June 2013 while threatening to impose significantly heavier levies on solar panel imports from China if no satisfactory arrangement could be found before 6 August 2013. Close to that deadline, an amicable ‘understanding’ was reached, whereby China agreed to reduce its overall quantity of exports to the EU and put a floor price on those exports. Thus, a major trade conflict about the largest contested trade volume ever was averted.
The paper assesses this recent antidumping case in the light of a changing world economy and the current anti-dumping framework of the European Union. Chapter 2 of the paper introduces the issue by presenting a factual narrative of the specific antidumping dispute about solar panels and recalling its antecedents, in which an almost worldwide hypertrophy of solar energy enthusiasm collapsed into a deep downturn in the solar energy sector.
As exports of certain products are targeted by anti-dumping duties, Chapter 3 of the paper first recalls China’s impressive export performance since around 1980, when China opened its economy to the wider world. It then positions the latter within the broader setting of three deeply impacting and intertwined changes in the world’s economy which provide a relevant background to the analysis. As a more exhaustive treatment of such complex topics would inflate the length of this paper, only the main essential features are sketched. These three metamorphoses that transformed the traditional channels of cross-border trade into highly complex sets of links between enterprises from different countries are: (a) the continual multinationalisation of a large number of enterprises (via foreign direct investment and contract manufacturing), (b) the increasing fragmentation of production in global value chains, in which multiple tasks are performed and various ‘slices’ of intermediate goods are manufactured and traded between different countries, and (c) the presently applicable convention in the statistical reporting of trade flows.
In order to provide an adequate understanding of the subject matter, Chapter 4 and 5, furthermore, provide a succinct look at two relevant strands of EU trade policies: The trade and investment relations between the EU and China (Chapter 4) and the methodologies used by the EU in its anti-dumping (AD) actions, particularly those pertaining to China (Chapter 5).
Against this background, Chapter 6 of this paper presents a critical analysis, in economic terms, of the solar energy case conducted by the EU (and by implication, of other similar anti-dumping cases). It thereby considers, on the one hand, various more general aspects of anti-dumping disputes such as the roles of governments versus those of firms, the conflict of interest between producers and importers, and the impact of anti-dumping duties on the competitiveness of domestic firms. On the other hand, specific aspects of the anti-dumping framework of the European Union are discussed, such as the ‘public interest’ test used in EU anti-dumping proceedings, the market economy treatment of foreign suppliers, the analysis of the economic impacts of anti-dumping duties on different stakeholders, as well as the political dynamics of the solicitation of trade defense measures. Based on these considerations, specific aspects of the dispute between China and the EU are considered, such as the controversial question about China’s market economy status and other arguments which have been invoked to discredit imports from China.
Chapter 7 provides some final considerations about the potential lapse of China’s market-economy status at the end of 2016. Chapter 8 concludes with some remarks on the future of the EU system of trade defense instruments, suggesting some paths to arrive at more satisfactory arrangements between the various stakeholders involved in anti-dumping disputes.
Before embarking on this ambitious agenda, however, it is necessary to clarify a few self-imposed limits on this paper, lest it becomes unwieldy. First, the paper looks essentially at anti-dumping measures proper, which are still the most frequently operated trade defense instruments (TDI) of the EU. Hence, countervailing’or anti-subsidy measures, which nowadays tend to be resorted to somewhat more frequently, are not included in the following analyses. Yet, the third conceivable instrument, a safeguard against import surges, will be mentioned, as it appears to have been introduced de facto as a, perhaps temporary, solution to the solar energy conflict. Second, the paper considers in essence only trade in manufactured goods, not trade in services. Third, the paper looks at the ’real’ world of international economics, as related to the border-crossing flows of goods and services, not at the even more globalized field of international financial transactions.