1. CHINA The concerns of the EU Industry Press Club – 26 April 2013 Inès Van Lierde Chair of the BUSINESSEUROPE TPI Working Group Secretary General of EUROALLIAGES

2. Art. 2 (7) of the Basic AD Regulation provides that: “In the case of imports from non-market economy countries (…), normal value shall be determined on the basis of the price or constructed value in a market economy country, or the price from such a third country to other countries, including the Community, or where those are not possible, on any other reasonable basis, including the price actually paid or payable in the Community for the like product, duly adjusted if necessary to include a reasonable profit margin”. → domestic prices and costs in China are not taken into account in the calculation of the dumping margin → only prices in an analogue market (market economy) The Basic AD Regulation (1)

3. According to the Basic AD Regulation:  A product is considered as dumped if sold in the EU, to the first independent buyer, at less than its “normal value”. Both values (domestic price, i.e. the normal value”) and the export price are calculated ex works.  The dumping margin is the difference between these two values, expressed as a % of the CIF import price.  Example: Normal value: 100 Import price (EXW): 80 Import price (CIF): 90 Dumping margin: 20 Dumping margin (%): 22% The Basic AD Regulation (2)

4. China became WTO member in 2001. In the WTO Accession Protocol, a transitional period (up to 11 December 2016) was agreed upon in respect to several topics, one of those being the potential granting of “Market Economy Status” (MES) WTO and MES are, de facto and de jure, two independent concepts: There are WTO members which were not granted MES at the time of their accession (China) There were non WTO members which were granted MES (Russia) China and the WTO

5. In 2016, the Accession Protocol provides for the recognition of China as a market economy, though there is a legal debate (and uncertainty…) about the “automaticity” of such a recognition by WTO Members. The question (and the debate..) there is: - Is this recognition automatically granted pursuant to the Accession legal provisions (in particular Art. 15 of the Accession Protocol) OR - Could WTO members unilaterally decide after 2016 that China still has to proof MES according to their own criteria (EU, US…), by industrial sector or case by case? China and the WTO

6. Article 15(d) of the Accession Protocol provides that it is China that must show that it has MES either for the whole economy or for subsectors of the economy. Hence, there is nothing automatic in the granting of MES. ‘Showing’ MES is not one single act valid immediately in all WTO Members. China must show that it has achieved MES according to the criteria laid down in the relevant law of each WTO member. As China was not granted MES on WTO accession, some Members considered China had met MES conditions. Others did not. China and the WTO

7. The problem facing investigating authorities (the Commission in the EU) is what happens if the exporting producers cannot show that ME conditions apply in their industry (or China is unable to show that it has achieved MES). In that situation, the investigating authority is not obliged to use the domestic Chinese prices and cost. It is likely that the investigating authority will have to use prices that are somehow comparable to domestic prices but not the actual prices. In other words, prices and costs adjusted to true market conditions. This issue still has to be resolved…. China and the WTO

8. The criteria for granting MES in the EU are purely technical: -Prices and costs are made without State interference, at market values -Accounting records are in line with international standards -Production costs and financial situation are exempted from former NME legacy (public ownership, barter trade…) -Bankruptcy and property laws do provide legal certainty and stability -Exchange rate conversions are carried out at market rate the criteria are technical… and their assessment should remain technical as well! MES in the EU

9. The impact for the EU industry of the current MET practice is a quite valid anticipation of what future MES could mean to industry. Ferro-Molybdenum: AD investigation regarding imports from the PR China -MET requests had been received from 10 companies -Only one company did comply with the MET criteria (no State interference) -Provisional AD duty: 3,6% (other measures varying between 9,8% and 26,3%) -Between provisionals and final duties, a meeting took place under the auspices of the China Chamber of Commerce and Minmetals (CCCMC): exports quotas were allocated according to the lowest level of AD duty, i.e. the company with MET… -At the definitive stage, MET was withdrawn. A country wide duty has been imposed: 22,5% MES /MET (market economy treatment) and the EU PRACTICE

10. Other examples: FeSi originating from PR China: company with MET15,6% another company (IT)29% residual duty31,2% Silicon originating from PR China:company with MET16,3% residual duty19% MES/MET and the PRACTICE

11. MET: Evidence to be provided for in the current AD practice -MET questionnaire to be filled in and documented by the companies requesting MET -Non confidential version of the replies: very poor…. -Complainants not in a position to rebut or comment! -Deadlines extremely short: « a determination (…) shall be made within three months of the initiation of the investigation (…) after the Community Industry has been given an opportunity to comment » (Art.2 (7) c) of the Basic ADR) -BUT: comments in practice are quite difficult if not impossible! MES/MET and the PRACTICE

12. MES: same difficulties…but at the level of the country (or industry’s sector)! It is the industry’s opinion therefore that: -All MES criteria should be screened and checked very carefully, on TECHNICAL grounds only! -Given the « lesser duty rule » in the EU, AD duties are already extremely low as compared with the US. -EU industry would be very exposed to Chinese dumping practices should MES be granted automatically or for political reasons…. SOME FINAL THOUGHTS