China won a long-lost victory in anti-dumping lawsuits. On December 3, the WTO panel made a first-instance ruling on China v. EU's anti-dumping case against Chinese steel fasteners and supported China's eight appeals. At the same time, it believed that China did not support 11 claims that were insufficient and it did not support it. The appeal is not adjudicated, or it is deemed to be out of jurisdiction, or no decision is necessary. The eight appeals China has received are the core of the dispute between the two sides. Therefore, as a whole, China has won the case.

In the name of anti-dumping under the heavy-duty revolt, in 2009, the EU began to impose heavy taxes on imported steel fasteners in China.

As a result of unbearable forbearance, on July 31, 2009, China sued the European Union at the WTO. The first is a mandatory consultation process, but the consultation has been fruitless. On October 12th of the same year, China requested the establishment of an expert group to conduct the trial. Brazil, Canada, Chile, Colombia, India, Japan, Norway, Taiwan, Thailand, Turkey, and the United States participate in litigation as third parties.

China’s appeal can be divided into three parts:

The first is that the EU’s original “Anti-Dumping Basic Law” related items violate the provisions of the WTO’s Anti-Dumping Agreement on Evidence and Anti-Dumping Duty, the GATT (1994) Regulations on Most Favoured Nation Treatment and Transparency of Trade Management Measures, and The "WTO Agreement" stipulates the strict implementation of treaty obligations.

Second, the anti-dumping order issued by the European Union on January 26, 2009 was issued in accordance with the relevant provisions of the EU's Anti-Dumping Basic Law, which not only violated the above-mentioned WTO Anti-Dumping Agreement, but also violated its minimum support rate for domestic industries. It stipulates the core terms of the definition of dumping, the definition of domestic industry and industrial damage, and the definition of causality between dumping and damage.

The third is to ask the panel to make specific recommendations on how the EU will implement the ruling while adjudicating it.

EU's "closed doors"

The EU is fully aware of the problems with anti-dumping measures. In order to exclude the core issues from the scope of the trial, they implemented a "closed door" strategy, saying that many of China's demands are not within the jurisdiction of the expert group. The reasons include that many items included in the application for the establishment of an expert group in China were not mentioned at the consultation stage, and the expert group should not hear the case; China's application for the establishment of an expert group is unclear on the matters of appeal; the EU’s original Anti-dumping Basic Law "" has been modified and should no longer be the subject of trial.

This move by the European Union did make it difficult for the expert group. If their opinions are adopted and the core issues are excluded from the jurisdiction, this litigation will not be necessary. The expert group first analyzes whether the items not mentioned in the negotiation stage can be put forward at the subsequent application for the expert group and become the object of the trial.

They have repeatedly considered the litigation theory of the WTO dispute settlement mechanism, read the precedents in the past, and concluded that: First, although the consultation phase is a necessary procedure, it is qualitatively different from the application for establishing a group of experts; it is not mentioned during the consultation phase. Matters, as long as they are the same as those of the application form of the expert group, can be included in the jurisdiction of the expert group.

Secondly, the expert group reviewed the timing of the changes in the relevant EU law, and the time for China to apply for the establishment of an expert group. It was found that the EU's amendment to the decree was before the Chinese application for the expert group, and the contents of the two decrees were almost identical and only changed. An insignificant word.

Thirdly, in response to the project proposed by the EU when China applied for the establishment of an expert group, the expert group found that China used a general statement in its prosecution. Although it is not very clear, it refers to the issue and lets the EU know about the dispute. Where it does not affect the EU's reasonable right to appeal.

The “closed doors” strategy is an occasional method used by experienced WTO members in litigation. Some members took advantage of this move to directly exclude the prosecution’s claims from the jurisdiction of the Group of Experts, thus defeating the purpose of the prosecution. This time, China is in danger and hopes to cross the border.

Arithmetical dumping and anti-dumping are all counted. If the export price of a product is lower than the production cost price, it is dumping; the difference obtained by subtracting the export price from the production cost price is the dumping margin; the importing country levies anti-dumping tax according to this dumping margin.

According to the relevant provisions of the WTO Anti-Dumping Agreement, the importing country should determine the dumping margin of each enterprise under investigation after the anti-dumping investigation and impose anti-dumping duties separately. Under special circumstances, if the types of products involved, producers, exporters, and importers are so large that they cannot be verified one by one, a sampling method can be used to select a reasonable number of interested parties to extract data to determine the dumping margin.

However, the EU did not do this. The EU's current Anti-Dumping Basic Law sets three calculation methods when calculating dumping margins and determining anti-dumping rates:

First, if an exporter can prove that its products are produced in a market economy, its own production costs and export prices are the basis for calculating the dumping margin.

Second, if an exporter cannot prove that its products are produced under market economy conditions, but has the marketization level stipulated by the EU, the export product will be calculated based on the production cost of the “substitute third country” and the manufacturer’s own export price. The dumping margin.

Third, if exporters can neither prove that their products are produced under market economy conditions nor do they have the so-called level of marketization, they will no longer determine tax rates separately for individual exporters, but apply to all products from the same country. The same tax rate.

In this case, if the degree of cooperation between the exporters of the same country is high, the average export price will be close to the export price; on the contrary, if the cooperation between them is not high, then the average export price will be a single one. The actual export price is very far away. The EU only calculates based on the available data and does not consider the difference between export prices.

For a long time, China's steel fasteners exported to Europe have been subjected to a third treatment. This is exactly where the EU’s “arithmetic” mechanism for dealing with Chinese products lies. Under this circumstance, the data used to calculate the production cost of Chinese products is not domestic and is a third country; the data used to calculate the export price is not the actual price and is the averaged price; at the average, the EU has very Big discretionary data selection.

As a result, although China's steel fastener export prices were originally high, exceeding the cost of production and there was no dumping, under the EU's "arithmetic," these fasteners have dumped and anti-dumping duties must be levied.

Therefore, China insists in the lawsuit that the EU's "arithmetic" violates the relevant provisions of the WTO's Anti-Dumping Agreement. The European Union refutes that the third parties participating in the complaint also hold their own words. Finally, the expert group supported China’s claim that the EU lost the case in this regard.

There are also successes and regrets. The EU's "arithmetic" has many other tricks. For example, in the determination of domestic industrial damage, deliberately selecting domestic industries that are beneficial to them, reducing the threshold for domestic industry requirements for protection, intentionally exaggerating industrial damage, unreasonable data conversion methods, favoring EU industry in the investigation process, and so on. Although China has also provided evidence and arguments in this litigation as a priority, in the end, the expert group believed that China's certification was insufficient and did not support it.

How to perform?

After the panel’s ruling, it is not clear whether China and the EU will file an appeal. Regardless of the appeal, the author is not optimistic about the implementation of this case.

Different from previous lawsuits, when the Chinese lawsuit was filed, China had explicitly requested the expert group to apply discretionary power in accordance with the WTO dispute settlement mechanism and to provide a clear opinion on how to enable the EU to implement the ruling. In other words, the panel is required to rule that the EU immediately withdraw the anti-dumping order that is not in conformity with the treaty.

However, the expert group quoted previous jurisprudence and proved that the expert group has the power to decide whether an anti-dumping measure complies with the WTO treaty rules. However, it has no statutory obligation to make very specific recommendations on how to implement the ruling and rejects China's demands. This is a helpless loophole in the WTO dispute settlement mechanism, which provides an opportunity for the EU to evade rulings.

According to information released by the Ministry of Commerce of the People's Republic of China, on November 24, European Commission Trade Commissioner De Gucht received a question and delivered a speech on the issue of trade remedy in the European Parliament. Its main point is that China is the main source of unfair trade and will take resolute actions when necessary, including countervailing investigations. At present, there is no need to reflect on existing trade remedy systems.

People in the industry generally believe that De Gucht’s above speech indicates that the European Commission will continue to strengthen its trade relief policy. The situation of trade friction between China and Europe may be even more severe. This case will not have much impact on the EU’s anti-dumping system.