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Economic Perspective: Dumping Charges Block China's Exports
The recent series of dumping charges against Chinese manufacturers have blocked China's exports into some foreign markets. In the past, the Chinese government and businesses did very little when accused of dumping, but this needs to change if this obstacle is to be removed.
While the European Union's anti-dumping charges against nine Chinese color TV manufacturers are being appealed, the EU has begun investigating Chinese energy efficient light bulb manufacturers for dumping. In June, the US slapped Chinese concentrated apple juice producers with an anti-dumping tax and in August, accused Chinese steel producers of dumping.
According to the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), anti-dumping lawsuits against products made in China have witnessed a huge increase in recent years. There were 53 anti-dumping cases between last year and the first half of this year, and another 10 cases are being prepared, affecting nearly US$1.5 billion in Chinese exports.
Since 1979, when the Europeans accused Chinese saccharin manufacturers of dumping for the first time, the dumping lawsuits against Chinese manufacturers have grown. By this February, a total of 376 dumping lawsuits have been filed against Chinese products, affecting at least US$10 billion in Chinese exports.
US$1.5 billion or US$10 billion isn't a big chunk of China's total export, but the dumping charges have a deeper negative effect. The Chinese color TV manufacturers have been sued by the EU for tens of millions of US dollars, which is bad enough. But with a 44.6% anti-dumping tax slapped onto Chinese TVs, aside from being locked out of the European market, it is very difficult to determine how much the Chinese TV manufacturing industry has lost.
As China's exports grow, the dumping issue will be a long-term issue the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) and Chinese businesses will have to deal with due to four major reasons.
One, in the fiercely competitive global markets, especially when the global economy takes a downturn, economic protectionism will rear its ugly head. Some countries will overuse the dumping charges.
Two, some countries have adopted discriminatory policies against China. Although it has been twenty years since China's reforms have begun, these countries still considered it a non-market economy. They use the unreasonable "substitute country price comparison" to determine whether China dumped its products.
Three, in the last twenty years, China's foreign exports have grown rapidly, at a clip of thirteen percent a year, which is nearly 100% higher than the increase in global trade.
Four, the overall added value of China's exports isn't very high, so Chinese manufacturers try to make their profits by the quantity they sell.
Ma Yu, assistant researcher at the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) Economic Institute, proposed directly handling the dumping allegations on two levels: the government level and business level.
The Chinese government has done a lot of work in this area in the last couple of years. The EU, New Zealand and Philippines have removed China from their lists of non-market economies. When they determine whether Chinese products have been dumped in their market, they consider each case separately.
The recent "Sino-Korean Garlic Trade War" is an example of the threat of using this kind of "an eye for an eye" strategy. But this is not a long-term solution and both sides end up losing.
Chinese businesses need to realize that they must not back off from confrontation when accused of dumping, like they have in the past. Not appealing the case will lead to dead end.
China's entrance into the WTO will help resolve the dumping issues. First, China will have the right to speak out on trade issues, which will help protect its legal rights. Second, China can use the WTO to resolve trade disputes.
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