Since China joined World Trade Organization ( WTO ) in 2001 and became a full member, it has played a important function in universe economic phase. Sing an unbelievable increasing figure of imports and exports of China in recent old ages, more and more states feel competition menaces coming from China. A batch of states have set up Torahs, ordinances, antidumping protocol and precautions against China, every bit good as mentioning to some specifications applied in WTO regulations aimed at China. Among these applicant provinces, European Union ( EU ) has applied anti-dumping ( AD ) statute law to China, regarded as one of non-market economic systems ( NMEs ) , dramatically frequent.

EU has become one of the most of import bargainers of China since China ‘s accession to WTO, and frailty versa. However, due to a immense shortage in international trade of EU, it considers the ground is that China ‘s dumping activities have done terrible harm to domestic industries and houses. During the 10-year development of China ‘s engagement in WTO, it owns the largest figure of dumping instances in the universe, from official statistics, one tierce comes from EU. Such phenomenon is good illustrated by a comparing made by China ‘s Trade Minister, Bo Xilai: “ The United States produces high-and-medium scope merchandises while China produces low-and-medium scope 1s. However, while you are eating lobster, you are still worrying that China eats excessively much sandwiches. ” Such state of affairs merely goes to the fortunes under which the EU and China every bit good.

Because of the EU particular anti-dumping ordinances, China has challenged and is calming disputing the trouble of its exports to EU. The chief job China now encounters is that the application of “ the 3rd state rule ” in ciphering “ normal values ” . For illustration, the usage of domestic market monetary values and production costs reported by houses in market economic systems ( MEs ) alternatively of place market monetary values and production costs announced by houses in NMEs, the dump trucks.

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This proposal intends to put up a general hypothesis that the employability of such sort of rule is really unjust to NMEs. To an apprehensible extent, the dumping borders calculated are biased, because there is a immense difference in capital-labor ratio in production between China and “ the 3rd state ” . The WTO clearly states that: “ The understanding does non stipulate any standards for finding what 3rd state is appropriate. ” Often, EU invites Korea, Singapore, etc. to be “ the 3rd state ” as an linear state ( AC ) . China is a state abounded with labour, known as a state which owns labour-intensive industries ; nevertheless, Korea and Singapore, are states concentrating on technology-intensive industries. Therefore, capital-labor ratio in production procedure in such more developed states is rather different compared to that in China. As a consequence, the production costs should be different, so the market monetary values. For such ground, the anti-dumping policy enacted by EU may be considered as an vague step of pure protectionist policy, to some extent. This proposal aims at look intoing to what extent this general hypothesis is right. If it is right, it will make some part to the reconsideration and reforms of the EU anti-dumping policy applied to China ; if it is non right, it will be a sample to supply some thoughts how to acquire into the prospective manner.

The EU Anti-dumping Policy towards China

The General Framework of EU Anti-dumping Policy

WTO provides the regulations about how a state should response to another state acts dumping activities or Acts of the Apostless like dumping activities. EU applies its policy stated in Article VI of GATT 1994 ( General Agreement on Tariffs and Trade ) . The general fortunes of utilizing AD steps consist: foremost, the being of a disparity between the monetary value of an imported good and a normal value ; and secondly, the outgrowth of or the mere possible outgrowth of an hurt to a domestic industry. “ A normal value is defined as a comparable consumer monetary value in an exporting state or, if this is non available, so either ‘the highest comparable monetary value for the similar merchandise for export to any 3rd state in the ordinary class of trade ‘ or ‘the cost of production of the merchandise in the state of origin plus a sensible add-on for selling cost and net income ‘ ” .

There are four chief functional organisations and several stairss in the process of EU committee anti-dumping probe. First, the EU domestic plaintiffs are responsible for supplying certification for dumping instances and hurt proofness to the EU committee. The EU committee later investigates into the dumping instances provided and determines whether dumping action and hurt is really taking topographic point, whether the dumping activities cause the stuff harm to importing economic systems. The EU ‘s advisory commission has the map of measuring the consequence coming from the EU committee. The EU ‘s Council of Ministers is responsible for the concluding judgement of such instances. If the EU ‘s Council of Ministers agrees with the instance that the exporting state so does a dumping action towards EU states involves harm and hurt, EU economies can take steps of anti-dumping responsibilities which last normally five old ages and can be extended by a viz. “ expiry reappraisal. ” The European Court of First Instance and The European Supreme Court has the map of judicial reappraisal. Normally, the dumping probe takes one twelvemonth to make a concluding determination, and the leery dump trucks are non allowed to go on exporting until the probe coatings. Undoubtedly, considerable clip and disbursals are required for a dumping probe and it is really dearly-won.

Equally far as AD responsibilities are concerned, the set degree of AD responsibilities should be equal to the degree of dumping borders or the degree of hurt. During the first period of probe, a probationary responsibility is imposed ; during the 2nd phase of probe, a unequivocal responsibility is imposed, which can non be higher than the probationary 1. However, from many documents and statistics, the general rate of anti-dumping from EU is normally equal or higher than 87 % , which is a great catastrophe for most exporting houses in China.

The Principles of EU Anti-dumping Policy against China

In a common sense, the EU AD statute law marks any state which is non a member of the European Union, particularly concentrate the visible radiation on NMEs. Before the twelvemonth 2002, two largest NMEs, viz. Russia and China, they were the chief mark concentrated by EU. With the economic passage procedure, Russia has successfully transmitted into a member of market economic system in 2002 ; more attending has been paid on China since so.

Because of the list of NMEs reduces, the AD regulations and clauses are altering every bit good, and new flexible attacks have been introduced ; nevertheless, the nucleus thoughts still remain the same.

For the NMEs, particularly China, normal value is defined on the footing of: Firstly, a monetary value from a market economic system 3rd state ; secondly, a constructed value calculated for the 3rd state ; or thirdly, a monetary value charged for exports from that state. If none of these fortunes are available, the anti-dumpers can use “ any other sensible footing, including the monetary value really paid or collectible in the community for the similar merchandise. ”

Sing the method of utilizing “ a 3rd state ” , it is known that in order to cipher the dumping borders and obtain the dumping certification and cogent evidence, EU needs to happen a 3rd state as an linear state. Because of the ambiguous regulations stated by WTO, there are no inside informations about how to use “ a non unreasonable mode ” to take a most appropriate 3rd state. This may consequences recreation in computation.

Refering the “ similar merchandise ” , Chinese houses argue that the monetary values of exporting trade goods reflect the low degree of engineering and added value. EU frequently chooses the merchandise in the same class from a far more development state. In comparing with EU merchandises, Chinese manufacturers use low quality natural stuffs with low capital intensive production procedures. For case, Lamps ( 2001 ) says that the Community industry produces “ life-long ” merchandises with life times over 8,000 hours, compared with 6,000 hours of Chinese merchandises. Nevertheless, none Commission has considered such factors into history of taking the similar merchandise.

Literature Review

This proposal makes usage of two types of documents. One is theoretical documents ; the other is empirical documents to exemplify the relationship between the capital-labor ratio in production and the degree of economic development, and whether there is a prejudice in taking Korea etc. as linear states.

a. The relationship between merchandises quality and economic development degree

The monetary value of exporting goods depends on the costs of factors input and the gifts the manufacturers own. Different gifts and different costs of inputs produce different quality, and merchandises quality has some relationship with the development degree of economic sciences in separate states, based on academic documents.

A batch of documents hold the belief that there is a relationship between the difference of merchandises quality and the degree of economic development. However, higher quality merchandises need higher capital-labor ratio in production. The model for the indirect relationship between capital strength and merchandises choice finds its theoretical statements in Linder ‘s ( 1961 ) work. Linder believes that the demand for quality of consumers additions in conformity with the rise of income per caput. Income per caput is determined by capital strength. In more precise words, consumers with high income prefer high quality merchandises than consumers with low income. As Falvey ( 1981 ) says, because of comparative advantage in international trade, trade with vertically differentiated merchandises occurs within a same merchandise group. Labor-abundant states such as China have comparative advantage in labour-intensive merchandises ; whereas capital-abundant states ( most of which are developed states ) have comparative advantage in capital-intensive merchandises. Falvey and Kierszkowski ( 1987 ) say that all consumers have the same penchant portfolio but consume different quality goods because of distinguishable income. The impression of perpendicular invention is rooted in the paper of Grossman and Helpman ( 1991 ) , and it argues that rich states invest in Research and Development ( R & A ; D ) consecutively to better their merchandises and upgrade the qualities ; while hapless states merely mime what the rich states ‘ engineering at low costs. The chief difference of selling point in states with different development degrees is that: For rich states, the merchandising point is the quality and engineering contained in merchandises ; for hapless states, the merchandising point is the cheaper monetary values and production disbursals of goods. A batch of academic documents have found that there is a positive relationship between the merchandises quality and economic development degrees. Therefore, monetary values have been an index of the quality of goods.

Tortensson ( 1991 and 1996 ) finds that rich states with high capital-labor ratio slope to export high quality goods. Nielson ( 2000 ) discusses that within the comparing of cardinal and eastern European states and EU, the quality degree of the former one is lower than that of the latter 1. Veugelers and Vandenbussche ( 1999 ) shows that the ground why exporting states act like dumping is that their trade comparative advantage lies in the cost advantage. Wang ( 1999 ) says that the EU Commission frequently ignores the economic development degrees between dump trucks and the linear state. Vandenbussche and Wauthy ( 2001 ) concept a duopoly theoretical account, which states the European Commission has acknowledged there is being of merchandises choice difference, but EU is still loath to set its domestic monetary values. EU Trade Commissioner, Peter Mandelson one time said: “ we will necessitate to set because, finally, our duty is to vie and pull off alteration and accommodation, instead than to pull off trade. EU manufacturers should pay attending on quality and value, non monetary value. ” Vandenbussche and Liu ( 2002 ) points out that the EU Commission did non take the quality differences factor into history because the Chinese exporters have non claimed that there exists quality difference between Chinese goods and EU goods in the same class. Nielsen, Jorgen Ulff-Moller, Rutkowski and Alesander ( 2005 ) made hypothesis to prove whether their guess is right. Their premise is that there is a positive relationship between vertically differentiated merchandises quality and the degree of economic sciences, and such sort of relationship does part on the application of taking a 3rd state to cipher the dumping borders. There are several important findings in their paper: First, they found that after theoretical analysis and empirical work, the EU committee so chooses parallel states which have higher economic development than China ; Second, when China ( one of the NMEs ) is involved in EU antidumping instances, there is a clear positive relationship between the quality of merchandises exported to EU and the economic development degree of the exporting states ; Third, their probe with regard to merchandises quality differences and degree of economic development is in conformity with other documents. Nielson et Al. suggest that EU should use a state which produces lower degree of merchandise quality that is similar to that of China. In other words, choose an linear state with similar economic development degree.

B. The appraisal on the EU trade redresss against China

The application of taking a 3rd state and the similar merchandise

Because of the misinterpretation of the Chinese manufacturers, the method chosen to measure the monetary values and quality of Chinese exporting trade goods by ask foring a 3rd state and the similar merchandise is inappropriate.

Prusa ( 1996 ) cogent evidence that there is a trade recreation from AD steps by EU, and such type of protection is less utile than their outlook. Andrea Lasagni ( 2000 ) uses empirical work to notice the AD policy by EU Commission may be linked with turning competition from low-wage or NMs ‘ states. EU domestic houses obtain small benefits from AD protection. Brussels ( 2000 ) in his paper argues that even with anti-dumping steps use as a sort of protectionism, after analysis of the arrested development theoretical account, there is statistically important impact of anti-dumping steps on the imports volume from other states, which is diminution ; while, there shows no grounds of the statistically important alterations in the size of responsibilities imposed on importing trade goods from exporting states. What ‘s more, he discusses that EU domestic houses are improbable to derive from enforcing anti-dumping responsibilities against external providers and EU anti-dumping policy may take to the lessening of domestic houses ‘ portion. Some documents argue that the AD policy initiated by EU is a sort of political issue. Actually, when EU pockets most of the money, it still worries about the benefit that China additions. Andrea Lasagni ( 2000 ) uses empirical work to notice the AD policy by EU Commission may be linked with turning competition from low-wage or NMs ‘ states. EU domestic houses obtain small benefits from AD protection. Xiang Liu and Hylke Vandenbusche ( 2002 ) acquire the decision that EU ever levies a really high responsibility on the imports from China instead than price-undertakings. Furthermore, the responsibilities imposed on Chinese manufacturers are higher than other suspects, with an mean responsibility degree of 41 per centum. Why EU has terrible harm to domestic industry? Not merely because the cheaper monetary values from external manufacturers. EU should burthen the duties themselves, excessively. First, it is loath to reassess and set for reconstituting its industries in the declared 10-year period in the WTO Article. It should anticipate that the harm consequence on its domestic markets is significant, monolithic and negative when the domestic market is full of low-price goods. Second, it is loath to do reform but continued to lodge to desperate industry. John H. Jackson ( 2003 ) : “ if all economic sciences is international, but political relations that drives the decision-making and political relations is local, there is a job. ” Leading trade economic expert at OECD, Raed Safari one time stated: “ The re-imposition of impermanent quotas would be many more occupations in the retail industry than it would same in fabric production. ” Ludo Cuyvers ( 2005 ) references that mentioning to the targeted states against by EU Commission, China ranks No.1 among the top 40 targeted states. Anti-dumping steps can be viewed a consequence of the limitation of duty barriers ruled by GATT unit of ammunitions, and AD is regard as the most of import non-tariff barrier in international trade. The direct effect of anti-dumping ordinance is the decrease of the volumes of imports and the addition of the monetary value of importing goods. The most focusing point is that he argues AD protocol has a more considerable consequence on the entire value and volume of imports than one unit value monetary values and the addition of the unjust monetary values of the dumping states are offset by the decrease of the importation volumes. More argument and treatment should be made to the inappropriate usage of AD step. Thomas J. Prusa ( 2005 ) makes his remarks that EU is one of the traditional advocates for AD steps and strong oppositions for the reform of AD protection. However, in the long-term, EU will weaken its usage of AD for it will recognize that AD is a failed policy. Consequently, because of menace of revenge, AD steps are so rare for every state is afraid to utilize AD activity in order to chief its exports and to avoid AD by importing states. In the work of Xingzheng Hong and Rongmin Ren ( 2006 ) , it gets a decision that the trade policies initiated by EU really and finally will make harm to its long-run involvement as good. If there is revenge, it is a barbarous circle that will ne’er stop. It is lose-lose unit of ammunition.

Research Methodology and Data

In order to measure whether the EU anti-dumping policy against China is appropriate, it requires certain methodological analysis and informations from official statistics.

a. methodological analysis

In this proposal, several methods are used to exemplify the rating. One is econometric theories, in precise words, arrested development theoretical account building ; the other is narration. We construct general hypothesis to look into whether EU builds a prejudiced construction. This general hypothesis can be divided into several partial hypotheses:

First, : To prove whether there is a positive relationship between the merchandises quality and economic development degree ;

Second, : To prove whether there is a positive relationship between the monetary value of merchandises and capital-labor ratio, in other words, the monetary value of merchandises and the costs of inputs ;

Finally, : To prove whether the 3rd state chosen by EU has a higher economic development degree than China.

After all these three hypotheses tested, we can make up one’s mind whether EU ‘s AD policy against China is appropriate.

In the first instance, the unit value of goods is used to denote the quality of certain goods ; GDP can be used to bespeak the economic development degree. Therefore, the undermentioned arrested development theoretical account can be constructed:

Where denotes the unit value of exporting goods from China in the twelvemonth T ;

denotes the unit value of goods produced in EU, compared with those of China in the twelvemonth T ;

denotes the gross domestic merchandises in China in the twelvemonth T ;

denotes the gross domestic merchandises in EU in the twelvemonth T ;

denotes the changeless term in this arrested development theoretical account ;

denotes the perturbation term in this arrested development theoretical account.

Make the void hypothesis. If can non be rejected by informations, it means that there is a positive relationship between the merchandises quality and economic development degree.

In the 2nd instance, we construct the arrested development theoretical account:

Where denotes the monetary value of exporting goods from China in the twelvemonth T ;

denotes the monetary value of goods produced in EU in the twelvemonth T ;

denotes the capital-labor ratio of bring forthing the exporting goods from China in the twelvemonth T ;

denotes the capital-labor ratio of bring forthing the goods in EU in the twelvemonth T ;

denotes the changeless term in this arrested development theoretical account ;

denotes the error term in this arrested development theoretical account.

In the same narrative, construct the void hypothesis. If can non be rejected, it indicates that there is a positive relationship between the monetary value of merchandises and the costs of inputs in production procedure.

Mentioning to the 3rd hypothesis, it can be seen from a figure of instances in historical histories. When ciphering the dumping border, EU frequently chooses an linear state with comparatively higher economic development degree. Use the footings GDP in China compared with that in the 3rd states, every bit good as the Purchasing Power Parity ( PPP ) conditions.

In order to make the arrested development work more expeditiously, certain econometric package, for illustration, Eviews, PcGive, needed to set about the building, computation and trial sum-up.

informations aggregation

Because this proposal aims at trial whether the general hypothesis is rejected or non, it needs to roll up informations history to regress the simple arrested development theoretical account. Datas from statistical office, informations from public functionary web sites, informations from company histories, informations from certain public database, informations from limited DataStream, every bit good as informations from computation can be used to exemplify the job. Not merely use the informations, but besides the usage of tabular arraies, diagrams, which can ease the work.

In order to do the analysis more updated, we use the information from the period from 1979 ( the twelvemonth of China ‘s unfastened and reform policy initiated ) until the twelvemonth 2009, both China and EU ‘s comparable informations.

The constructed theoretical account can non merely measure the appropriation of EU anti-dumping policy against China, but can besides supply a better manner how to direct EU to modulate the protection regulations.

Qualifications

When tackle the research proposal, a batch of makings needed to assist. I need necessitating a good preparation in economic theories and econometric techniques and accomplishments. Furthermore, I need to specialise and develop my specific accomplishments in using such techniques and illustration. Supports from my academic coachs, my lectors, my schoolmates and my friends are besides really of import.