China’s WTO accession has been ten years, and we have experienced the joy of economic growth and trade disputes, troubles as well. All of them made us to rethink the function of the WTO, and how to use the WTO rules to make our interests more secure and safe. In 2010, China is the world’s largest exporter and the world’s second largest national economy. The country now accounts for about 11% of world trade in goods. Bilateral trade with the EU has gone from €4 billion in 1978 to €395 billion in 2010. The EU continues to be China’s main export market. In 2010 the EU imported goods worth€281.9 billion from China.
At the same time, China is Europe’s fastest growing export market. European companies are deeply integrated in Asian production chains. More than half of China’s exports are currently produced by foreign invested enterprises. As a result, the EU runs a deficit with China on trade in goods which was €133 billion in 2009 (compared to €169 billion in 2008). On the services market Europe runs a surplus with China of €5.0 billion in 2009(compared to €4.9 billion in 2008). Investment flows also show vast untapped potential. European companies invested €5.3 billion in China in 2009(€4.7 billion in 2008). China invested €0.3 billion in 2009. This is respectively less than 3% and 1% of both sides’ total investment outflow.
The EU was a strong supporter of China’s accession to the WTO, arguing that a WTO without China was not truly universal in scope. For China, formal accession to the WTO in December 2001 symbolized an important step of its integration into the global economic order. The commitments made by China in the context of accession to the WTO secured improved access for EU firms to China’s market. Import tariffs and other non-tariff barriers were sharply and permanently reduced. While China has made good progress in implementing its WTO commitments, there are still outstanding problems between these two trading partners. The EU uses the regular Trade Policy Review of China in the WTO to raise a number of concerns regarding China’s trade policy. These include inadequate protection of intellectual property rights, the maintenance of industrial policies which may discriminate against foreign companies especially in sectors like automobiles and barriers to market access in a number of services sectors including construction, banking, telecommunications, and express postal services). Access to raw materials has also been identified as a major trade obstacle as well.

As “economic United Nations”, WTO is not only enthusiastic about moral issues as the United Nations, but also established reciprocal tariff concessions, as well as trade in services, intellectual property, and safety measures to reach a new agreement to promote national consciousness, or force some authorities to implement free trade policies. Therefore, it is a helpful in dealing with Trade protectionism in this framework. However, its impact on trade protectionism is limited, especially in the invisible protectionism. In recent years, some foreign scholars call for WTO reform on the future development of WTO gradually, one of the claims is the “regulatory model”, advocates the expansion of WTO powers and the establishment of global regulatory standards in the inhibition of invisible trade protectionism. Some scholars believe that democratic transformation from the global regulatory regime is needed to establish a fair, open and peaceful international order, That is to say, following some of the country’s regulatory regime to re-design the WTO system and operational mode is necessary. Some other scholars such as Professor McGinnis (2005) and his followers opposed to this point of view. In their perspective, strengthen the WTO’s regulatory power to replace national sovereignty will not only undermine the public welfare, threaten the sovereignty of member parties, but also easily be controlled by some interest groups. They proposed a tit for tat “discrimination” model, advocated to give W TO more judgment rights, but not the unlimited regulatory power. According to this reform model, to prevent WTO members to take the invisible trade protectionist measures, it is appropriate to use test methods such as transparency, consistency and performance orientation, but not impose sovereign nations on developing a uniform global rules. The use of these methods and measures for members to review domestic legislation could identify some trade protection measures which designed in neutral might increase the burden on importers and constitute non-tariff barriers. This reform in WTO will help to protect the interests of consumers and weaken the ability of interest groups in pursuit of selfish interests, but also for us to use the WTO anti-discrimination policies to against the EU invisible trade protectionism.
Within the framework of the WTO, free trade theory is based on the comparative advantage of the members. Comparative advantage theory is based on the optimum competitive hypothesis. Through the trade with their respective comparative advantages, the factors of production could be allocated in a optimum way in all parties who participate in. The beneficiaries of free trade are the consumers in all the countries. The benefits of free trade can be showed in the United States, Europe. The goods come from all the countries with comparative advantage are showed in the market of United State. As a result, in the United States and Europe, people could enjoy the world’s best goods and services by spending very limited money.
China has changed its view on economic development from ignoring the comparative advantage to economic globalization. Economic globalization is a catalyst for economic development, which could accelerate China’s economic growth. China’s WTO accession not only made a significant contribution to GDP growth, but also improved the incomes for ordinary people, and increased government revenue to pay for environmental governance, China has become the biggest beneficiary of free trade.
However, free trade, promoting economic prosperity, does not mean the operating conditions of each enterprise are quickly improved. If products of similar imported goods are much cheaper than domestic, the companies would be negatively affected by free trade, and the companies who lack of competitive products would be “loser”. For example, cheap shoes from China are exported to Italy, which might be a negative impact on some Italian footwear manufacturers and workers. In order to survive, these enterprises are about to form interest groups to against free trade by encouraging the government to adopt protectionist policies.
Some scholars proposed higher level negotiations and tariffs reduction between countries. Such negotiations would make both sides reach a new equilibrium. When the government imposes import tariffs, it would not only cause harm to foreign exporters, but also lose their terms of trade, or get more market access restrictions. Then, countries can negotiate trade agreements and commitments to promote greater exchange of market access policies to be mutually beneficial. Market access could reflect the competition between domestic products and imported products. Therefore, developed countries are accustomed to set up limitations to developing countries on this issue. WTO provided a platform for negotiations all around on the issue of market access, but also formed effective government constraints to unilateral government action.
In 2008 EU became China’s largest trading partner. Bilateral trade volume between China and the EU increased, but the proliferation of trade will inevitably lead to trade friction. Trade friction is the trade activities the trading partners behaved to harm some related industries between both sides. EU believes that its imports from China are much more than exports, which leave a long-term deficit to EU.
Dumping is an important aspect of unfair trade practice. China has been the main target of EU anti-dumping over years, especial since China’s accession to WTO, with the development of China’s exports to EU increased sharply, the scale of EU anti-dumping on China is growing, and China has become the largest antidumping country in EU’s investigations. On the one hand, EU took some mea-

sures to subside its own similar product in the internal trade. On the other hand, they also resort the case to the WTO by the WTO dispute mechanism. China has been involved into WTO dispute cases for many years. As Article 6 in GATT said, When a product considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, as a result, materially injures or threats the existing industry, or even retard the establish of new industries of a party to the agreement, the dumping should be condemned, “to offset or prevent dumping, a Party may impose anti-dumping duty on the dumped product at no more than the amount of margin of dumping.” WTO Supports the anti-dumping, aiming at protecting the normal economic development of members and ensuring trade under fair competition. WTO rules protect legal interests to counter the unfair treatment, but also become a European Union anti-dumping excuse. EU anti-dumping to China involves from textiles, agricultural products and other primary products extend to vehicles, equipment, and other industrial products.
Dumping is determined by three factors: the normal value, the export price and dumping margin. Paragraph 7 in Article 2 established the basic rules of EU anti-dumping: Dumping exporters were distinguished as from non-market economy or a market economy. In the anti-dumping investigation, the normal value of the products from market economy shall be accounted according to domestic prices; While for non-market economy approach is based on the surrogate country method, the normal value shall be determined on the prices of similar products or the structure of value of a market economy, or the exporting price to other countries including SADC countries. The alternative-country system is the EU’s basic anti-dumping legal basis. EU imposed temporary anti-dumping duties on silicon-manganese ferroalloy imports from China in 1997; at the same year it ended imports from China of tungsten trioxide and acid; In 1998 it imposed temporary anti-dumping duties on crude magnesium from China; In 2002 it imposed a formal anti-dumping duties on color TV from China and other countries; these all have invoked the “basic rules” of alternative-country to establish China’s normal value with similar products in surrogate countries. After 1998, the revised anti-dumping rules did not make antidumping restrictions on Chinese exporters any better. And Chinese manufacturers and exporters were not given market economy treatment.
Actually there are some truths that would explain the reason why EU-China hold a huge trade friction. EU applied non-market economy standards in anti-dumping practice to China. In fact, there is no “non-market economy” concept in the WTO rules. The purpose of establishment of WTO is with respect to institutional differences between rich and poor, members seek mutual benefit, tariffs reduction, free trade and the elimination of discrimination. Of course, WTO rules and principles of market economy are mutually exclusive. Discriminatory are highlighted in the following two aspects: First, the unfair use of alternative-country system; the second is unfairly imposed uniform anti-dumping tax rate on Chinese exports. This hurts Chinese exporters seriously due to high anti-dumping duties.
In addition, weak economic growth in European countries, lack of competitiveness and se- rious unemployment, social welfare and immigration abuses and other social problems could intensify the conflict of trade friction. The frustration in EU constitutional treaty referendum could also affect the trade friction. Meanwhile, since the reform and opening up, China has made a sustained rapid growth in overall national economy. China-EU bilateral relations will be naturally affected by these asymmetries. EU accepted “China threat” when they are facing China’s development. The friction in trade might be attributed to the politic relations.
In 2008, a wide range of financial crisis swept the world. The financial crisis originated from the United States, had a serious impact on Europe, the EU was facing a full recession. Although the EU-China trading volume
ranked well in the world trading market, some main EU countries were getting involved into the worst areas affected by the financial crisis, which inevitably affect China for its exports, especially exports of traditional products. In fact, China’s export-oriented economy has been under attack, especially in the coastal areas of China. Under this situation, EU introduced a number of antidumping measures against China, reflecting the downturn in the global economy. The EU trade protectionism has been on the rise. In the context of trade liberalization all over the world, trade protectionism never disappeared, free trade and protection has been a shift in the international trade.
However, EU attributed the reason to the dumping of Chinese goods, which is unacceptable from China’s perspective. Under the framework of WTO, the Road to seek the corresponding
However, EU attributed the reason to the dumping of Chinese goods, which is unacceptable from China’s perspective. We have to find and take some appropriate measures in response under WTO framework.
(A) Require the European Union to repeal provisions about nonmarket economy in bilateral negotiations
Non-market economy standards applied to measuring anti-dumping from China could drive investigation agency to use domestic prices of third countries with higher labor costs as measurements. The use of this method would easily derivate falsedumping judgments, of which there are no good reasons. Therefore, in addition to continuing the demonstration of its market economy status, China shall directly expose EU invisible trade protectionism-the nature of non-market economic standards--in bilateral negotiations, calling for the abolition of discriminatory provisions of the nonmarket economy. As a short-term goal, we should at least urge the EU to use the surrogate country standards adopted by the United States.
(B) Use WTO dispute settlement mechanism
As China and the EU both are members of the WTO, solutions should be actively sought within the framework of the WTO to settle their conflicts of interest. In August 2000, WTO Appellate Body supported adverse ruling from Dispute Settlement Panel to the U.S. Antidumping Act of 1916. And EU played an active role in the legislation process as the case challenging party. We can learn from it by using the “rules on dispute settlement procedures and the understanding”as the restriction weapon against EU’s abuse of anti-dumping measures. We can also propose directly to the WTO Appellate Body to abolish the EU’s basic rules about China’s non-market economy status, and reiterate that WTO members should follow Fair trade and anti-discrimination principles.
(C) Demand to abolish China’s special provisions in the Protocol, and modify the relevant provisions of the AD Agreement in the new round of WTO negotiations
China has undertaken in many ways more of WTO obligations than other members. China’s WTO Accession Protocol agreed to been seen as non-market economy so as to build anti-dumping investigations to China’s company in fifteen years since accepted as a member. This allows WTO members to adopt “a strict comparison approach not based on China’s domestic prices or the cost” in antidumping investigations, so that the EU current practice has been legitimized by using non-market rules to determine China’s dumping and to counter Chinese exports. this approach of using higher labor costs in alternative country or adding profit margin into value is extremely disadvantageous to China. Chinese manufacturers and exporters thus should prove that their products are based on market economy status case by case. Their status in the WTO legal system, legal effect, and how to conduct are all quite problematic. Therefore, applicability should been explained according to the general principles of public international law. The investigative arm of the importing country must apply the appropriate standards of objectivity in determining the prices of similar products.
EU’s overuse of anti-dumping measures has seriously weakened the value of trade liberalization. It also violates seriously the WTO spirit of anti-discrimination. Therefore, in the Doha Development Agenda (DDA) negotiations in the antidumping, China should join and unite “anti-dumping Friends Group” and change the tradition that developing countries follow the rules made by developed countries. China should also actively support DDA’s request to clarify and improve the Anti-Dumping Agreement, to end automatically the anti-dumping measures after five years and not to set up new investigation in one year to the same product from the same country.
(D) Stimulate domestic demand
Last but not lease, turning to domestic market is another important way out. In the process of the financial crisis and economic recovery, China and the EU both are carrying out rescue plans, planning the adjustment of economic structure. To resist the adverse effects of the international economy financial crisis, the Chinese government issued 4 trillion economic stimulus plans in 2008, and decided to adopt flexible and prudent macroeconomic policies to cope with the complicated situation. The Chinese government shall introduce more effective measures to expand domestic demand, by speeding up livelihood projects, infrastructure, ecological environment construction and reconstruction, improving income levels of the urban and rural residents, especially low-income groups, and promoting stable and rapid economic growth. Through expanding domestic demand, China’s domestic markets would effectively dissolve external conflicts in trade with the EU.
(Author: SCHOOL OF FINANCE, RENMIN UNIVERSITY OF CHINA)