Anti-Dumping Retaliation

By Lan Xinzhen

The Ministry of Commerce(MOFCOM) has decided to launch a retrospective taxation investigation against imports of solar grade polysilicon originating from the United States, South Korea and the European Union (EU), according to a statement released by the ministry on November 26. Three days earlier, the ministry announced a preliminary ruling on an antidumping investigation against the imports of resorcinol originating from Japan and the United States, deciding to take provisional anti-dumping measures by means of deposit. The time interval between the two trade measures is the shortest since Chinas accession to the WTO in 2001.

Tu Xinquan, Deputy Director of the China Institute for WTO Studies at the University of International Business and Economics, said that China is simply utilizing WTO rules to respond to product dumping by foreign countries and their anti-dumping measures against China.

Chinese products are often faced with anti-dumping investigations by foreign countries. According to MOFCOM figures, from 2003 to September 2012, there were 758 trade investigations against China, involving 68.4 billion yuan ($10.87 billion) worth of products.

For 17 consecutive years, China has encountered more anti-dumping investigations than any other country, and for six consecutive years, it has faced the most anti-subsidy investigations. Leading the pack in claims against China is India, followed by the United States, the EU, Argentina, Turkey, Brazil and South Africa.

On November 8, the U.S. International Trade Commission determined that the United States was a victim of dumping of crystalline silicon photovoltaic cells and modules from China. The result is Chinese producers pay anti-dumping duty up to 249.96 percent and anti-subsidy duty ranging from 14.78 percent to 15.97 percent.

Most of Chinas polysilicon—the raw material used for making photovoltaic products—is imported from the United States, the EU and South Korea.

Serious damage

Customs figures show that in 2011, China imported 64,600 tons of polysilicon, a yearon-year increase of 36 percent. The abovementioned countries sold a large amount of polysilicon to China at prices lower than normal values, causing a serious blow to Chinas polysilicon industry.

Polysilicon producers in these countries have also received massive government subsidies. For example, large companies in Germany can receive aid of up to 30 percent for investments in the polysilicon industry, while small and medium-size companies can get aid of up to 40 percent and 50 percent of their investments respectively.

In 2011, Chinas polysilicon consumption increased by 62 percent from the previous year. The high-speed growth of the polysilicon market should have led to further development of the industry in China, but that same year the industry at home suffered widespread production suspension.

According to figures from the Silicon Industry Association under the China Nonferrous Metals Industry Association, among the seven polysilicon enterprises listed on the stock market, three had suspended production. Figures from the Ministry of Industry and Information Technology show that among the 43 polysilicon enterprises in operation, only seven or eight are still in production.

Therefore Chinas polysilicon manufacturers jointly applied for an anti-dumping probe with the MOFCOM against imported polysilicon products. In July, the MOFCOM first started anti-dumping and anti-subsidy investigations against polysilicon products from the United States and anti-dumping investigations against those from South Korea.

On November 1, the ministry announced the start of similar investigations against solar grade polysilicon originating from the EU.

However, since the launch of the investigations, polysilicon producers and exporters from the above-mentioned three countries and regions are still relentlessly dumping their exports into China. Such unfair trade practices have caused the Chinese industry to suffer severely.

On November 26, the MOFCOM approved a petition by polysilicon manufacturers to launch a retrospective taxation against imports of solar grade polysilicon originating from the United States, South Korea and the EU.

Chinas farming industry is an even greater victim of dumping. China was once a major exporter of cotton and soybean but is today a major importer of the products. Farming land devoted to soybean and cotton has declined sharply.

The major cause of the decrease in farm productivity is dumping from countries such as the United States.

Customs figures showed that in the first 10 months this year, China imported a total of 4.3 million tons of cotton, soaring 95.8 percent from a year ago. The cost of producing cotton in the United States is much higher than that in China, but the price of U.S. cotton in China is much lower than that of Chinese cotton.

For each ton of cotton, the price difference is nearly 1,000 yuan ($158.98), making it impossible for Chinese cotton growers to be competitive, and resulting in a declining planting area. According to a survey by the China Cotton Association, the area devoted to planting cotton in 2012 is 4.85 million hectares, a decline of 9.2 percent from last year.

The Rural Development Institute of the Chinese Academy of Social Sciences estimates that in 2012 China will import 57.5 million tons of soybeans, accounting for 86 percent of the countrys soybean demand, hitting a record high. In 2012 only 5.79 million hectares of soybeans have been planted, down 13.8 percent from last year. This is the fifth consecutive year that farmland devoted to soybeans in China has fallen.

Forced retaliation

China has never initiated anti-dumping investigations without being compelled to after other nations launched their own probes against Chinese products.

After the United States launched an investigation against Chinese-made tires, China launched a similar probe against chicken products from the United States. Only after the United States and the EU began antidumping investigations against Chinas photovoltaic products, China retaliated against polysilicon imports from the United States.

The MOFCOM figures show that from 2003 to September 2012, China had launched a total of 131 anti-dumping investigations and five anti-subsidy investigations involving $20 billion worth of products, much smaller than the number of trade remedy cases initiated by foreign countries against Chinese products.

According to the MOFCOM, China has increased the number of trade remedies at its disposal. Before 2009, the countrys trade remedy ability was limited to investigations of dumping. Since 2009, the MOFCOM began launching anti-subsidy investigations against some products imported from the United States and the EU. Today, China has become one of the few WTO members that can adopt all the three trade remedy measures, namely anti-dumping, anti-subsidy and safeguard measures.

Tu said China interprets anti-dumping rules as a means to promote trade liberaliza- tion instead of trade protectionism, and China is becoming a responsible and rule-abiding member of the international community in that regard.

Faced with trade frictions, the first reaction from Chinese officials is not to resort to trade remedies, according to a MOFCOM statement. The Chinese Government will adopt WTO rules to actively cope with trade remedy investigations and trade barriers launched by foreign countries and promote the establishment of bilateral and regional trade cooperation.

Boosting free trade

China has dialogue channels for bilateral trade disputes with 17 trade partners including the United States, the EU, Russia, India and Brazil. It is working to establish such trade channels with organizations such as the Eurasian Economic Community and Gulf Cooperation Council.

The focus is to build an understanding of the rules during trade remedy investigations in order to enhance mutual trust, reduce disputes and resolve frictions. Even if consultations fail, China will first defend itself in any trade litigation.

At present, China is actively participating in negotiations and the formulation of international rules to ease trade frictions between nations. The MOFCOM says a multi-lateral trade mechanism is important to maintaining global free trade, and that China hopes international trade rules to be open, inclusive and non-discriminative.