The EU recently drew global attention for its reluctance to fulfill its obligations under Article 15 of the Protocol on China’s Accession to the World Trade Organization. The European Commission announced it would no longer use the “surrogate country” method to calculate anti-dumping measures against some WTO members, including China, that have been labeled “non-market economies.” But it left open the option to use international price and cost reference in further anti-dumping cases if “market distortions” were found.

The commission replaced the concept of “non-market economies” with “market distortion,” which has no basis in the WTO framework. On the surface, the commission appears to be keeping its promise to the WTO, but it is essentially a further distortion of WTO rules.

Since the outbreak of the European debt crisis in 2010, the EU has gradually lost its competitive edge in the global economy. Instead of seeking solutions through innovation and industrial transformation or finding out root causes, it blames exports from China and other countries while constantly using trade protectionism as a shield against China’s manufactured goods. The anti-dumping probe of photovoltaic products and steel from China are all cases of European protectionism.

In fact, protectionism is not beneficial to boosting EU growth and competitiveness. On the contrary, the EU’s economic predicament is closely related to its over-protection of its own enterprises and laborers. Over-protection provides survival opportunities for those backward enterprises in disadvantageous sectors that offer no comparative advantages and are supposed to withdraw from the market. They in turn become a burden for EU’s already frail economy. Therefore, it is actually EU’s own “market distortions” that put its products at a disadvantage in international competition.

Since it entered the WTO, China has always supported globalization and free trade while observing WTO rules and upholding its obligations. Moreover, China’s rapid growth in economy and trade relies on its own natural endowment as well as vast domestic and international market resources. China is also becoming increasingly adroit in utilizing WTO rules, which guaranteed its success in disputes with the EU.

The EU now tries to sidestep existing rules and make new anti-dumping rules in violation of the principles of multilateral free trade. Also, the WTO earlier this year ruled partly in favor of Argentina in a dispute concerning anti-dumping duties imposed by the European Union since 2013, which shows that the EU’s “international market price” method of calculation does not work within the WTO framework. EU’s protectionism is like trying to quench a thirst with poison. In the short term, the practice will increase revenue and employment, but in the long run, it will bring potential harm to both the EU and the global economy.

As a major WTO member, the EU is obligated to take the lead in observing WTO rules and not violate the conventions of the multilateral trade system. With China’s increasingly deeper involvement in the global economy, China is willing to have more economic and trade exchanges with the EU with a more open mind. The only way for the EU to come out of the economic predicament and maintain public welfare is to develop cooperation with mutual benefits with China and other trade partners.

 

Tu Xinquan and Cao Hongyu are from the China Institute for WTO Studies at the University of International Business and Economics.