CHINA – Market economy status in trade defence investigations

19 octobre 2021 Pierre Perrin-Monlouis

What is “market economy status” in trade defence investigations?

This is an issue which ONLY concerns trade defence investigations. In trade defence investigations (anti-dumping and anti-subsidy) the authorities have to use prices and costs reported by the companies concerned to calculate whether dumping/subsidies are taking place. In the case of market economy countries, the prices and costs used are those reported by the individual companies. In case of economies in transition (such as China), it is presumed that prices and costs are influenced by States interference and therefore the investigating authorities use the prices and costs of companies in a market economy third country.

However, in late 1998 the EU adapted its trade defence rules to allow individual companies to claim market economy status if they could prove that their prices and costs are not influenced by the state. Out of the 111 individual requests received since 1999, only 28 have been found to be acceptable.

Today, a total of 10 countries (China, Ukraine, Kazakhstan, Vietnam, Albania, Armenia, Georgia, Kyrgyzstan, Moldova and Mongolia) are considered economies in transition for the purpose of trade defence investigations

In 2003, only 0,5% of Chinese exports of goods to the Community were subject to anti-dumping measures.

The possibility to treat China as an economy in transition in trade defence investigations for up to 15 years was agreed and enshrined in the Chinese WTO accession protocol signed in 2001. Therefore there is a clear and mutually agreed legal framework to deal with this matter while the request is being examined.

MES does not have an impact on the number of anti-dumping/anti-subsidised cases; it is simply a method to calculate AD duties.

New Zealand, Singapore and Malaysia have granted MES to China. The number of AD cases opened by these countries against China in 2003 is very limited 2 cases for New Zealand and none for Malaysia. Australia is looking at the issue on a two-year basis in the context of a Free Trade Agreement. Other countries such as the United States, Brazil and Canada have not granted MES to China.


China lodged its request for Market Economy Status (MES) in June 2003 and provided supporting documentation in September 2003. Additional information was submitted in the course of 2004.

The Commission undertook to provide the Chinese authorities with a preliminary assessment of their MES request by the end of June 2004.

The analysis was carried out by the Commission services on the basis of the documents supplied by China and of information obtained from authoritative external sources.

MES assessment is not a political statement. It is a technical analysis exclusively linked to trade defence investigations. We need to be sure that costs and prices of Chinese companies can be relied on for the purpose of these investigations.

Results of the preliminary assessment

The preliminary assessment, transmitted to the Chinese authorities end of June acknowledges the economic progress achieved by China over the past years.

However, remaining shortcomings in four broad areas, which affect the conduct of anti-dumping investigations, mean that it is not possible to grant MES at this stage. In practice, the EU is committed to granting China MES as soon as the following conditions are fulfilled:

State influence: ensuring equal treatment of all companies by reducing state interference, which takes place either on an ad hoc basis or as a result of industrial policies, as well as through export and pricing restrictions on raw materials.
Corporate governance: increasing the level of compliance with the existing Accounting Law in order to ensure in general the usability of accounting information for the purpose of trade defence investigations.
Property and bankruptcy law: ensuring equal treatment of all companies in bankruptcy procedures and in respect of property and intellectual property rights.
Financial sector: bringing the banking sector under market rules, i.a. by removing discriminatory barriers, in order to ensure rational allocation of capital by financial institutions.
This preliminary assessment is not an overall judgment on the state of development of the Chinese economy, but a technical analysis linked exclusively to the determination of companies’ costs and prices in trade defence investigations.

The Commission is ready to identify areas in which changes take place and to monitor any progress achieved.

Number of current AD cases against China

The Community has currently 32 definitive anti-dumping measures in force and 22 ongoing anti-dumping investigations (6 new cases and 16 reviews) against China. The most important products by import volume subject to measures are bicycles and their parts, fluorescent lamps, dead-burned magnesium and fluorspar.

The US has currently 52 anti-dumping measures in force against China on products such as chemicals, non-iron and steel products (e.g. potassium permanganate, pure magnesium, steel concrete reinforcing bars).

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