Granting Market Economy Status to China in the EU: An Economic Impact Assessment
CEPII, Policy Brief No 11, September 2016
16 Pages Posted: 25 Apr 2019
Date Written: September 1, 2016
We assess the possible economic impacts for the European Union of granting market economy status (MES) to China in antidumping investigations. The issue is important: China ranks first among the countries targeted by European antidumping, and sanctions cover tariff lines worth 8.7% of EU imports from China, based on pre-investigation imports (0.5% for MES partners). We find that China’s exports face a larger number of antidumping investigations than those from MES partners, even accounting for China’s trade specificities. These investigations also have a higher chance of being won by the plaintiff. Furthermore, when a sanction is decided, its trade-restrictive impact is higher against China. In addition, we show that antidumping measures lead not only to an increase in the prices of targeted Chinese products but also in those of Chinese untargeted products similar to those directly targeted. This chilling effect materializes in 4 to 14% prices increases for untargeted exports belonging to the same sector as those targeted. It does not affect MES partners. Antidumping cases against non-MES partners other than China are not numerous enough to isolate the impact of the MES per se. We thus assess the impact of granting MES to China assuming that all China’s specificities in EU antidumping procedures would disappear as a result. Under this assumption, disregarding the chilling effect, changing China’s status would boost its exports to the EU by 3.9% to 5.3% in volume (€13bn to €18bn). Factoring in the removal of the present chilling effect, the impact might reach 7.4% to 21% in volume (€25bn to €72bn). Domestic output losses would be small in relative terms (up to 0.06% disregarding the chilling effect, up to 0.32% taking it into account), but significant in absolute terms (respectively, €3.9bn and €23bn); 90% of these impacts reflect the decline in the number of investigations, as opposed to the level of duty in case of sanction. Accordingly, dropping the so-called lesser duty rule would not alter significantly these impacts.
Keywords: Antidumping, Market Economy Status, Chilling Effect, China
JEL Classification: F13, F14
Suggested Citation: Suggested Citation