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Price Strategy in the EU: Suggestions to Chinese Exporters in the Light of Anti-Dumping

Research output: Contribution to book/anthology/report/proceedingBook chapterResearch

  • Jørgen Ulff-Møller Nielsen, Denmark
Dumping is present in the European Union market when the export price at which a product is sold in the Community market is shown to be lower than what is considered "normal value". While in most cases the normal value is calculated as the price in the exporter's home market, the normal value, in the case of China, is the home market price in a so-called analogue country. The philosophy behind using an analogue country when calculating the normal value is based on the belief that intervention by the Chinese government in price setting, etc., distorts home market prices, making them unusable in normal value calculations. Because of the ongoing reforms in China, which have led to an increasing number of Chinese companies operating on market economy principles, Chinese companies have, since 1 July 1998, been allowed to apply for individual market economy status and in such cases the normal value of a product is based on the home market price of the company. The criterion which the companies have to fulfil is that there must not be any significant external interference in their economic decision-making in relation to prices, costs, investments, etc.

    Based on the practice of the EU anti-dumping policy against China in 1990-2001, this paper shows that companies operating in China and exporting to or planning to export to the EU market have a number of possibilities for lessening the threat of or the size of EU anti-dumping measures. Firstly, the companies may use the information given by the EU institutions in relation to anti-dumping cases. This information may be useful for Chinese companies in formulating their price strategies on the EU market. Secondly, since the treatment of a Chinese company depends on the strength of its links to Chinese public authorities, such dependency should be reduced. There are numerous ways of doing this. A state-owned Chinese company may try to become privatised or may enter into a joint venture with a foreign company, thus ensuring that the joint venture obtains an export license and the right to sell on the Chinese domestic market. The combination of such rights and application for market economy status or at least individual treatment, opens the possibility of a reduced level of duty. By entering into negotiations with the EU, the Chinese company may also have the possibility of obtaining permission to convert a duty into a price agreement resulting in better economic performance.  A foreign company investing in China should prefer a wholly owned company or should at least acquire majority ownership.

    The Chinese membership of the WTO gives Chinese companies an opportunity to check the legality of the EU anti-dumping decisions by using the dispute settlement system of the WTO. In addition, instead of just having the possibility of applying for 'market economy status' and waiting for approval or rejection the Chinese producers have a WTO-based legal right to 'market economy status' if market economy conditions obviously obtain.                       

 

Original languageEnglish
Title of host publicationMarketing Issues in Western Europe : Changes and Developments
EditorsErdener Kaynak, Frederic Jallat
Number of pages19
Place of publicationNew York
PublisherHaworth Press
Publication year2005
Pages125-143
ISBN (print)978-0-7890-2838-9, 0-7890-2838-7
Publication statusPublished - 2005

    Research areas

  • EU anti-dumping; owner structure; market economy status, individual treatment; price strategies; circumvention of duties

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