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Granting Market Economy Status to China in the EU: An Economic Impact Assessment

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  • Cecilia Bellora
  • Sébastien Jean

Abstract

This Policy Brief assesses 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.

Suggested Citation

  • Cecilia Bellora & Sébastien Jean, 2016. "Granting Market Economy Status to China in the EU: An Economic Impact Assessment," CEPII Policy Brief 2016-11, CEPII research center.
  • Handle: RePEc:cii:cepipb:2016-11
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    References listed on IDEAS

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    Cited by:

    1. Sébastien Jean & Ariell Reshef, 2017. "Why Trade, and What Would Be the Consequences of Protectionism?," CEPII Policy Brief 2017-18, CEPII research center.
    2. Michel Aglietta & Virginie Coudert, 2016. "Trump and the Dollar in the Refection of History," Working Papers hal-01671414, HAL.
    3. Anne-Laure Delatte & Sébastien Jean, 2017. "Trade and Macro-Economic Issues for International Co-Ordinational in Tense Times," CEPII Policy Brief 2017-16, CEPII research center.
    4. Hillel Rapoport, 2017. "Who is Afraid of the Brain Drain? A Development Economist’s View," CEPII Policy Brief 2017-14, CEPII research center.
    5. Matthieu Crozet & Gianluca Orefice, 2017. "Trade and Labor Market: What Do We Know?," CEPII Policy Brief 2017-15, CEPII research center.

    More about this item

    Keywords

    Antidumping; Market Economy Status; Chilling effect ; China;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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