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The Implications to Chinese Wood Flooring Export Enterprises from American Anti-dumping and Countervailing Investigations

Author: LiuQin
Tutor: ChenXiaoDong
School: Dongbei University of Finance
Course: International Trade
Keywords: anti-dumping countervailing "double reverse" investigations trade friction trade remedy
CLC: F426.88
Type: Master's thesis
Year: 2011
Downloads: 284
Quote: 0
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Abstract


Since the establishment of Sino-US relationship in 1979, the bilateral trade is gradually increasing. As bilateral trade rapidly developed, China and the U.S. became each other’s important trade partner, and Sino-US trade frictions became more severe. According to Department of Commerce of the United States, China is the second largest trade partner, the third largest export market and the first largest import country for the United States. Meanwhile, the United States is the second largest export market and trade partner for China. Since China’s accession to WTO in 2001, the trade deficit between the United States and China has expanded dramatically, so do the trade frictions and trade remedies. Among these remedy measures used by the United States against China, anti-dumping and countervailing measures totally account for 70%. In November 2006, the United States firstly initiated anti-dumping and countervailing investigations against Chinese coated free sheet paper. Moreover, the outbreak of financial crisis in 2007 became the catalyst to bilateral trade friction, and American anti-dumping and countervailing investigations are frequently used. Therefore, the research on American simultaneous initiation of anti-dumping and countervailing measures against China is very significant for Chinese wood flooring.The anti-dumping and countervailing targets are distributed into different types in our leading export field, especially into steel products. From the first initiation of "double reverse" investigations by U.S., the number of anti-dumping and countervailing investigations increases rapidly from 2006 till now; the suspected amount of money is becoming extremely huge; punitive duties differ between different enterprises according to their attitudes toward responding; and there exists unfair and partial treatment during anti-dumping and countervailing investigations. In 2007, the United States initiated 7 "double reverse" investigations against China, and 5 in 2008,10 in 2009, and 3 in2010. For the United States, "double reverse" measures have already become the main trade remedy measures against China.My paper focuses on exported Chinese engineered wood flooring, introduces the statue quo of Chinese wood flooring export and the U.S. initiation of "double reverse" investigations against Chinese engineered wood flooring, analyzes the "double reverse" reasons and impacts, and summarizes the implications that we learn from the case.There are 5 chapters in my paper.The first chapter is the introduction part, briefly introduces the "double reverse" case and the significance of research:forcing wood flooring industry to optimize its development and providing theories for international trade policies. Meanwhile, it defines some relevant concepts:wood flooring, anti-dumping, countervailing as well as "double reverse" investigations. Thereafter follows the domestic and foreign research on this subject.The second chapter is the status quo of Chinese wood flooring export. Firstly it introduces the three periods that Chinese wood flooring industry had through:The first period, the infant period, it started from the middle 80s of 20th century to early 90s. In this period, Solid wood floor was banned in 50s by national industry policy, but began to develop after Chinese reform and opening policy. Meanwhile, laminated wood floor was imported from Europe on 1995. The second period, the rapid-growth period, began from early 90s to early 21st century. From late 90s, the total output and sales volume increased 30% annually, and the number of our wood floor enterprises changed into several thousands instead of early hundreds. The third period is the mature period after entering into 21st century. The style and quality of Chinese wood flooring have achieved the standards as developed countries’, and gross output and sales reach to the top rank worldwide. It uses tables to analyze the exportation of three types of wood flooring:solid wood flooring, engineered wood flooring and laminate wood flooring. Because my research target is exported engineered wood flooring, it analyzes the exportation of engineered wood flooring which imported by the U.S. and points out the export problems through two angles:resource and technology problems. At last, it gives detailed analysis for export problems.The third chapter concentrates on American "double reverse" case analysis. At the beginning, it introduces the whole process of this case:(1) On October 21st 2010, the Coalition for American Hardwood Parity, Anderson Hardwood Floorings LLC, Award Hardwood Floorings, Baker’s Creek Wood Floorings, Inc., From the Forest, Howell Hardwood Flooring, Mannington Mills, Inc., Nydree Flooring and Shaw Industries Group, Inc. applied to the U.S. Department of Commerce and International Trade Commission for anti-dumping and countervailing investigations against Chinese engineered wood flooring and suggested imposing as much as 242% anti-dumping duties on Chinese products. Meanwhile, they also suggested imposing countervailing duties. (2) On Nov 12th 2010, the U.S. Department of Commerce made a decision to investigate into imported Chinese wood flooring products. (3) On Dec 3rd 2010, the U.S. International Trade Committee made the preliminary ruling that Chinese exported engineered wood flooring products caused material damage to the U.S. wood flooring industry. It was estimated that the involving number of Chinese enterprises was 169 and the total value was about 10 billion RMB. (4) On March 22nd 2011, the U.S. Department of Commerce made the preliminary ruling on Chinese engineered wood flooring that it would collect 27.01% countervailing duties on imported Chinese engineered wood flooring to get rid off the unfair subsidy provided by Chinese government. Meanwhile, some American producers asked for as much as 281% anti-dumping duties on Chinese wood flooring, but the U.S. Department of Commerce had not made a decision on this. (5) On May 20th 2011, the U.S. Department of Commerce made the positive preliminary ruling on Chinese engineered wood flooring:Two of three enterprises that deliberately responded to investigations would be levied zero anti-dumping duty, and the rest one would be collected 10.88% anti-dumping duty. Other enterprises that responded to investigations would be levied 10.88% anti-dumping duty. The enterprises that did no respond to would be levied 82.65% anti-dumping duty. (6) On 27th June, the United States decreased the anti-dumping duties:Three companies that deliberately responded to investigations would be levied zero anti-dumping duty. Other enterprises that responded to would be levied 6.78% anti-dumping duty instead of 10.88%. For those enterprises which did not respond to would be levied 27.12% anti-dumping duty instead of 82.65%. (7) On October 13th 2011, the United States made the final anti-dumping and countervailing duties on Chinese engineered wood flooring products. The 3 samples enterprises were Friends Wood Ltd, Jiaxing Bailin Import and Export Ltd, and Yuhua Wood Company. The anti-dumping and countervailing duties of Friends Wood Ltd were 3.98% and 0.33%, the anti-dumping and countervailing duties of Jiaxing Bailin Import and Export Ltd were 2.63% and 0, the anti-dumping and countervailing duties of Yuhua Wood Company are 0 and 0.47%. The anti-dumping and countervailing duties of enterprises that responded to investigations were 1.5% and 3.31%. The anti-dumping and countervailing duties of enterprises that did not respond to investigations were 58.84% and 26.73%. (8) The United States International Trade Committee had an industry injury hearing. If China successfully counter-appeals it, the announced final rulings would be revoked. Thereafter, it analyzes American "double reverse" reasons in inner and outer factors and summarizes the characteristics of anti-dumping and countervailing investigations: (1) The number of "double reverse" cases increases rapidly from 2006 till now. (2) The suspected amount of money is extremely huge. (3) Punitive duties differ from different enterprises. (4) There exists unfair and partial treatment during anti-dumping and countervailing investigations. What’s more, it shows the legal bases of domestic and international laws of U.S. anti-dumping and countervailing against Chinese wood flooring. From the past rulings of U.S. domestic laws, it’s legal. The U.S. actually created a new law case that was applied to non-market economy countries, and provided a new law precedent for those non-market economy countries to initiate countervailing investigations. According to Price Comparability in Determining Subsidies and Dumping, the Article 15 of the Protocol on China’s Accession to the WTO, we can draw the conclusion from the indication of Article 15 that simultaneous initiation of anti-dumping and countervailing measures against China is legal. Finally, both China and the United States have been influenced by this case. For China, if China is collected higher anti-dumping and countervailing duties, there would be a devastating attack to our wood flooring export enterprises. Higher taxation would not only affects the enterprises and industry, but also the national economy, even though influence bilateral or multilateral relationship and makes international economic trade environment more complicated. For the United States, it seems that the main aim of initiation of anti-dumping and countervailing against China is the trade remedy to the materially injured wood flooring industry and the maintenance of a fair and impartial trade environment. However, honestly speaking, the higher taxation decreases the welfare of domestic consumers. After the taxation, the adjustment of industry structure and total development of the whole industry do not indicates any positive or substantial change, their products competitiveness do not get enhanced.The forth chapter is the implications from this case. To Chinese wood flooring enterprises, they should improve technology and creativity, increase wood flooring products’value added, and construct wood flooring brands. Meanwhile, Chinese wood flooring enterprises should change their minds to expand domestic markets and further explore foreign markets. Thereafter, they should strength the anti-dumping and countervailing education and cultivate some professional talents who can deal with these problems. Finally, they should estimate and prevent loss from other trade barriers. To industry association, as the intermediary of government and enterprises, it should collect data, control and master abundant information flow, and communicate with the government whenever there is imperfection in the existing early warning mechanism and pose the questions to government. Industry association plays the critical role in preventing and dealing with anti-dumping and countervailing in the following ways:(1) Establishing capital guarantee mechanism. (2) Advocating positive responding. (3) Reinforcing inner coordination and management. (4) Building early warning mechanism. To Chinese government, on the one hand, it should issue some relevant policies in this field, and force our export enterprises changing constantly, improving export standard, integrating and optimizing the product itself before exporting, regulating export specification, finally decrease trade friction with foreign countries and fosters development of wood flooring industry. On the other hand, China should actively negotiate with foreign economic entities, and impel the settlement of market economy status problem for the sake of fair and impartial treat environment.The fifth chapter, which is the conclusion part, summarizes all the analyses.Fundamentally speaking, anti-dumping and countervailing are traditional trade remedies recognized by WTO. However, implementation of anti-dumping and countervailing is primarily intended to reduce or eliminate the negative impact of foreign dumping on domestic market. In practice, the influence of abusing anti-dumping and countervailing would diffuse to other trade areas, and even impact the normal bilateral trade and diplomatic relationship. In this "double reverse" case, the United States needs Chinese market; similarly, China also needs the United States market at the same time. For this reason, both China and the United States should be rational while dealing with trade problems.

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