 In recent years, many Chinese enterprises have lost anti-dumping cases brought by foreign companies. However, there was a successful counter-case against the powerful EU by a dozen companies producing cigarette lighters in Wenzhou city. What were the reasons for this, and what does it mean?
After China’s entry to the WTO in late 2001, the Chinese economy merged with the world economy to a greater extent. At the same time, many Chinese enterprises suffered greatly from a lack of knowledge concerning trade exchanges between countries. However, some Chinese companies have begun to pay more attention to self-protection through legal means. An anti-dumping case which took place recently in Wenzhou city in eastern China may bring some enlightenment in this regard.
Statistics show that China is the biggest victim of anti-dumping cases in the world. The Chinese suffer tens of billions of dollars of financial losses. Given this severe reality, the winning case of Chinese lighter companies offers much valuable experience for other domestic enterprises. To take up the weapons of law and regulation in defense of our business interests turns out to be a proper way towards joining the world economic community.
In an office of a cigarette lighter company in Wenzhou city in eastern China, a special fax made the managing director Su Shangxi very pleased.
Managing Director of Wenzhou Oriental Lighter Corp, Ltd. Su Shangxi explains this:”This is the symbol of the EU. And this is the signature of the official who is in charge of anti-dumping in the Trade Department of the EU Commission. The main content of the fax is an announcement issued by the EU Commission. It states that the European Lighter Manufacturers Association, on behalf of the European Economic Community’s disposable gas-filled lighter industry, has withdrawn its anti-dumping counterclaim on July 14, 2002. It means that we’ve won completely the lighter case.”
Since 2001, some European lighter manufacturers have been creating trade barriers through the EU to stop the entry of Chinese companies.
In September 2001, the EU began to draft regulations creating barriers for Chinese lighter companies who sold cheap products. The regulation provided that imported lighters under 2 Euros must include an operation lock function for children. This was clearly designed to target foreign companies producing comparatively cheap lighters, including a great number of lighter factories in China’s Wenzhou city. Because these companies had to purchase the patent for the lighter safety lock at a high cost, they were likely to lose their past competitive power in terms of price.
Domestic anti-dumping experts pointed out that nearly all lighters under 2 Euros exported to European countries were made in China, so the EU’s regulation was a discriminatory measure targeting Chinese companies. In early 2002, some lighter companies in Wenzhou managed to go to Europe for negotiations with the parties involved in the drafting of the discriminatory regulation. However, when they set foot on the European soil, they felt it was too late to win back their rights.
Li Zhongjian, the vice chairman of Wenzhou Lighters Association says:” They said that they’d received no response at all from the Chinese lighter industry long after discussion of the regulation. This didn’t work against the announcement of the regulation, because our companies went to Europe to discuss this matter till they finally decided to make it take effect from 2004. But during the months ahead, they might make some revisions.”
Although the regulation was passed as scheduled, Wenzhou’s businessmen still felt optimistic about their fate in the future. Because of the somewhat mild response from the EU officials to their first visit to Europe, they became aware that the EU threshold was not too high to cross. Soon after their return, Wenzhou’s lighter manufacturers urged the EU to initiate the revision procedure as promised to the delegation from the Chinese enterprises. Meanwhile, they suggested that the Chinese government set up a dispute resolution system after China’s entry to the WTO. Their pleas for help received strong government support. As a counter measure, the EU issued a report in June of 2002, which said that if Chinese lighter companies’ dumping behavior was confirmed, they would impose high tariffs on Chinese lighters.
Li Zhongjian also says:” If our exported lighters had a 150 percent tariff imposed, it would become impossible for Chinese products to enter the European market.”
In the face of the changes in form by the EU, Chinese enterprises could not afford to give up. For that would usher in a ripple effect spreading to other industries.
Li explains:”if the EU succeeds in the anti-dumping case, other countries will follow suit. It is likely that such cases will extend from the lighter industry to many other sectors, such as leather shoes, glasses and clothes.”
Zhou Dahu, the chairman of Wenzhou Lighters Association tells us:”Through the organization and arrangement by our association, we made a final decision that 15 lighter companies should raise a harmless plea and one should try to win market economy status.”
Right after meeting the EU’s charges, the association played a very important role in mobilizing all forces in the lighter industry in Wenzhou city. They worked in coordination, raised fund and invited lawyers for some months. Meanwhile, they punctually reported the situation of the anti-dumping case to the relevant government departments. Some EU officials even came to Wenzhou to make on-site investigations of the enterprises involved in the case.
When these companies cooperated with the EU investigators, the Chinese government was trying all means at a different level to win benefits for Chinese lighter enterprises. In October of 2002, Wenzhou Oriental Lighter Corp, Limited was exclusively entitled to take part in the “Sino-European Anti-dumping Forum” to be held in Brussels, the headquarters of the EU. On October 7, Li Zhongjian delivered a speech at the forum on behalf of the Chinese lighter industry.
Li said:”Ladies and gentlemen, we feel honored to participate in today’s “Sino-European Anti-dumping Forum”. The title of my speech is “Why is Wenzhou a market economy enterprise?
I feel that this was very significant. If we had not stepped up to such a forum to make a brief introduction of the overall situation, many of the people working in the office wouldn’t have known the whole picture of Chinese development from the Chinese point of view. The day after the forum, they sent the approval for Market Economy Status to our lawyer’s office in Brussels. I was welcomed by fireworks when I walked off the plane. All people concerned agreed that we had won the first victory.”
The EU for the first time bestowed market economy status on Wenzhou Oriental Lighter Corp, Limited and 4 other Chinese companies.
Professor,Yang Ruilong from China Renmin University comments:” It is a signal for the great number of Chinese enterprises and entrepreneurs that it’s time for us to take measures. If this is correct, we’ll probably be the winners. With the increasing internationalization of our country, trade friction of this kind will continue. So our enterprises should first gain sufficient awareness: don’t be afraid but meet it positively.”
With market economy status, one company can adjust its production costs according to the market price of its own country. Thus the low price of its products becomes reasonable. Of course, this was not the outcome which many European lighter companies had expected. But for Chinese companies, it was a good example for foreign trade, especially after China became a WTO member.
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