Page 12 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.76, # 1, 2019, pp. 4-19

The difference respect to the past regulation (at least at this stage) is in the
responsibility of the proof. With the new regulation, it will not be China’s
responsibility to demonstrate the absence of market distortion, but the European
Commission investigation. In this way, the European firms will not be penalized
directly by the necessity to issue evidence in support of claiming AD or AS
measures. When the process to approve the new legislation has been completed on
December 20 2017 the European Commission issued the first Report on China (EC,
2017).

The core of the new rules is the use of the "substantial market distortions," which is
stated neither in the anti-dumping nor in the anti-subsidy rules of the World Trade
Organization (WTO), as a replacement of the "surrogate country" approach. It is not
neutral, as said, neither non- discriminatory. The new methodology for calculating
dumping margins is a repackaging of "non-market economy methodology. After the
adoption of the new regulation, Chinese words portend legal initiatives before the
WTO Dispute Settlement Unit. According to Emanuele Scimmia (2017): EU and US
are adopting similar move against China’s market distortions. Along with Japan the
three powers evidently aimed at Beijing’s market-distorting subsidies, forced
technology transfer and overcapacity in key sectors such as steel and aluminium.
However, there is a plenty of contradictions: Trump’s new tax code has drawn
criticism from major EU countries because against WTO rules (there is a provision
that favours US companies, as it reduces the tax rate on their export gains to about
13%). The WTOs could consider this tax code an illegal subsidy. After abandoning
TPP and marginalize TTIP, Trump does not seem to be a good ally. Moreover, the
contradictions are also inside Europe, as previously mentioned.

3. ON THE NEW EUROPEAN INVESTMENT REGULATIONS
Another important chapter in the EU-China economic relations is related to the new
regulation of the Parliament and the Council proposed by the Commission on
September 13, 2017. The aim is to establishing a framework for screening foreign
direct investments into the European Union. First, we can remind that Chinese
investments in Europe – and abroad in general - are a very recent phenomenon. They
appear only in the last 10 years and become significant during the last few years,
since 2011 and, specifically, the last two years after the EU-China Comprehensive
Investment Agreements (2013). On the contrary, European investments in China are
older and still higher, as stocks, then those of China in Europe. The capital account
imbalance of China towards Europe is reducing, as a reflex of the structural
economic transformation in China. The latter is moving up to the production value
chain, strongly reducing dependence on trade (in terms of GDP, where China’s

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