On 19 July, the EU Court of Justice (ECJ) dismissed “in its entirety” the EU Council’s appeal in an anti-dumping case against Chinese chemical giant Zhejiang Xinan Chemical Industrial Group (Xinanchem), which specialises in the production of glyphosate - a basic herbicide chemical widely used by farmers throughout the world – originating in China.

The court ruled that the Chinese state’s control over the general meeting of Xinanchem’s shareholders cannot be the sole reason for denying it market economy status (MES). It found unjustified the Council’s decision (Regulation No 1683/2004) to apply the country-wide anti-dumping duty calculated for China instead of an individual anti-dumping duty to imports of glyphosate by Xinanchem (the latter procedure applies to companies operating under MES).

The court’s judgement lays the ground for the future administrative practice of the Commission and the Council in anti-dumping proceedings. According to experts, it is expected to further liberalise the treatment of Chinese exporters accused of selling products at low prices to European customers (dumping). Ultimately, the EU is likely to become more of a level playing field for Chinese and non-Chinese exporters who manufacture in China. In more general terms, the case, according to the court’s opinion, is of “fundamental importance” for future trade relations between the EU and a number of dynamic emerging countries, such as China, which are currently in transition from a planned economy to a market economy but are still classified as ‘non-market economy countries’.

In its judgement, the ECJ underlined that the ‘basic anti-dumping’ regulation does not preclude all types of state interference in producer undertakings, but “only significant interference in decisions regarding prices, costs and inputs”. It insisted that the control exercised by the Chinese state over Xinanchem “cannot be equated, automatically, to significant state interference”. According to the ECJ, the Council and the European Commission “failed” to carefully assess Xinanchem‘s MES claim and the evidence it offered to prove that its business decisions are not subject to state interference but are taken in response to market signals.

As regards the export contract stamping mechanism, the court’s ruling rejected the Commission’s argument that the fact that the Chinese Chamber of Commerce was able to refuse to stamp export contracts if the reference price was not complied with should be considered prima facie evidence of state interference in setting prices.