Of course, the EU and China hold divergent opinions on anti-dumping measures. For its part, the EU stresses its anti-dumping duties collection is in accordance with WTO rules, and serves to protect EU member states and their interests from unfair competition from Chinese goods. China believes the EU's move disguises trade protectionism with anti-dumping measures. Which side follows reason? The answer lies within the basic concept of "anti-dumping."

According to the WTO's anti-dumping agreement, if a country exports a product at a price lower than what it normally charges within its domestic market, it will be regarded as "dumping" the product. Moreover, countries are allowed to take certain measures to protect their products from material injury caused by the import of dumped goods. This rule was originally written with good intentions and aims to protect a healthy trade environment from unfair competition. But protectionists frequently abuse the concept of anti-dumping.

The EU, for example, takes advantage of the concept of "regular prices," a term whose definition is a crucial element for countries to determine whether any anti-dumping measures can be applied. In other words, since the EU refuses to recognize China's market economy status, it thus denies China's internal prices as "fair prices." Instead, it uses the prices of corresponding products in subrogate countries.

But the WTO doesn't set clear criteria for defining "subrogate countries" and "corresponding products"—leaving holes allowing the EU to exploit its anti-dumping policies against Chinese exports.

In one anti-dumping case against Chinese color TV exporters, for instance, the EU selected Singapore as the subrogate country—one whose domestic price is much higher than in China. The same thing happened when the EU filed a complaint against Chinese iron and steel fasteners, as it compared China's low-end product price with India's high-end ones.

The EU's game can quickly and easily turn Chinese products into anti-dumping targets.

Meanwhile, EU anti-dumping activities have lacked transparency—in the face of WTO rules themselves. At one point, for example, the EU initiated anti-dumping investigations with domestic producers expressly supporting the investigations accounting for less than statutory percentages. Another example for the EU's illegal act has been its inaccurate way of assessing the level of anti-dumping duties.

As a "late comer" to the international system, China was not familiar with WTO regulations, much less the EU's anti-dumping operations. Consequently, China had been unable to defend itself in the past which, to a certain degree, had emboldened the EU.

There are two means by which the EU abuses anti-dumping measures. It either utilizes the loopholes within the WTO legal framework, or violates international law—disrespecting free trade, the soul of WTO legislation. "Anti-dumping," instead of being the "protector" of free trade, becomes the "accomplice" of protectionism. Therefore, despite how hard the EU tries to justify its actions, it cannot mask its plot of imposing protectionism via anti-dumping regulations.

Unspoken reasons

In general, before taking anti-dumping measures, a country must conclusively prove foreign "dumped goods" have caused harm to its businesses. In all international trade, rarely has any country ever undertaken anti-dumping actions based on "threats of material injury"—before any actual harm has been done. In light of this, the anti-dumping duties the EU has imposed on Chinese steel wire rods indicate a strong degree of protectionism.

Currently, the gloom of the ongoing economic crisis has yet to give way to sunnier days. But such days will not transpire if China and EU nations close their doors on foreign trade, and allow protectionism to prevail. World leaders were sure to be clear on this point when they emphasized the need to protect free trade in the G20 London summit in April. So why is the EU still so willing to go against the grain and use protectionism, which is so unpopular?

In examining this, we must understand the anti-dumping mechanism inside the EU itself. The European Commission (EC) is responsible for initiating anti-dumping investigations and working out anti-dumping measures. Theoretically, levying anti-dumping taxes on a particular foreign product does have the effect of protecting relative domestic industries. But it will also raise the product's price in the domestic market, damaging the interests of consumers, retailers and industries that use it as the input.

The EC should weigh the advantages and disadvantages of such actions, and—with the overall interests of EU member states in mind—decide whether or not to launch anti-dumping measures. In practice, however, the EC best protects the interests of certain industries instead of the overall interests of the EU. The reason is that powerful European trade associations—which represent the interests of big business conglomerates—often lobby the EC for anti-dumping measures, whereas consumers and retailers, lacking influence over the EC's decisions, become easy victims of anti-dumping.