The struggling situation of European enterprises under the economic crisis, meanwhile, has put great pressure on the EC, and it has to resort to anti-dumping, regardless of the interests of consumers and retailers, and even at the risk of a trade reprisal.

This imposition of anti-dumping duties on Chinese steel wire rods is the handiwork of no other than the European Confederation of Iron and Steel Industries' lobbying the EC. European iron and steel industry has been heavily stricken by the economic crisis, due to the shrinking market and competition from foreign goods. In fact, recent statistics reveal that its production capacity utilization in 2009 fell to only 55 percent to 60 percent—posing a threat to its survival. Under great pressure, the EC gave in to these protectionist forces.

From a macroeconomic view, one can see the surge in the EU's protectionism as stemming from the fact that companies are beset with difficulties against the backdrop of the ongoing economic recession. Despite the American origins of the international crisis, the extent and duration of the economic recession in the EU may exceed those of the United States, owing to factors like large deficits, weak labor market elasticity and difficulty in coordinating economic policies.

Nor can the EU compare with China, which is already showing a recovery. In June, according to statistics, EU unemployment reached a historical high of 9.4 percent. Long-term recession, of course, is bound to stimulate protectionism, beginning with the iron and steel industries this time—and possibly expanding to other sectors in the future, wherein anti-dumping could become a sideshow.

Counter-reaction

The comeback of protectionism is, indeed, a hot potato for China. But China must fight for its interests. Meanwhile, Beijing must also avoid over-stimulation, lest it ends up in a trade war with the EU. Since the EU economy can scarcely get rid of its recession in the short term and protectionism may be a circular trend, China needs to give the matter more thought while seeking effective countermeasures.

China can take a measured response by learning the rules of the game—rules initiated and manipulated by Westerners. And while China has been a member of international trade system for some time, it should do in Rome as the Romans do—and exploit rules just like the Westerners do.

Rather, taking advantage of legal loopholes is a substantial clause for the EU to have its way to protectionism. By studying and familiarizing itself with international trade regulations, China can apply them to deal its arrogant opponents a head-on blow—a warning to pre-empt similar types of underhanded moves in the future.

For one thing, China can lodge WTO complaints against the EU's illegal protectionist actions. For another, it can impose anti-dumping measures toward the EU within a legal framework. On July 31, China decided to file a suit with the WTO over the anti-dumping measures the EU took in January on Chinese iron and steel fasteners, which is a good example of the first method.

Besides, the EU's frequency of violating rules in its adoption of anti-dumping measures and losing certain international trade disputes should give China more confidence in its counter-reaction. Meanwhile, China must study the EU's anti-dumping procedures and adoptions in order to discover its illegal acts in time.

In addition, domestic enterprises should play an active role when fighting EU dumping probes. When the EU launched its anti-dumping investigation against steel wire rods from China in July last year, all Chinese steel wire rod producers—except for one in Hunan Province—acted like outsiders, paying no attention to the probe. Finally, the Hunan enterprise that cooperated with EU officials was charged anti-dumping levies of only 7.9 percent—much less than others' levies of 24.2 percent. Many Chinese enterprises, especially small ones, find difficulty in responding to anti-dumping investigations independently, due to their limited human and financial resources.

Thus, it is better for them to fight as one under the direction of industrial associations. In fact, the EU's anti-dumping activities are often manipulated backstage by industrial associations. Beyond that, China needs to take precautionary measures, while grasping the latest information and tendency of the EU anti-dumping actions.