Companies looking overseas need an active response for probes: experts
Private-owned Sichuan Dawn Precision Technology Co Ltd recently scored a victory against U.S. anti-dumping and anti-subsidy investigations, setting a good example for Chinese companies that may need to handle possible trade disputes under the upcoming Trump presidency.
After U.S. mechanical and power transmission equipment manufacturer TB Wood's Inc filed a complaint with the U.S. International Trade Commission (USITC) to probe certain iron mechanical transfer drive components imported from China on October 28, 2015, Sichuan Dawn spent more than 386 days responding to the investigation, which could be a lesson for Chinese exporters that face similar trade disputes, Xie Longde, the company's vice president and the board secretary, told the Global Times on Wednesday.
The company, which has an annual production capacity of 20 tons of mechanical components such as sheaves and flywheels, exports to 40 countries and regions every year.
The machinery firm has recorded annual revenues of 500 million yuan ($72 million) during the last two years, but faced $284 million in duties levied by the U.S. authority.
"Also, a single trade dispute case has an impact on the whole industry. As mandatory respondent, our company has been facing huge pressure since [the USITC] launched the probe," he noted.
From November 2015 to October 2016, the company received more than 500 pages of documents, and "every time we responded to their questionnaires, we took them very cautiously, and even set up a special group to deal with the case," Xie added.
On November 16, 2016, six USITC commissioners voted against issuing anti-dumping or countervailing duties as a result of the probe.
"While some of the charges were against individual companies, most were against whole industries. In both cases, responding to charges, even if it is by only a few companies in the industry, would likely retain some of the market share or result in slashed tariff rates," said Tu Xinquan, deputy dean at the China Institute for WTO Studies at the Beijing-based University of International Business and Economics.
Industry associations can play important roles in responding to these charges, such as organizing response efforts and sharing the costs, he said, adding that collaboration and coordination among industry players is equally important.
Tu also noted that there are shortcomings in regards to Chinese industry associations as many of them were born out of former government institutions and are somewhat less responsive to the needs of companies, compared with their foreign counterparts.
"Actively facing challenges, actively responding to charges, using laws and regulations as weapons, and protecting the rightful interests of enterprises through every way and mean is how all Chinese companies should be eyeing overseas markets," Li Xinchuang, president of the China Metallurgical Industry Planning and Research Institute, told the Global Times Wednesday.
Future challenges
On Tuesday, U.S. President-elect Donald Trump named Robert Lighthizer as his chief trade negotiator, according to Reuters.
Lighthizer was formerly part of the Reagan administration and has legally represented U.S. steelmakers in anti-dumping and anti-subsidy cases for three decades. Lighthizer has been a harsh critic of China's trade practices, the Reuters report noted.
Tu warned that there is a spillover effect in these investigations. "When the U.S. does it, Chinese exports that were originally headed to the U.S. divert to other markets, which causes other countries to also start investigations against Chinese exports.
"No country is having a good time under the current world economic situation," Tu said, predicting that there will be more trade friction in 2017.
Chinese companies have to hone their ability to predict possible trade disputes, and ready concerns over intelligent property rights, product standards and modern management systems in advance, not only for those that already have business overseas but also firms that are mulling on investing in foreign markets, according to Xie.
