Given the uncertainty surrounding the global recovery, the United States, the European Union and Japan have recently released new trade protectionism measures. Trade protectionism, which is a tool to transfer domestic conflicts to other countries, has become the biggest threat toward Chinese exporters, experts from major Chinese universities have said.

The U.S. Commerce Department on Aug. 26 introduced 14 measures to toughen enforcement of trade laws, including changes to make it harder for individual companies to be excused from country-wide duties, adjustments in methods of anti-dumping calculations and alterations to how labor rates are calculated when determining if products are being sold at artificially low prices.

The European Union proposed a temporary anti-dumping tax of as high as 43.5 percent on fiber glass imported from China. A recent report from Nikkei said that Japan will loosen conditions for enterprises to issue anti-dumping probe applications.

Experts predicted that the U.S. government will issue more anti-dumping and countervailing probes, and there will be higher anti-dumping or countervailing taxes for non-market economy countries.
In 2009, the International Trade Administration under the U.S. Commerce Department launched 34 anti-dumping and countervailing investigations, and a third of them were directed at non-market economy countries.

Data from China's Ministry of Commerce showed that by July 2010, over 80 categories of products are facing U.S. trade remedy measures, and 59 categories are suffering from anti-dumping or countervailing duties by the European Union.

Wang Jinbin, a professor with Renmin University of China, pointed out that the U.S. citizens' confusion and concerns have become a political pressure that pushes the Obama administration to toughen enforcement of trade laws.

U.S. President Barack Obama vowed in January of this year to create 2 million new jobs through export growth and double U.S. exports in five years.

However, U.S. exports only grew 9.1 percent in the second quarter and contributed only 1.08 percentage points to GDP growth rate, the lowest in four seasons. During the same period, its imports hiked 32.4 percent.

In the months ahead, the United States will be forced to choose either protectionism or soaring trade deficits with rising unemployment. It will almost certainly choose the former, but if it overreacts — a likely scenario — it could unleash another round of global protectionism, which will especially hurt trade-surplus countries, Michael Pettis, a Peking University professor, said in an article published in the Financial Times.
Bai Shuqiang, a professor with the University of International Business and Economics, emphasized that an open multi-lateral trade mechanism and the enforcement of WTO rules are of great importance to stimulate global trade recovery and curb trade protectionism.

Experts suggested that China should expand its market in the emerging economies. In fact, emerging economies contributed most to China's surging exports. From January to July, China's exports to the ASEAN, India and Russia have grown by 43.2 percent, 40.1 percent and 70.7 percent, respectively, higher than the growth of exports to developed countries.

European glass fibre manufacturers start anti-dumping procedure
In December, the Official Journal of the European Union published a notice of initiation of anti-dumping proceedings concerning imports of certain continuous filament glass fibre products from China. European Composites Industry Association (EuCIA) believes that this action could lead to price increases in the composites industry.

The complaint was lodged by the European Glass Fiber Producers Association (APFE).
According to EuCIA and EuPC, the Trade Association of the European Plastics Converters, this anti-dumping case could have several effects on the composites industry.

Based on the existing official information and further clarifications from the European Commission, EuCIA considers that import duties on glass fibre from China will very likely lead to prices increase within the composites industry in a short time period.

EuCIA states that it supports a free competitive business environment and will investigate whether dumping takes place or not. Based on the conclusions, it will support or act against the anti-dumping proceedings.

Short and long-term effects
EuCIA lists the possible short and long-term effects of the anti-dumping action:
o Significant import duties for business and consumers. Past similar experiences within the polymer and other industries have shown that in some cases, import duties can reach figures as high as 20%, thus increasing the cost of raw material in Europe.

o Rise of unemployment in the composites industry. The use of glass fibre from China by the composites industry is part of global business development, balancing the costs in the production process. If changes occur, the cost competition within the industry will be affected and have negative outcomes for ongoing and future investments and employment within the sector.

o Relocation of production plants outside Europe. Due to increased prices and other factors, companies may consider relocation of production outside Europe (e.g. China). The price of glass fibre is as competitive in Europe as is in China.
 
DUMPING
European fibreglass producers asked the EU Commission to introduce protective duties last year, accusing Chinese exporters of dumping their wares on European markets below cost.

They say illegal Chinese pricing threatens jobs at producers such as PPG Industries and Saint-Gobain Vetrotex, whose owner Owens Corning invented the ultra-strong glass-based strands.
Opposing countries say the new duty will prompt supply shortages and hikes in production costs, hurting companies such as science-based products firm DuPont and wind turbine giant Vestas , as well as thousands of small firms.

Europe's fibreglass market had an estimated size of 1 million tonnes or a value of 1 billion euros ($1.26 billion) in 2009, with China supplying about 15 percent.

Global demand for the strong and light composites has been growing at twice the rate of global growth as the world increasingly turns to lightweight vehicles and renewable wind energy to cut harmful greenhouse gas emissions.

This year, demand for the material is expected to be 25 percent higher than in 2009, according to some industry estimates, at a time when fibreglass is in short supply, meaning prices could soar.
China is set to play an increasingly important role in this sector, as producers including China Fiberglass <600176.SS> already supply about half the world's fibreglass.

"The question Europe needs to ask itself is, do we want to harm those high-tech industries that make composites that are still surviving in Europe," said Nikolay Mizulin, trade lawyer for international law firm Hogan Lovells.