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As a traditional pillar industry, petro-chemical sector has been a key field of international dumping and antidumping dispute. China’s access into the WTO launched the global economic integration process in a real sense, which exerts far-reaching influence over China’s petro-chemical imports and exports. While expanding markets worldwide, China opens the door to dumping of foreign products. The author applies advantageous trade theory, global economic integration theory as well as game theory to analyze the current anti-dumping situation of Chinese petro-chemical industry before presenting macro measures concerned.
Current situation of China regarding dumping of foreign petro-chemical products
Second only to textile and machinery manufacturing industry, petrochemical sector has already been the third largest industry in China and plays an important role in our overall economic situation. Because of lack of demand in world economy, serious access of capacity in petro-chemical sector and continuing lowering of our import tariffs, China is becoming the victims of the dumping of petro-chemical products due to dumping strategies by foreign petro-chemical enterprises.
The huge impact of foreign oil refining enterprise is dramatically diminishing the price of our domestic oil production. Let’s take the Middleeast’s petro-chemical products which have strong competitiveness in price as an example. Some one in Petro China reveals that the productivity of three main kinds of polyethylene production in 2012 will be twice higher than the one in 2007 and with the new refineries putting into operation, much more products with higher quality will surge into China in the second half year of 2009. The domestic market will be under long-time potential pressure as the speed of petro-chemical production is increasing and outpacing the speed of import of petro-chemical products in China. Besides, the large quantity of stock in chemical plant and the macro background of general economic downturn are also key factors leading to short-time decreasing of the price. During the dumping period, our Chi- nese petro-chemical enterprise suffered insufficient operating rate, negative pretax profit of same category production and many petro-chemical enterprises are on the verge of deficit and bankrupt.
Current situation of China regarding anti-dumping in petro-chemical sector
Since December 2008, an obvious trend is trade integration of China’s petrol-chemical products as well as diversification of importing places. Besides Middle-east, Japan, Singapore, Taiwan, Thailand and some other competitors are all targeted on the Chinese market(Chart.1). Up to March 2009, the stock of methanol has come to its max in history. The import of PVC’ for the whole year is estimated to be 2.3 times than that of 2008. Moreover, many petrolchemical enterprises of different places are facing a significant increase of risk. As is known to all, the complex factors like the price level in history and the consequences of potential trade friction will lead to a lengthened anti-dumping investigation. Even so, the Methanol Organization of China (MOC) still submitted an application of antidumping investigation to the Commerce Department in early 2009.
The anti-dumping of our domestic industry has gone through three periods in general from the perspective of the quantities and the trend of anti-dumping cases.
Passive response outnumbered the active counter-attack during the first period. Around the year in which China join the WTO (1995 to 2002), the manufacturing industry frequently encountered anti-dumping measures in the international market and some products were subjected to heavy antidumping duties. During the same period, foreign products poured into China. It’s a regret that seldom Chinese enterprise had the capacity to deal with anti-dumping lawsuits and they were very passive in general. Psychological factor is that the intrinsic Chinese Culture of consultation is far away from the modern business spirit. Factor regarding law is that weak legal basis cannot establish a mature legal environment. Besides, economic factor is that majority of small and medium industries are unable to bear the high cost of the legal cost alone.
We were transformed from spontaneous reactions to tackling the problem consciously during the second period. After experiencing several trade disputes Waterloo, the legal sense of our domestic enterprises was awakened. Take the anti-dumping investigation of imports of newsprint in 1997 to 2003 for example, the number of China’s anti-dumping cases grew dramatically(see Chart 2). During that period of time, the anti-dumping cases which were initiated by the domestic chemical industries accounted for 70% to 80% of the total cases and the cases of anti- dumping of petro-chemical products showed a corresponding downward trend (see table 3). Up to March, 2007, we had initiated 49 anti-dumping cases and 35 of which were relevant to petrochemical products. Among the 28 antidumping cases of petro-chemical products with final ruling, China had won 22 cases with the winning rate of 78.6%. The Methanol Organization of China(MOC) restarted the anti-dumping investigation of the PVC against Korea, Japan, Russia and Taiwan China in October 2008.
We Initiated attack with reason and restrain during the third period. In August, 2007, trade protectionism was on the horizon under the cloud of U.S. subprime mortgage crisis. A number of countries including Western countries made various anti-dumping rules. To make matter worse, those countries abandoned the international standard of measuring dumping and all focused on Chinese products. According to the journalist of Legal Person who recently learned from the Ministry of Commerce, in the period of January to April in 2009, on the one hand, the number of anti-dumping suits initiated by foreign enterprises against China reached more than 90 cases. On the other hand, China raised approximately 48 antidumping cases. The number of two sides had a slight increase compared with that of last year (see Chart 3), China was still suffering the most from anti-dumping lawsuits than any other country. Regardless of the opposite opinions from domestic industry associations and international organizations, Barrack Obama approved the application for investigation of China’s “tires safeguard case”. China then announced double investigations against part of the American cars and the broiler subsidies and dumping. This is the typical case of China using anti-dumping weapon to counter the trade protectionism proactively.
The effects of anti-dumping raised by China’s petrochemical sector and the remaining problems
After series of anti-dumping measures taken by our petrochemical industry effectively curb the trend
of dumping of foreign products, there is a steady rise of the domestic petrochemical product price and trade order returns to normal. What’s more, since we levied anti-dumping taxes against SBR of Russia, Japan and South Korea, the largest domestic petrochemical producer-QiLu Petrochemical’s capacity have been released and its earning per share has risen form 0.02 Yuan in 2002 to 0.22 Yuan in the first three quarters of 2003. In addition, the ruling to levy anti-dumping tax on imports of PVC has made the quantity of imports decreased significantly and a rebound in price has been obtained, and therefore, the long-term slump result from dumping in Chlorine-alkali industry had been reversed. This also provides a footnote for the theory that anti-dumping is often able to deter and force exporting countries to accept voluntary export restraints. Anti-dumping and transfer pricing can also cause damage to public interests and have some other adverse effect. After the withdrawal of the dumping products from Chinese market, other products often take advantage and make it difficult to maintain the effectiveness of anti-dumping. Some light profit, heavy polluted small chemical corporation may get protection according to this policy.
The anti-dumping policy for Chinese petro-chemical industry
Our current research on antidumping focuses mostly on benefits and losses, relations between upstream and downstream sectors, public interest rules and so forth. In the context of global financial crisis, the trading situation of China is changing dramatically. Western big trading countries that enjoy the rule-making rights are not content with the current irreciprocal trading rules. Those countries abuse the WTO anti-dumping rules as well as take covered protective measures such as setting green barriers, sanitary barriers and technical barriers. Some countries even bring forward the policy of purchasing domestic products. Antidumping is obviously not an isolated inter-sector behavior, but rather a crosssector systematic policy. Anti-dumping policy for Chinese petro-chemical can be presented in the following three ways in the case of trade integration.
Firstly, protective trading network can be constructed to bar dumping products from coming into China. A report of Ministry of Commerce of PRC indicated that EU brought antidumping accusations against China in 1979, while China had not began to use anti-dumping measures to protect its interests until 1997. Trade dumping which originates from the mercantilism era has so far the history of hundreds years. It is imperative to take economic measures, administrative means, and legal methods as well as matched industrial policy in order to offer comprehensive protection to Chinese petro-chemical companies which have a low integrated level. The rules that duties shall be levied retroactively in the 2004 new antidumping regulation have some deterrent power over a spate of import volume before preliminary determinations.
Secondly, it is time to bar trade protectionism and to remove the chain reaction hidden danger. In the recent decade, developed countries have continually expanded the anti-dumping investigation scope and raised antidumping tax rate. Those countries have reinforced trade protectionism by means of law and reduced trade deficit against China. In the meantime, they have set various trade barriers and most of those barriers are asymmetry sanctions with strong points against China. To make matters worse, non-market economy status is a trump card played by western trade partners to protect themselves. It is obviously discriminatory to calculate normal value of our exported products by a third country. Its demonstration effect will definitely disrupt trade order. It is our inevitable choice to give a sharp reply to this trend.
Thirdly, industrial upgrading should be promoted to provide a buffer for anti-dumping. Industrial competitiveness is the corporate power of companies’ strength in the industry of one country. It is hard to take anti-dumping measures against high-end products due to its irreplaceability. Although Advantageous trade theory is in conformity with the national conditions to some degree and is helpful to accelerate economic growth, this theory ignores the sustainable development of economy and will do harm to the evolution of industrial structure as well as system innovation. Therefore, it is fundamental to handle the following three relations when it comes to the adoption of antidumping measure.
(1) Long term and short term relation. According to theories of advantageous trade and opportunity cost, WTO offers its members multilateral negotiation mechanism to release their capacities and promote the free flow of factors. In the long term, trading partners can maximize resources and realize the ultimate goal of social welfare maximization only if elements can flow in a complete free condition. Antidumping is just a self-protection tool in terms of crisis. The final way to solve the problem lies in improving the technology. According to China Petrochemical Industry Association, energy consumption of petrochemical industry accounts for 40% of the total energy consumption in China. Energy consumption cost per unit is 4.1 times higher than that of USA and Canada. Obviously, based on the theory of comparative advantage, our petrochemical industry should focus on the structure adjustment of export industry in the long run and try to achieve a breakthrough to have our own intellectual property right concerning the core technologies. Moreover, we should improve the energy efficiency(especially in the west area of China where energy reserves are abundant) and reverse the situation of relying on the imports of basic raw materials and technology.
In addition to strengthen the investments in the Middle East oil-producing countries, we should accelerate the diversification process with respect to oil-importing countries of origin and began to import oils from Central Asia, Russia, Australia and neighboring countries such as Southeast Asia. Moreover, we need to encourage Chinese companies to bid for oil assets overseas to safeguard the country’s strategic oil supply security. Besides, building the oil refineries in the vicinity of oil-producing area is also a way to improve the energy efficiency since transportation cost can be saved.
(2) Upstream and downstream relation. Calculation of the losses caused by dumping of foreign products should not be limited to the loss of the enterprise itself, but should be based on the loss of the whole industrial chain. The function of antidumping is like a double-edged sword. On the one hand, it offers effective protection to the domestic industry. But on the other hand, it may damage the industrial chain and affect the downstream companies. At present, antidumping is common in the domestic chemical area. Duties imposed after winning the suit are bound to push up prices of imported chemical raw materials. The production cost of the textile and other downstream industry will rise accordingly. Obviously, if we give up the right of antidumping due to the consideration of the enterprise, it will inevitably damage the enterprises involved. And the related rise of importing prices will cause damage to the downstream companies. Therefore, it is crucial to make an overall estimate of the effect of anti-dumping prior to the application of the antidumping investigation.
（3）Part and the whole relation. Firstly, during the anti-dumping proceedings, in addition to coordinating the interests of the domestic petrochemical enterprises, we should enhance industrial efficiency of allocating resources internally based on the early implementation of the strategy. And we should combine with key partners in the international trade environment for the country’s trade policies for dynamic analysis, so there is time to put a collection choice, there are anti-lock objects as well as efforts to loose a tight grasp. In 2009, China’s PVC imports continued to increase for the root reason of the technical advantages of overseas counterparts which enables the cost of similar products to be still lower than that of Chinese even after China levied anti-dumping duty on them. Technical and price advantages of foreign industries force China’s petrochemical industry which is in the critical transition period to knock out those enterprise lack of economies of scale and to protect small businesses with tremendous potential until they have the advantages of backwardness. Secondly, we should strengthen state-owned joint venture with foreign companies and get advanced technology through the domestic market and cost advantages. Thirdly, during the production gap period of short supply when upgrading the industrial structure, there is usually an opportunity for competitors to dump. Our government should be close monitoring and timely warning and exercise, if necessary, the anti-dumping rights granted by WTO.
China began to truly integrate with the global economy after its accession to WTO. The Government is actively expanding regional and bilateral trade negotiations as well as insisting on multilateral trade agreements. The two most important bilateral agreements are the United States – China Agreement signed in November 1999 and the EU -China agreement signed in May 2000. The free trade agreement with ASEAN is proceeding in an orderly way. The Government also launched free trade negotiations with the South American Customs Union (SACU) and the Gulf Cooperation Council (GCC). Different levels of trade agreements provide a stable protection mechanism for the orderly development of China’s petrochemical products trade.
In order to fulfill its WTO commitments, China’s overall tariff has dropped to 9.9% in 2006, more than 40% lower than the level of the early nineties, and its imports growth has been higher than that of exports in recent years. Competition from the Middle East petrochemical products heats up. The limited market size and excess production of downstream petrochemical enterprises make the Middle East target the Chinese market. A number of petrochemical projects will be com- pleted and put into production in 2009-2010. According to a chief engineer of China National Petroleum Corporation, Middle East which exported large quantities of petrochemical products to China in the first quarter of 2009 will increase its exports. Plans recently released by State Department to expand ethylene production capacity will make the competition fiercer in the future. We should be wary that China’s huge domestic demand stimulus plan may cut down the profit margin due to over capacity. If China revalued RMB under the pressure of the United States and Japan, the high import prices of raw materials would impede downstream enterprises expanding production capacity. What we should also pay attention to is when many small businesses are closed due to restructuring or environmental reasons the shortage of domestic market supply may become more intense. At this point the Government should take the reverse action, relaxing the antidumping measure degree appropriately to facilitate the inflow of foreign lowpriced products.
Conclusion
Throughout the whole process of trade liberalization, integration is clearly the general trend. The dumping and anti-dumping game between specific industries in different economies will become the distinctive feature of modern trade. China, whose trade volume ranks third in the world, will undoubtedly play a more important role. The external shocks that China’s petrochemical industry faced will continue. As a cross-cutting and cross-sector strategic system, we need to co-ordinate long term and short term relation, upstream to midstream relation as well as part and the whole relation. The policy should be adjusted according to local conditions in order to effectively protect the interest of national industry. At the same time, we should also take into account of the promotion of international trade and the healthy and steady development order.
Current situation of China regarding dumping of foreign petro-chemical products
Second only to textile and machinery manufacturing industry, petrochemical sector has already been the third largest industry in China and plays an important role in our overall economic situation. Because of lack of demand in world economy, serious access of capacity in petro-chemical sector and continuing lowering of our import tariffs, China is becoming the victims of the dumping of petro-chemical products due to dumping strategies by foreign petro-chemical enterprises.
The huge impact of foreign oil refining enterprise is dramatically diminishing the price of our domestic oil production. Let’s take the Middleeast’s petro-chemical products which have strong competitiveness in price as an example. Some one in Petro China reveals that the productivity of three main kinds of polyethylene production in 2012 will be twice higher than the one in 2007 and with the new refineries putting into operation, much more products with higher quality will surge into China in the second half year of 2009. The domestic market will be under long-time potential pressure as the speed of petro-chemical production is increasing and outpacing the speed of import of petro-chemical products in China. Besides, the large quantity of stock in chemical plant and the macro background of general economic downturn are also key factors leading to short-time decreasing of the price. During the dumping period, our Chi- nese petro-chemical enterprise suffered insufficient operating rate, negative pretax profit of same category production and many petro-chemical enterprises are on the verge of deficit and bankrupt.
Current situation of China regarding anti-dumping in petro-chemical sector
Since December 2008, an obvious trend is trade integration of China’s petrol-chemical products as well as diversification of importing places. Besides Middle-east, Japan, Singapore, Taiwan, Thailand and some other competitors are all targeted on the Chinese market(Chart.1). Up to March 2009, the stock of methanol has come to its max in history. The import of PVC’ for the whole year is estimated to be 2.3 times than that of 2008. Moreover, many petrolchemical enterprises of different places are facing a significant increase of risk. As is known to all, the complex factors like the price level in history and the consequences of potential trade friction will lead to a lengthened anti-dumping investigation. Even so, the Methanol Organization of China (MOC) still submitted an application of antidumping investigation to the Commerce Department in early 2009.
The anti-dumping of our domestic industry has gone through three periods in general from the perspective of the quantities and the trend of anti-dumping cases.
Passive response outnumbered the active counter-attack during the first period. Around the year in which China join the WTO (1995 to 2002), the manufacturing industry frequently encountered anti-dumping measures in the international market and some products were subjected to heavy antidumping duties. During the same period, foreign products poured into China. It’s a regret that seldom Chinese enterprise had the capacity to deal with anti-dumping lawsuits and they were very passive in general. Psychological factor is that the intrinsic Chinese Culture of consultation is far away from the modern business spirit. Factor regarding law is that weak legal basis cannot establish a mature legal environment. Besides, economic factor is that majority of small and medium industries are unable to bear the high cost of the legal cost alone.
We were transformed from spontaneous reactions to tackling the problem consciously during the second period. After experiencing several trade disputes Waterloo, the legal sense of our domestic enterprises was awakened. Take the anti-dumping investigation of imports of newsprint in 1997 to 2003 for example, the number of China’s anti-dumping cases grew dramatically(see Chart 2). During that period of time, the anti-dumping cases which were initiated by the domestic chemical industries accounted for 70% to 80% of the total cases and the cases of anti- dumping of petro-chemical products showed a corresponding downward trend (see table 3). Up to March, 2007, we had initiated 49 anti-dumping cases and 35 of which were relevant to petrochemical products. Among the 28 antidumping cases of petro-chemical products with final ruling, China had won 22 cases with the winning rate of 78.6%. The Methanol Organization of China(MOC) restarted the anti-dumping investigation of the PVC against Korea, Japan, Russia and Taiwan China in October 2008.
We Initiated attack with reason and restrain during the third period. In August, 2007, trade protectionism was on the horizon under the cloud of U.S. subprime mortgage crisis. A number of countries including Western countries made various anti-dumping rules. To make matter worse, those countries abandoned the international standard of measuring dumping and all focused on Chinese products. According to the journalist of Legal Person who recently learned from the Ministry of Commerce, in the period of January to April in 2009, on the one hand, the number of anti-dumping suits initiated by foreign enterprises against China reached more than 90 cases. On the other hand, China raised approximately 48 antidumping cases. The number of two sides had a slight increase compared with that of last year (see Chart 3), China was still suffering the most from anti-dumping lawsuits than any other country. Regardless of the opposite opinions from domestic industry associations and international organizations, Barrack Obama approved the application for investigation of China’s “tires safeguard case”. China then announced double investigations against part of the American cars and the broiler subsidies and dumping. This is the typical case of China using anti-dumping weapon to counter the trade protectionism proactively.
The effects of anti-dumping raised by China’s petrochemical sector and the remaining problems
After series of anti-dumping measures taken by our petrochemical industry effectively curb the trend
of dumping of foreign products, there is a steady rise of the domestic petrochemical product price and trade order returns to normal. What’s more, since we levied anti-dumping taxes against SBR of Russia, Japan and South Korea, the largest domestic petrochemical producer-QiLu Petrochemical’s capacity have been released and its earning per share has risen form 0.02 Yuan in 2002 to 0.22 Yuan in the first three quarters of 2003. In addition, the ruling to levy anti-dumping tax on imports of PVC has made the quantity of imports decreased significantly and a rebound in price has been obtained, and therefore, the long-term slump result from dumping in Chlorine-alkali industry had been reversed. This also provides a footnote for the theory that anti-dumping is often able to deter and force exporting countries to accept voluntary export restraints. Anti-dumping and transfer pricing can also cause damage to public interests and have some other adverse effect. After the withdrawal of the dumping products from Chinese market, other products often take advantage and make it difficult to maintain the effectiveness of anti-dumping. Some light profit, heavy polluted small chemical corporation may get protection according to this policy.
The anti-dumping policy for Chinese petro-chemical industry
Our current research on antidumping focuses mostly on benefits and losses, relations between upstream and downstream sectors, public interest rules and so forth. In the context of global financial crisis, the trading situation of China is changing dramatically. Western big trading countries that enjoy the rule-making rights are not content with the current irreciprocal trading rules. Those countries abuse the WTO anti-dumping rules as well as take covered protective measures such as setting green barriers, sanitary barriers and technical barriers. Some countries even bring forward the policy of purchasing domestic products. Antidumping is obviously not an isolated inter-sector behavior, but rather a crosssector systematic policy. Anti-dumping policy for Chinese petro-chemical can be presented in the following three ways in the case of trade integration.
Firstly, protective trading network can be constructed to bar dumping products from coming into China. A report of Ministry of Commerce of PRC indicated that EU brought antidumping accusations against China in 1979, while China had not began to use anti-dumping measures to protect its interests until 1997. Trade dumping which originates from the mercantilism era has so far the history of hundreds years. It is imperative to take economic measures, administrative means, and legal methods as well as matched industrial policy in order to offer comprehensive protection to Chinese petro-chemical companies which have a low integrated level. The rules that duties shall be levied retroactively in the 2004 new antidumping regulation have some deterrent power over a spate of import volume before preliminary determinations.
Secondly, it is time to bar trade protectionism and to remove the chain reaction hidden danger. In the recent decade, developed countries have continually expanded the anti-dumping investigation scope and raised antidumping tax rate. Those countries have reinforced trade protectionism by means of law and reduced trade deficit against China. In the meantime, they have set various trade barriers and most of those barriers are asymmetry sanctions with strong points against China. To make matters worse, non-market economy status is a trump card played by western trade partners to protect themselves. It is obviously discriminatory to calculate normal value of our exported products by a third country. Its demonstration effect will definitely disrupt trade order. It is our inevitable choice to give a sharp reply to this trend.
Thirdly, industrial upgrading should be promoted to provide a buffer for anti-dumping. Industrial competitiveness is the corporate power of companies’ strength in the industry of one country. It is hard to take anti-dumping measures against high-end products due to its irreplaceability. Although Advantageous trade theory is in conformity with the national conditions to some degree and is helpful to accelerate economic growth, this theory ignores the sustainable development of economy and will do harm to the evolution of industrial structure as well as system innovation. Therefore, it is fundamental to handle the following three relations when it comes to the adoption of antidumping measure.
(1) Long term and short term relation. According to theories of advantageous trade and opportunity cost, WTO offers its members multilateral negotiation mechanism to release their capacities and promote the free flow of factors. In the long term, trading partners can maximize resources and realize the ultimate goal of social welfare maximization only if elements can flow in a complete free condition. Antidumping is just a self-protection tool in terms of crisis. The final way to solve the problem lies in improving the technology. According to China Petrochemical Industry Association, energy consumption of petrochemical industry accounts for 40% of the total energy consumption in China. Energy consumption cost per unit is 4.1 times higher than that of USA and Canada. Obviously, based on the theory of comparative advantage, our petrochemical industry should focus on the structure adjustment of export industry in the long run and try to achieve a breakthrough to have our own intellectual property right concerning the core technologies. Moreover, we should improve the energy efficiency(especially in the west area of China where energy reserves are abundant) and reverse the situation of relying on the imports of basic raw materials and technology.
In addition to strengthen the investments in the Middle East oil-producing countries, we should accelerate the diversification process with respect to oil-importing countries of origin and began to import oils from Central Asia, Russia, Australia and neighboring countries such as Southeast Asia. Moreover, we need to encourage Chinese companies to bid for oil assets overseas to safeguard the country’s strategic oil supply security. Besides, building the oil refineries in the vicinity of oil-producing area is also a way to improve the energy efficiency since transportation cost can be saved.
(2) Upstream and downstream relation. Calculation of the losses caused by dumping of foreign products should not be limited to the loss of the enterprise itself, but should be based on the loss of the whole industrial chain. The function of antidumping is like a double-edged sword. On the one hand, it offers effective protection to the domestic industry. But on the other hand, it may damage the industrial chain and affect the downstream companies. At present, antidumping is common in the domestic chemical area. Duties imposed after winning the suit are bound to push up prices of imported chemical raw materials. The production cost of the textile and other downstream industry will rise accordingly. Obviously, if we give up the right of antidumping due to the consideration of the enterprise, it will inevitably damage the enterprises involved. And the related rise of importing prices will cause damage to the downstream companies. Therefore, it is crucial to make an overall estimate of the effect of anti-dumping prior to the application of the antidumping investigation.
（3）Part and the whole relation. Firstly, during the anti-dumping proceedings, in addition to coordinating the interests of the domestic petrochemical enterprises, we should enhance industrial efficiency of allocating resources internally based on the early implementation of the strategy. And we should combine with key partners in the international trade environment for the country’s trade policies for dynamic analysis, so there is time to put a collection choice, there are anti-lock objects as well as efforts to loose a tight grasp. In 2009, China’s PVC imports continued to increase for the root reason of the technical advantages of overseas counterparts which enables the cost of similar products to be still lower than that of Chinese even after China levied anti-dumping duty on them. Technical and price advantages of foreign industries force China’s petrochemical industry which is in the critical transition period to knock out those enterprise lack of economies of scale and to protect small businesses with tremendous potential until they have the advantages of backwardness. Secondly, we should strengthen state-owned joint venture with foreign companies and get advanced technology through the domestic market and cost advantages. Thirdly, during the production gap period of short supply when upgrading the industrial structure, there is usually an opportunity for competitors to dump. Our government should be close monitoring and timely warning and exercise, if necessary, the anti-dumping rights granted by WTO.
China began to truly integrate with the global economy after its accession to WTO. The Government is actively expanding regional and bilateral trade negotiations as well as insisting on multilateral trade agreements. The two most important bilateral agreements are the United States – China Agreement signed in November 1999 and the EU -China agreement signed in May 2000. The free trade agreement with ASEAN is proceeding in an orderly way. The Government also launched free trade negotiations with the South American Customs Union (SACU) and the Gulf Cooperation Council (GCC). Different levels of trade agreements provide a stable protection mechanism for the orderly development of China’s petrochemical products trade.
In order to fulfill its WTO commitments, China’s overall tariff has dropped to 9.9% in 2006, more than 40% lower than the level of the early nineties, and its imports growth has been higher than that of exports in recent years. Competition from the Middle East petrochemical products heats up. The limited market size and excess production of downstream petrochemical enterprises make the Middle East target the Chinese market. A number of petrochemical projects will be com- pleted and put into production in 2009-2010. According to a chief engineer of China National Petroleum Corporation, Middle East which exported large quantities of petrochemical products to China in the first quarter of 2009 will increase its exports. Plans recently released by State Department to expand ethylene production capacity will make the competition fiercer in the future. We should be wary that China’s huge domestic demand stimulus plan may cut down the profit margin due to over capacity. If China revalued RMB under the pressure of the United States and Japan, the high import prices of raw materials would impede downstream enterprises expanding production capacity. What we should also pay attention to is when many small businesses are closed due to restructuring or environmental reasons the shortage of domestic market supply may become more intense. At this point the Government should take the reverse action, relaxing the antidumping measure degree appropriately to facilitate the inflow of foreign lowpriced products.
Conclusion
Throughout the whole process of trade liberalization, integration is clearly the general trend. The dumping and anti-dumping game between specific industries in different economies will become the distinctive feature of modern trade. China, whose trade volume ranks third in the world, will undoubtedly play a more important role. The external shocks that China’s petrochemical industry faced will continue. As a cross-cutting and cross-sector strategic system, we need to co-ordinate long term and short term relation, upstream to midstream relation as well as part and the whole relation. The policy should be adjusted according to local conditions in order to effectively protect the interest of national industry. At the same time, we should also take into account of the promotion of international trade and the healthy and steady development order.