Ris­ing fric­tions over dis­tri­bu­tion of trade div­i­dends

China Daily (Canada) - - VIEWS -

Last year was a tough one for the global econ­omy, and this year looks like it could be an­other. Mar­ket de­mand con­tin­ues to wane, and pro­tec­tion­ism and ter­ror­ism have made some in­roads in the West where glob­al­iza­tion and the free flow of peo­ple have tra­di­tion­ally been cham­pi­oned and revered.

In the United States, the up­com­ing ad­min­is­tra­tion led by Don­ald Trump may pose a chal­lenge to the coun­try’s eco­nomic pol­icy. And along with the United King­dom pre­par­ing to break away and the need to ac­com­mo­date the con­tin­u­ing in­flux of refugees, the Euro­pean Union now has the rise of right-wing forces to worry about.

But even asWestern de­ci­sion­mak­ers re­treat from glob­al­iza­tion and shift their fo­cus to do­mes­tic is­sues, China is pur­su­ing and up­hold­ing more open and in­clu­sive cross-bor­der trade. A par­tic­i­pant and a ma­jor ben­e­fi­ciary of glob­al­iza­tion, it is now the lead­ing ad­vo­cate of sus­tain­able eco­nomic glob­al­iza­tion.

On the one hand, China main­tains close trade ties with theWest. It is theUS’ se­cond largest trad­ing part­ner, the big­gest source of im­ports and se­cond largest ex­port mar­ket for the EU, as well as Ja­pan’s se­cond largest trad­ing part­ner in both im­ports and ex­ports.

On the other hand, fre­quent fric­tions over bi­lat­eral trade ex­changes add to the fact that their dis­putes over the fair dis­tri­bu­tion of trade div­i­dends have reached un­usual lev­els. Chi­nese steel­mak­ers, in par­tic­u­lar, have been sub­ject to an in­creas­ing num­ber of trade rem­edy in­ves­ti­ga­tions in 2016.

This has a lot to do with the sur­ro­gate coun­try ap­proach, which al­lows oth­erWorld Trade Or­ga­ni­za­tion mem­bers to use costs of pro­duc­tion in a third coun­try to cal­cu­late the value of Chi­nese im­ports. That has im­posed an ex­tra fi­nan­cial bur­den on Chi­nese en­ter­prises as­pir­ing to “go global”.

In ac­cor­dance with Ar­ti­cle 15 of the ac­ces­sion pro­to­col signed when China joined theWTO in 2001, the sur­ro­gate coun­try ap­proach ex­pired on Dec 11, which was sup­posed to mark a cru­cial mo­ment for Chi­nese ex­porters.

How­ever, fear­ing Bei­jing’s grow­ing in­flu­ence over global trade may bode ill for their em­ploy­ment and in­dus­trial re­cov­er­ies, some mem­bers in­clud­ing the US and Ja­pan still refuse to grant China “mar­ket econ­omy sta­tus”, they have sought to in­ten­tion­ally play up ex­ces­sive out­put of steel to con­tain China’s rise.

Apart from si­mul­ta­ne­ously launch­ing anti-dump­ing and an­ti­sub­sidy in­ves­ti­ga­tions against Chi­nese en­ter­prises on a reg­u­lar ba­sis since 2006, Wash­ing­ton has more than once used “mar­ket econ­omy sta­tus” as a bar­gain­ing chip in ex­change for Bei­jing’s con­ces­sions in trade ne­go­ti­a­tions.

The EUin­tro­duced a new ap­proach dubbed “mar­ket dis­tor­tion” as an ex­cuse for anti-dump­ing and anti-sub­sidy cal­cu­la­tions, blur­ring the dif­fer­ences be­tween mar­ket economies and non-mar­ket ones. Yet that still al­lows it to use “in­ter­na­tional” prices and cost ref­er­ence in anti-dump­ing cases if “mar­ket dis­tor­tion” is found, leav­ing enough room for the bloc to play the old tricks on Chi­nese im­ports.

China has launched dis­pute set­tle­ment pro­ce­dures at the WTO re­quest­ing con­sul­ta­tions with the US and the EU with re­gards to the sur­ro­gate coun­try ap­proach. That is not enough as more chal­lenges lie ahead. It needs to do more to de­fend its law­ful rights and add more weight to its role as the world’s se­cond largest econ­omy.

It needs to do more to de­fend its law­ful rights and add more weight to its role as the world’s se­cond largest econ­omy.

The author is an as­so­ciate re­searcher at the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion at the Min­istry of Com­merce.

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