Politics over mar­ket econ­omy must end

But the pro­to­col does say that “in any event” WTO mem­bers may not use the ana­logue coun­try method against Chi­nese ex­ports beyond the 15-year tran­si­tion pe­riod.

China Daily (USA) - - VIEWS -

Whether or not the Unites States and the Euro­peanUnion will honor the com­mit­ment they had made when China ac­ceded to the­World Trade Or­ga­ni­za­tion 15 years ago will be­come a touch­stone for theUS and the EU lead­er­ships’ cred­i­bil­ity.

In Sec­tion 15 of the Ac­ces­sion Pro­to­col of China to theWTO, signed by all mem­bers in­clud­ing theUS and China in De­cem­ber 2001, they agreed a 15 years’ tran­si­tion pe­riod to al­low in­ves­ti­gat­ing au­thor­i­ties in oth­erWTO mem­bers to use the ana­logue coun­trymethod in their an­tidump­ing in­ves­ti­ga­tions against im­ports from China.

Un­der the ana­logue coun­try method, in­ves­ti­ga­tors don’t use the prod­uct price in the ex­port­ing coun­try as a ba­sis when de­ter­min­ing whether to im­pose tar­iffs, and in­stead use third-coun­try ref­er­ence prices. As a re­sult, more Chi­nese prod­ucts are in­ves­ti­gated, and in most cases they have to pay higher anti-dump­ing du­ties even though there are prob­lem­atic is­sues re­lated to price es­ti­ma­tion in China.

There are two op­tions for the 15-year tran­si­tion pe­riod. First, if Chi­nese pro­duc­ers can prove mar­ket econ­omy con­di­tions pre­vail in their re­spec­tive in­dus­tries, such as in the pro­duc­tion and sales of the goods, im­port­ingWTO mem­bers would need to use Chi­nese prices or costs in their in­ves­ti­ga­tions. Sec­ond, if those pro­duc­ers can­not demon­strate such mar­ket econ­omy con­di­tions, oth­erWTO mem­bers can use prices and costs of a third ana­logue coun­try.

From a strictly le­gal per­spec­tive, the Ac­ces­sion Pro­to­col does not ex­plic­itly say that oth­erWTO mem­bers should grant China mar­ket econ­omy sta­tus and it does not set a dead­line by which this must hap­pen. In ad­di­tion, the WTO it­self does not have a definition of what ex­actly is a mar­ket econ­omy. Do­mes­tic trade laws have cre­ated the con­cept of mar­ket econ­omy sta­tus and the cri­te­ria to grant it.

But the pro­to­col does say that “in any event” WTO mem­bers may not use the ana­logue coun­try method against Chi­nese ex­ports beyond the 15-year tran­si­tion pe­riod. This means that af­ter Dec 11, 2016, theUS should treat Chi­nese ex­ports like those from other WTO mem­bers, un­less it rene­go­ti­ates an agree­ment to pro­long the tran­si­tion pe­riod with China, which Bei­jing would not agree. So, whether or not theUS con­firms China’s mar­ket econ­omy sta­tus, from Dec 11 it will have to stop us­ing the ana­logue coun­try method against Chi­nese prod­ucts.

Ex­perts like Bernard O’Con­nor ar­gue that other pro­vi­sions of Sec­tion 15 im­ply that even af­ter Dec 11, China will need to meet the mar­ket econ­omy cri­te­ria of im­port­ing coun­tries to stop other coun­tries from us­ing the ana­logue coun­trymethod. This logic has two ma­jor flaws. First, if China still needs to prove it qualifies as a mar­ket econ­omy af­ter Dec 11, as O’Con­nor ar­gues, then the ex­piry date in the pro­to­col is mean­ing­less. Sec­ond, the most likely in­ten­tion of the ne­go­tia­tors writ­ing this spe­cific text was to al­low for a 15-year tran­si­tion pe­riod for both China and other mem­bers, dur­ing which China ac­cepted dis­crim­i­na­tory treat­ment in anti-dump­ing in­ves­ti­ga­tions.

More im­por­tantly, we are wit­ness­ing a de­gree of hypocrisy here from EU andUS of­fi­cials, who ap­ply cri­te­ria to other coun­tries that they them­selves do not meet. No gov­ern­ment in­ter­ven­tion in pro­duc­tions and sales?

There are nu­mer­ous cases whereWTO pan­els have ruled against the EU and theUS for their gov­ern­ment in­ter­ven­tions, in­clud­ing bil­lions of dol­lars of sub­si­dies to do­mes­tic civil air­craft man­u­fac­tur­ing as well as cot­ton sub­si­dies. CNNMoney tracker shows theUS gov­ern­ment pledged $11 tril­lion and ac­tu­ally spent $3 tril­lion to res­cue its fi­nan­cial in­sti­tu­tions from 2008 to 2009, and the EU spent at least $1 tril­lion to bail out its banks.

Yes, China is still far from be­ing a smooth-func­tion­ing mar­ket econ­omy, al­though it has made steady progress in that di­rec­tion. And it ought to con­tinue im­prov­ing its mar­ket in­sti­tu­tions for the good of its own de­vel­op­ment.

But the fact that China falls short of a per­fect mar­ket econ­omy ac­cord­ing to theUS should not be an ex­cuse forWash­ing­ton to not re­spect the let­ter and spirit of the ne­go­ti­ated agree­ment of a 15-year tran­si­tion pe­riod for the ana­logue coun­trymethod.

Ap­pro­pri­ate so­lu­tions to the is­sue could be an op­por­tu­nity for US lead­ers to show thatWash­ing­ton re­mains cred­i­bly com­mit­ted to stand­ing by a rule-based, nondis­crim­i­na­tory mul­ti­lat­eral trad­ing sys­tem. The author is man­ag­ing di­rec­tor of ICTSD China.

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