China faces bat­tle over mar­ket econ­omy sta­tus

Kuwait Times - - BUSINESS -

China’s bat­tle for recog­ni­tion as a mar­ket econ­omy that would help it avoid penal­ties from key trade part­ners has been thwarted, as a key clause in Bei­jing’s deal to join the WTO ex­pired yes­ter­day.

As China marks the 15th an­niver­sary of its ac­ces­sion to the WTO, the United States, Euro­pean Union and Ja­pan are main­tain­ing tough rules that pro­tect them from cheap Chi­nese prod­ucts flood­ing their mar­kets. An out­raged Bei­jing said the fail­ure of its ma­jor trade part­ners to grant China mar­ket econ­omy sta­tus on De­cem­ber 11 as promised was an ex­am­ple of “covert pro­tec­tion­ism” and “dou­ble stan­dard” by the West.

Bei­jing highly cov­ets mar­ket econ­omy sta­tus, which would make it more dif­fi­cult for other coun­tries to launch anti-dump­ing cases against it. Dump­ing is when a coun­try prices its ex­ports be­low what it would charge for the same prod­uct in its home mar­ket. When China joined the WTO on De­cem­ber 11, 2001 it was writ­ten into the terms of the deal that mem­ber states could treat it as a non-mar­ket econ­omy, al­low­ing them to im­pose heavy anti-dump­ing du­ties on the ba­sis that its low prices did not re­flect mar­ket re­al­ity.

China was told all that would change by the end of 2016 when it would be up­graded to mar­ket econ­omy sta­tus. But rather than en­joy­ing this trade ad­van­tage, Bei­jing con­tin­ues to face a cli­mate of mis­trust to­wards its ex­ports, with crit­ics ar­gu­ing the coun­try has not done enough to qual­ify for the des­ig­na­tion.

“China will take steps to de­fend its rights if (WTO) mem­bers con­tinue this old prac­tice of anti-dump­ing reg­u­la­tion against Chi­nese prod­ucts af­ter the ex­pi­ra­tion date” of the ac­ces­sion agree­ment clause, China’s com­merce min­istry spokesman Shen Danyang was quoted as say­ing by state me­dia on Fri­day. In­ter­na­tional trade ex­perts say China will have to start a lengthy le­gal bat­tle at the WTO against its trade part­ners in or­der to get recog­ni­tion of its new sta­tus.

Pro­tec­tion­ism in dis­guise

In a vit­ri­olic com­men­tary, the of­fi­cial Xin­hua news agency said that “China would au­to­mat­i­cally move to mar­ket econ­omy sta­tus” on De­cem­ber 11. “The re­fusal is noth­ing short of covert pro­tec­tion­ism, which runs against the trend of glob­al­iza­tion and poi­sons the re­cov­ery of the global econ­omy,” it said Fri­day, de­nounc­ing “an­other dou­ble-stan­dard ap­plied by the West against China”.

But for Wash­ing­ton, the grant­ing of mar­ket econ­omy sta­tus is not au­to­matic and other anti-dump­ing clauses of the ac­ces­sion agree­ment “re­main in­tact”. “The United States re­mains con­cerned about se­ri­ous im­bal­ances in China’s State-di­rected econ­omy, such as wide­spread pro­duc­tion over­ca­pac­ity, in­clud­ing in the steel and alu­minum in­dus­tries, and sig­nif­i­cant State own­er­ship in many in­dus­tries and sec­tors,” ac­cord­ing to a state­ment by the Depart­ment of Com­merce.

“China has not made the re­forms nec­es­sary to op­er­ate on mar­ket prin­ci­ples.” Wash­ing­ton will there­fore con­tinue to ap­ply “al­ter­na­tive” meth­ods for cal­cu­lat­ing dump­ing mar­gins, added the DoC.

That is un­likely to change un­der a Donald Trump ad­min­is­tra­tion af­ter the pres­i­dent-elect threat­ened to im­pose 45 per­cent puni­tive tar­iffs to pro­tect Amer­i­can jobs. The po­si­tion is also sup­ported by the Al­liance for Amer­i­can Man­u­fac­tur­ing (AAM), who say China’s trade sur­plus has cost 3.2 mil­lion jobs in the US since Bei­jing joined the WTO. “It is no co­in­ci­dence that eco­nomic pain played such a cen­tral role this elec­tion sea­son. — AFP

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