China faces battle over market economy status
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