Broken promises?

China files official complaint with World Trade Organization over US and EU’s failure to withdraw anti-dumping penalties

China is filing an official complaint with the World Trade Organization over US and EU’s failure to withdraw anti-dumping penalties.

In a reversal of roles, China has filed a complaint with the World Trade Organization over the failure of the United States and the European Union to honor promises made 15 years ago when China joined the global trade body. Usually they are the ones demanding that others obey international rules.

“China urges each party to keep their word, observe international law and fulfill their international obligations,” said Minister of Commerce Gao Hucheng on the 15th anniversary of China’s entering the WTO.

“As for those who refuse to keep their promises, China will adamantly protect its legitimate interests and reserve the right to take further measures.”

On Dec 12, the day after China’s WTO transitional period ended, Beijing notified the WTO Secretariat that it had requested dispute consultations with the United States and the European Union over their refusal to act on promises in the WTO accession documents.

Article 15 of China’s WTO entry protocol allowed other members of the WTO to employ the so-called “surrogate country” mechanism to calculate anti-dumping penalties against Chinese products. It clearly states that the provision expires 15 years after China’s accession, which would be Dec 11 this year.

Starting on Dec 12, China’s domestic prices — not those of a third country — should be used as references when WTO members calculate dumping margins, if such cases emerge.

Gao said that since this obligation was written into the international treaty, each WTO member should fulfill it by abolishing the “surrogate country” system as scheduled.

Xue Rongjiu, deputy director of the Beijing-based China Society for WTO Studies, warned that a continuation of the surrogate country system in anti-dumping investigations by the EU and US against China will damage the interests of all three parties in the long run and cost a huge amount in legal resources.

Xue’s comments came after China notified the Secretariat on Dec 12 that it had requested the dispute consultations.

Under the rule, if consultations fail to resolve the dispute, China can request adjudication by a panel. At that stage, experts say, China has a strong case.

The defendant party has the right to challenge the panel’s ruling within a year. Under these circumstances, a final adjudication would be made by a WTO committee within 90 days. The WTO allows 15 months for the defendant to carry out the final order. If the defendant fails to do so, the aggrieved party can apply trade retaliation measures.

It took three decades for China to integrate into the global multilateral trade system. It took 15 years from 1986 for China to resume its status as a party of General Agreement on Tariffs and Trade, known as GATT, which was converted into the World Trade Organization in 1995.

After inking the deal in Doha, Qatar, in 2001, China has worked to turn promises in the lengthy accession documents into action. That involved radical domestic reforms during the 2001-16 transitional period.

The figures show that China’s efforts have paid off as a win-win with the world economy.

Yi Xiaozhun, deputy directorgeneral of the WTO, says China’s historic accession has made both China and the WTO stronger and more vibrant, while China has made “deep and broad commitments” to reach this point.

Yi said China accelerated major steps to liberalize trade before its entry into the WTO — for example, its reduction of most-favored-nation tariffs from 45 percent in 1992 to 15 percent in 2001. In 2015, the average of such tariffs was reduced to 9.5 percent. And China’s trade-weighted average tariff is now as low as 4.5 percent. China also has opened up more than 100 service subsectors, such as finance, insurance, legal services, telecom, distribution and courier logistics.

He also said China overhauled some 3,000 laws and regulations at the central government level, and many more at the local level, to bring its legal system into compliance with WTO standards.

Yi said in the past 15 years both China and the world have seen trade flows rise dramatically.

“In the absence of the surge of imports into China over the last six or seven years, it’s very likely the global recession would have further deepened and that Asian countries would have been more adversely affected,” he said.

Furthermore, China is one of the few major developing countries that are committed to granting duty-free treatment for up to 97 percent of products made by the least-developed countries.

However, China has yet to agree to terms with many of the developed economies on how to calculate the so-called dumping prices after Dec 11.

Many WTO members fulfilled their promises just a few years after China’s WTO entry. Examples include New Zealand, Australia, Iceland and Switzerland, which have not only recognized China as a market economy but also signed agreements for free trade. Up to 100 countries have already phased out the “surrogate country” mechanism, which usually puts Chinese exporters in a disadvantageous position in calculating dumping margins.

Within the EU, the UK, Netherlands, Hungary and the Nordic countries support China’s market economy status. Germany is supportive in principle but is interested in safeguards for sensitive industries. Italy and France are opposed.

Since late 2015, US think tanks have exerted influence on the EU, warning of huge job losses if its members grant China market economy status.

The EU has also linked the WTO issue to steel overcapacity, which is a global problem. In March, about 5,000 steelworkers marched on the streets outside some EU institutions in Brussels; and the European Parliament voted to refuse China market economy status, with many members saying that it had not met the five criteria set by the European institutions. The vote is not binding.

All these efforts go hand-in-hand with the EU’s so-called legislative reform steps, which allow it to scrap the list of market economies and use the concept of “market distortions” in calculating anti-dumping tariffs.

Some European politicians share China’s worries about the rise of protectionism in the West.

“Regretfully, the European Union and United States have not fully recognized the potential China would release, and instead have resorted to protectionism,” said former French premier Jean-Pierre Raffarin during an interview in Paris. “Protectionism is rampant and we must fight against it.”

Facing the EU and US failure to recognize China’s status, Gao, the commerce minister, said the country will join hands with most of the member states to protect the solemnity of the multilateral trading system.

Switzerland, among the earliest countries to recognize China’s market economy status, has taken a similar position.

On Dec 12, in a meeting with visiting Chinese Foreign Minister Wang Yi, Johann N. SchneiderAmmann, president of the Swiss Confederation and head of the Federal Department of Foreign Affairs, Didier Burkhalter, agreed that the Swiss side is willing to deepen cooperation with China to maintain the global free trade system.

Wang said: “With the trends of protectionism picking up, we will take advantage of the chance to upgrade our free trade partnership to send active signals of maintaining the global trade system, while opposing any form of protectionism.”

CHINA DAILY Song Chen /