A Market Economy or Not? China Turns to the WTO for an Answer
12/12/2016 - Chinese officials said they are initiating dispute-resolution procedures against the U.S. and the European Union over their refusal to recognize the country as a market economy, marking the beginning of a fight over how anti-dumping tariffs are assessed against the country.
According to The Wall Street Journal, China announced its intent on Monday.
At issue is a single clause in China’s 2001 ascension agreement to the World Trade Organization. The clause allows WTO countries to use product prices from places other than China in determining anti-dumping duties in cases involving its producers.
It has been a sore spot for China because the rule typically has resulted in higher margins on its exported products.
The clause expired Sunday, and China argues that it now must be treated as any other market economy in trade disputes. U.S. manufacturers, however, have argued that China does not qualify as a market economy under U.S. law. And, they say, treating it as such would make it much more difficult, if not impossible, to impose meaningful trade measures against a country that routinely dumps its products in foreign markets.
U.S. officials have said they won’t consider China a market economy, which at least one group, the Manufacturers for Trade Enforcement, a coalition of producers in the steel, aluminum, cement, chemical, and textile industries, among others, is the right thing to do.
"Given the significant role of the Chinese government in many key aspects of its economy, and especially in its state-owned and controlled steel sector, there can be no question that China remains a non-market economy," said Thomas J. Gibson, president and chief executive of the American Iron and Steel Institute and co-chairman of Manufacturers for Trade Enforcement.
"This is not just a North American concern. The steel industries in Europe and throughout Latin America share our concern."
Alan Price, chairman of the international trade practice at Washington, D.C., law firm Wiley Rein, said in a statement that he believes the U.S. government is taking the correct stance.
“China’s claim is misplaced,” said Price, who has represented American steelmakers in numerous trade disputes.
“Despite the fact that (the clause) expired yesterday, the remainder of (the applicable section) remains in full force and effect and continues to provide sufficient authority to treat China as a non-market economy. Treating China as a market economy would be an unwarranted step with significant negative ramifications.”
China, however, disagrees.
“China has communicated through many channels for the third-country comparison to expire. What’s very regrettable is that EU and U.S. have not acted to allow it to expire. It has had a severe impact on Chinese exports,” the country’s commerce ministry said in a statement, according to the (London) Financial Times.
“China is protecting its lawful rights and acting appropriately to maintain the WTO rules.”
At issue is a single clause in China’s 2001 ascension agreement to the World Trade Organization. The clause allows WTO countries to use product prices from places other than China in determining anti-dumping duties in cases involving its producers.
It has been a sore spot for China because the rule typically has resulted in higher margins on its exported products.
The clause expired Sunday, and China argues that it now must be treated as any other market economy in trade disputes. U.S. manufacturers, however, have argued that China does not qualify as a market economy under U.S. law. And, they say, treating it as such would make it much more difficult, if not impossible, to impose meaningful trade measures against a country that routinely dumps its products in foreign markets.
U.S. officials have said they won’t consider China a market economy, which at least one group, the Manufacturers for Trade Enforcement, a coalition of producers in the steel, aluminum, cement, chemical, and textile industries, among others, is the right thing to do.
"Given the significant role of the Chinese government in many key aspects of its economy, and especially in its state-owned and controlled steel sector, there can be no question that China remains a non-market economy," said Thomas J. Gibson, president and chief executive of the American Iron and Steel Institute and co-chairman of Manufacturers for Trade Enforcement.
"This is not just a North American concern. The steel industries in Europe and throughout Latin America share our concern."
Alan Price, chairman of the international trade practice at Washington, D.C., law firm Wiley Rein, said in a statement that he believes the U.S. government is taking the correct stance.
“China’s claim is misplaced,” said Price, who has represented American steelmakers in numerous trade disputes.
“Despite the fact that (the clause) expired yesterday, the remainder of (the applicable section) remains in full force and effect and continues to provide sufficient authority to treat China as a non-market economy. Treating China as a market economy would be an unwarranted step with significant negative ramifications.”
China, however, disagrees.
“China has communicated through many channels for the third-country comparison to expire. What’s very regrettable is that EU and U.S. have not acted to allow it to expire. It has had a severe impact on Chinese exports,” the country’s commerce ministry said in a statement, according to the (London) Financial Times.
“China is protecting its lawful rights and acting appropriately to maintain the WTO rules.”
