Dumping at heart of Chinese trade stand off
Debate goes to China’s WTO membership and market economy status.
China and its major trading partners are embroiled in an impending stand-off that could undermine trust and sour international commerce in ways we have not seen since the country joined the World Trade Organisation (WTO) 15 years ago.
The problem arises from the terms of China’s membership of the organisation agreed in 2001. China’s protocol of accession contained a number of sui generis provisions, one of which concerned procedures for anti-dumping actions.
Anti-dumping rules allow governments to impose duties on imports if their price is in excess of the comparable price of the like product in the domestic market of the exporting country. Various provisions exist to allow alternative means of assessing the margin of dumping if that particular comparison is deemed inappropriate or simply impossible.
The Chinese accession protocol allows its trading partners to assume that China is not a market economy and domestic price comparisons with export prices never need to be used as a reference point. Instead, the comparison can automatically rely on third country data, providing an easy way to ratchet up dumping margins and impose more punitive duties.
That arrangement is due to expire on December 15, 2016. Until quite recently, the general assumption was that this would happen. But a flurry of legal arguments have been offered up, questioning the solidity of the language in the protocol and suggesting that the determination of China’s market economy status is a matter for individual countries to decide.
The main economies prospectively holding out on market economy status (MES) for China are the big players – the US, the European Union and Japan – although others lurk in the wings. Around 90 of the WTO’s member economies have already declared that they accept China’s MES for the purpose of anti-dumping actions.
The EU may be more inclined to give MES to China than the United States, but it would be an uphill battle, considering that the European Parliament decided overwhelmingly against the idea recently in a non-binding vote. All the EU member states would have to concur. Rumour has it, however, that the EU may try to split the difference by granting MES in some sectors but not others.
