On November 30, the United States officially submitted a legal application to the WTO, refusing to recognize China’s market economy status. In its written statement, the United States has ignored the WTO rules and repeatedly confused the question of “alternative country” with the issue of “market economy status” in an attempt to confuse the general public.
Why the United States denies China’s market economy status?
When China acceded to the WTO in 2001, it had no choice but to accept an unfavorable clause in the accession agreement: China would not have the market economy status within the next 15 years (until December 10, 2016).
According to WTO rules, when a “market economy” launches anti-dumping proceedings against the exports of a “non-market economy”, the criteria for judging whether the export price is too low are based not on the actual domestic price of the “non-market economy” but on the price of an alternative “market economy”. Thus, it is very easy to convict a country of anti-dumping if the high-cost of an alternative market economy can be used as a benchmark. However, if China has the market economy status, it will not be so easy to be judged as “dumping.”
The United States politicized the market economy status issue
Wei Jianguo, Vice Chairman of China Center for International Economic Exchanges and former Vice Minister of Commerce, told China’s Fortune Bond that China’s market economy status is not subject to one country’s rejection. Since China has started its reform and opening-up nearly 40 years ago, it has always regarded the market economy as a very important direction of development, and it has made great achievements. The development of the Chinese market economy has also made an important contribution to the effective operation of the multilateral trading system and is beneficial to the rest of the world, including the United States. In rejecting China’s market economy status for its own practical interests, the United States is actually politicizing the issue of market economy status, which does not help to solve the problem at all.
Wei Jianguo said that America’s action further demonstrates that the United States is a country with dishonesty and violates the original commitments it made when China joined the WTO. Disrespecting facts, failing to abide by the rules, have greatly damaged the credibility of the entire US market.
The United States Should Face China’s Development
America’s refusal to recognize China’s market economy status will also have a negative impact on the development of China’s foreign trade, Wei Jianguo told China’s Fortune Bond. This would allow other countries to follow suit and use “alternative countries” to conduct anti-dumping investigations against China when conducting bilateral trade with China, adversely affecting China’s export.
Bai Ming, Deputy Director of the International Market Research Department of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, recently expressed in the Global Times that the United States should accept China’s changes and developments. President Trump has just concluded his visit to China, the US and China have also reached a “hundred-day plan” in trade and economy and therefore, “pouring cold water” at this time is not good for both countries.
The U.S. position will not affect the ongoing WTO dispute settlement mechanism
At the crossroad of this dispute, the ongoing WTO dispute settlement mechanism has also become the focus of attention. On December 12, 2016, China formally initiated the dispute settlement process by submitting requests for consultations under the WTO Dispute Settlement Mechanism on the use of alternative countries for anti-dumping by the United States and the EU against China.
Wei Jianguo told China’s Fortune Bond that the U.S. position will not affect the ongoing WTO dispute settlement mechanism. According to the procedure, an expert panel will be set up to decide if the appeal of the losing party still needs the ruling of the appellate body. Although this process is estimated to take two or three years, we believe that China will eventually win.