China is intensifying lobbying to gain “market economy status” under the World Trade Organisation despite growing opposition in Europe and the US to a move that would make it harder for other major economies to bring anti-dumping cases against Beijing.
Washington and many European politicians, under pressure from protesters fretting about the impact of Chinese imports on jobs, are seeking to block automatic MES for Beijing, which China says should be accorded in December — the 15th anniversary of its 2001 accession to the WTO.
Instead the US and Europe want to gain a few years’ reprieve by requiring China to jump through the hoops for MES when it contests its next anti-dumping case at the WTO.
The timing is especially sensitive as jobs and factories are scythed globally as a result of China-swollen capacity surpluses in areas such as steel.
An upcoming paper from the European Commission analysing the domestic impact attracted more than 5,000 responses during the public comment period, most of them from the steel industry. On Tuesday a commission representative will appear before the European Parliament to lay out its case.
Securing market economy status would benefit China by requiring global trade regulators to compare the price of Chinese exports to its domestic market — instead of higher-priced third countries — in anti-dumping cases and thus limiting their ability to impose tariffs.
“China is firmly against any misinterpretation or delay in performance of the clause. We call on members, such as the US and EU, to take necessary measures as soon as possible in order to ensure ending the use of ‘third countries’ before the due time,” China’s Ministry of Commerce said in response to questions from the FT.
Mei Xinyu, a researcher at a think-tank affiliated with the Ministry of Commerce, went further. “If the EU doesn’t want to honour the WTO protocol it has signed, it should consider withdrawing its membership. The clause in the protocol is very clear and it’s unconditional.”
Although international politicians are against the move, European trade negotiators are more supportive. The European Parliament must vote on granting the status to China, whereas the US Trade Representative has some political wiggle-room as it does not keep specific non-MES lists.
The clause in question states that “in any event”, provisions allowing Chinese goods to be compared with those of third countries “shall expire 15 years after the date of accession.”
However, loose language in other parts of the agreement has allowed trade lawyers to argue that importing states can still decide on whether or not China is a market economy after December 2016.
Politicians in Washington and Europe are betting that any challenge would take two to three years to wend its way through the WTO. That could buy their own industries some time.
“China also needs to ask itself if it has really transformed into a complete market economy,” said Zhang Haibin, director of the Centre for International Organizations at Peking University, who believes that US and European concerns about competition are behind the recent unwillingness to grant the status.
“Recognising it or not should have been a simple trade issue, but now there are politics behind it.”