Committed to FreeTrade
China seeks treatment corresponding to its role as an active WTO member
Overcapacity is a globally prevalent issue resulting from stimulus policies in the wake of the 2008 financial crisis. It should be solved by negotiation. There’s no need to relate this issue to China’s market economy status.
Yao Ling, Associate Researcher, Chinese Academy of International Trade and Economic Cooperation
Back in 2001 China’s admission to the World
Trade Organization (WTO) was a watershed event for the organization, its members and China itself. December 11, 2016 marked the 15th anniversary of China’s admission to the WTO. The country has since become better integrated with the global economy and gained a strong foothold in global trade. In addition to being the world’s second largest economy, China is now the world’s largest trader in goods, the second largest destination for foreign investment and the third largest outbound investor. China’s forex reserves also far outstrip that of any other country.
China’s reforms have always headed toward more market orientation, and WTO membership has become the most significant driver of this process.
Over the past 15 years, China has strictly adhered to WTO rules by gradually reducing tariff levels and by January 1, 2010, had fulfilled all the tariff reduction promises it made in joining the WTO ahead of schedule.
The nation has long been an advocate of free trade, as evidenced by the fact that it has to date signed 14 free trade agreements with 22 countries and regions.
Over the years, to comply with WTO rules, China has amended more than 2,300 laws and regulations, and rewritten more than 90,000 local statutes. Moreover, it actively participates in setting the rules for global trade and in settling trade disputes on the basis of these rules.
XINHUA
A worker examines solar panels in the workshop of a photovoltaic producer in Xingtai, north China’s Hebei Province
Great contributions
According to Shuaihua Wallace Cheng, Managing Director of ICTSD China, China has made great contributions to the WTO’s multilateral trading system as well as to global economic growth. ICTSD - the International Center for Trade and Sustainable Development - is an independent, non-profit organization based in Geneva, Switzerland.
China tries to act as a bridge between developed and developing nations. It positions itself as a coordina-tor and supporter of developing countries’ interests, Cheng told ChinAfrica.
WTO Deputy Director General David Shark said that that since its WTO accession, China has significantly increased national income, made great progress in poverty relief, influenced economic growth in many regions, and made vital contributions to raising incomes and living standards globally.
China not only plays a key role in global value chains, but also is a core WTO member, Shark told reporters at a seminar held at the Shanghai WTO Affairs Consultation Center on November 9.
Tang Xiaoyi, a Brussels-based senior trade advisor with the European arm of global law firm Dentons, believes China has fulfilled its WTO accession commitments.
All of the commitments were clearly described in the admission protocol of China to the WTO, the document governing the nation’s WTO entry. Had China failed to implement its promises, the United States and the EU would have sued it on many occasions, which has not actually happened, Tang told ChinAfrica.
Tang said China is one of the largest beneficiaries and contributors of the WTO, as its membership in the organization has significantly driven product upgrades in China.
Disputes continue
According to China’s WTO admission protocol, the use of the “surrogate country” method in anti-dumping investigations against China ended on December 11.
Under the surrogate country method, authorities determine whether or not to impose tariffs on the basis of reference prices in a third country rather than product prices in the exporting country. As a result, more Chinese products end up being investigated, and in most cases, they have to pay higher anti-dumping duties compared with countries not subject to the surrogate country method.
But the European Commission on November 8 submitted to the European Council and the European Parliament an amendment proposal on protection against dumped imports.
In the proposal, the EU has introduced the concept of “market distortion,” which will take multiple criteria into consideration - state policies and influence, the extent to which government-owned enterprises operate in the sector, discrimination in favor of domestic companies and the degree to which the financial sector is independent. According to the new EU proposal, the surrogate country method will still be used in cases involving countries found to have so-called market distortions.
China has expressed its discontent about the proposal. “We have taken note of this, and we have concerns,” said Lu Kang, Spokesperson of the Ministry of Foreign Affairs.
Lu said China acknowledges the European Commission’s proposal to remove it from the list of non-market economy countries, which reflects the EU’s willingness to fulfill Article 15 of the Accession Protocol of China to the WTO.
“Much to our regret, however, the new methodology proposed by the EU, which replaces the non-market economy concept with that of market distortion, fails to uproot the practice of surrogate country. It only gives it a new cover. That’s neither a thorough implementation of Article 15 nor compliance with WTO rules,” Lu said.
The latest EU proposal mainly targets China, although the new rules may also be used against other countries, according to Tang.
Tang said the EU was concerned about the expiration of Article 15. If the EU stops using the surrogate country method in anti-dumping investigations against imported goods from China, a number of industries, including iron and steel, ceramics and photovoltaics, will bear the brunt, and according to a report by European Industries, close to 200,000 Europeans will lose their jobs, a prospect which sparked massive protests in Brussels in February.
The European Commission is under lots of pressure and caught in a dilemma. Consequently, it has created the market distortion concept to protect European industries most vulnerable to Chinese exports, Tang said.
According to Cheng, the WTO itself does not actually define the nature of a market economy. “Domestic trade laws have created the concept of market economy status and the criteria for granting it.”
The protocol, however, does say that “in any event,” WTO members may not use the surrogate country method against Chinese exports beyond the 15-year transition period following China’s WTO accession.
According to German Ambassador to China Michael Clauss, positive progress will be made with regard to China’s market economy status.
“I think things are developing toward a good direction,” Clauss told ChinAfrica. “In the meantime, the EU will strengthen trade remedy measures. Overcapacity exists globally, including in China, therefore the EU needs to take some effective measures to fight against dumping in some industries.”
But Yao Ling, Associate Researcher with the Chinese Academy of International Trade and Economic Cooperation, disagrees with Clauss, saying that overcapacity should not be an excuse for not abiding by the rules.
“Overcapacity is a globally prevalent issue resulting from stimulus policies in the wake of the 2008 financial crisis. It should be solved by negotiation. There’s no need to relate this issue to China’s market economy status or whether or not to abide by some of the provisions in its WTO accession protocol,” Yao said.
By 2015, the EU had been China’s largest trading partner for 11 consecutive years, while China had been the EU’s second largest trading partner for 12 consecutive years.
If the EU can fulfill its obligations stipulated in Article 15 and maintain its status as an advocate for and leader of free trade within the WTO, it will be a win-win choice for both China and the EU, Yao said. CA