In the first round of Sino-US Strategic and Economic Dialogue held in Washington D.C. on July 27-28, the American side proposed to recognize China’s market economy status (MES) as soon as possible via a cooperative form of the Sino-US Joint Commission on Commerce and Trade.
China joined the WTO as an economy under transformation in December 2001. That enables WTO member countries to have the rights to decide whether to grant China MES within 15 years after its accession to the WTO.
An impact of MES on China was shown mainly on anti-dumping and anti-subsidy investigations against the country. If China is granted a MES, other countries, while conducting anti-dumping investigations of Chinese products, must calculate the normal prices, based on China’s domestic actual costs and prices of these products, rather than adopt the market prices of a third country (substitute country).
If this is not the case, much higher prices in a third country will be used or referred to as the benchmark. With the employment of this method, many innocent enterprises will be ascertained that they have involved in dumping and subsidy actions and thus have to pay high anti-dumping and anti-subsidy tariffs.
WTO statistics show that China was the target of most trade remedy investigations in 2008, subject to 73 anti-dumping cases and 10 countervailing cases, accounting for 35 percent and 71 percent of the global cases respectively.
Hence, China has stated repeatedly that its main trade partners should recognize its market status as soon as possible since the nation has made great progress in the market-related reform or innovation.
For years, China has been pressing its trade partners to give it MES. The U.S., however, has used the market economy status to impose restrictions on imports from China, and so American consumers, too, paid a high price. This practice, nevertheless, has a very limited role in the protection of the US industry and employment. The U.S., having not granted the MES to China for a long time, has used it as a bargaining chip in its negotiations with China and to seek its own interests.
The United States is currently ready to strengthen cooperation with China and to recognize its MES as soon as possible for the ensuing reasons:
First, China has made substantial progress in its pursuit of market reform. Second, against a backdrop of great recession globally and particularly in the U.S., the Barack Obama administration is eager to cooperate with China on a great number of issues and to satisfy its needs on an issue, which is of concern to the country. Third, 97 countries worldwide have granted China MES, but some of the countries the U.S. granted MES cannot compare their market access level to that of China's and, finally, China can automatically acquire MES by 2016, or 15 years after its accession to the WTO, in line with the relevant WTO rules.
The United States is the second biggest market for China's export, only next to the European Union (EU)t. China's exports to the U.S. in 2008 accounted for 17.6 percent of the nation's total export. After the recognition of China's MES, the U.S. will find it hard to use anti-dumping and anti-subsidy measures against China. So, Chinese firms will benefit from a fair trade status, and more Chinese goods will be exported. On top of this, owing to the U.S. vital status in the world economy and trade, other economies will follow suit or be prompted to recognize China’s MES as soon as possible.
In fact, it should be recognized that the U.S. has not formalized any agreement with China on granting it MES, though it has promised to do so as soon as possible. Both sides still need to consult each other on the concrete content of the “cooperative form” the U.S. has suggested.
Meanwhile, we should also bear in mind the fact that trade protectionism in the U.S. would not vanish anyway even after the country recognizes China's MES but will instead re-emerge via other forms.
By People's Daily Online and contributed by Chen Changying, a veteran international trade expert at the International Economic Research Institute under China’s National Development and Reform Commission
By People's Daily Online
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