No reason to deny China market economy status

No reason to deny China market economy status

The European Union will take the first step on Wednesday to debate on whether to grant China "market economy status".

The Clause 2 of Article 15 of the Protocol of China's Accession to the World Trade Organisation says that when another WTO member launches an anti-dumping investigation into the products imported from China, it should not use the prices of products in China's domestic market but rather the prices of those products from a third (alternative) country as comparison.

This discriminatory practice, to be maintained for 15 years - that is, until the end of 2016 - has forced Chinese enterprises to often face unfair anti-dumping investigations by other countries. The refusal to grant China rights similar to those enjoyed by other WTO countries has dealt heavy blows to Chinese companies.

And it's time the WTO prevented other members to stop taking advantage of the discriminatory policy - which in a way would also mean recognising China as a market economy.

China is now the world's largest trading country, and acknowledging it as a market economy would be conducive to promoting global trade. China has been urging other WTO members to recognise it as a market economy, and quite a few, including Russia, Brazil, New Zealand, Switzerland and Australia, have done so.

But the United States, the European Union, Japan, Canada and some regional trade organisations have yet granted China market economy status.

Within the EU, Germany and the United Kingdom have shown a positive attitude toward the move, but some other EU members seem intent on continuing their protectionist policies for fear of losing their advantages in the steel, ceramic, textile and solar power sectors.

Some countries are also worried that recognising China as a market economy will make it more difficult for them to impose anti-dumping charges on China. And some US officials have objected to the EU's move to recognise China as a market economy, arguing that the move would be unfavorable for the US and EU members.

China and the EU both want a high-level investment accord.

In fact, the two sides have made significant progress in this regard, and the agreements they have reached on a range of topics and the arrangements for co-operation will lay a good foundation for their talks to discuss the next stage of co-operation. It is also important to note that the EU is China's largest trade partner, while China is the EU's second largest.

Despite all this, the lack of a free trade agreement between the two sides will hamper the further development of two-way trade. So reaching a free trade agreement at an early date will not only consolidate the China-EU win-win strategic partnership, but also elevate two-way trade and co-operation to a much higher level.

China's customs data show the country's import and export volume reached $3.56 trillion in the first 11 months of 2015, the largest by any country.

China's rising labour costs and technological progress have prompted its export-oriented enterprises to wean themselves away from low-price competition and gradually shift to higher models of growth.

Moreover, the difference in the prices of products made by China and other emerging countries is shrinking because of the above factors, making it unnecessary to continue the practice of using a third country as reference to decide whether to impose anti-dumping tax on products from China.

The US has never taken substantial steps to recognise China as a market economy, although it has made such a promise several times, because it has been using the issue as a political tool to pressure China to change its policies on the yuan's exchange rate and US national debt.

Being recognised as a market economy may be important for China, but it will be a lot more important for offsetting the negative influence of some of the WTO's existing policies and to make international trade really fair.

China is further opening up its economy to the outside world, which will boost global trade and help improve the world economy. Hopefully, the US and the EU realise this and recognise China as a market economy in order to energize global trade and win-win partnerships.

The author is a researcher with the Chinese Academy of International Trade and Economic Cooperation affiliated to the Ministry of Commerce.

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