China fights US hard over trade practices

The Word Trade Organisation (WTO) held its sixth review of China’s trade policies and practices in Geneva from June 20 to 22. "The basic national conditions of China as a big developing country have not changed and will not be fundamentally changed despite its economic development achievements," the world trade body concluded. 

The WTO further foresees the Middle Kingdom to be subject to “the challenges of onerous development tasks for a long time”. This might warm the cockles of the United States or other emerging economies like India. However, the incontrovertible fact is that China has of late begun throwing its weight and its growing clout leveraging both its soft and hard power pitch, much to the consternation of many peace-loving nations across the world.

If there is one country in the world which has an obsessive Chinese fever over its ambition to emerge as the unrivaled power in this century, it is the United States. The latter is uneasy over the Chinese naval exercises in the South China Sea, its burgeoning economic might in Africa, Latin America and also through the proposed revival of its “one belt one road” Silk route policy of linking Europe and Asia.     

When China joined the World Trade Organisation in 2001, it agreed that other members would be allowed to apply “non-market economy (NME) methodology” in antidumping cases against Chinese goods for 15 years.  That deadline will soon end in December 2016, but U.S. officials are proactively pressuring their European counterparts to continue using the NME methodology indefinitely. 

This is not quite unsurprising, given Washington’s protracted record of intentionally violating WTO antidumping rules and most experts surmise that the United States would not budge from its practices at the end of 2016 to comply with WTO rules. This is so as the US antidumping law is primarily purported to safeguard a handful of politically powerful US industries from legitimate competition.

Many commentators within the US have drawn attention to the history of NME status as an alibi for lawless protectionism by the world’s premier free trade nation! The US is keen on trade litigation at the WTO where the United States will be continually called out for violating trade rules, according to these experts. 

The WTO Antidumping Agreement lays out detailed rules for how members can implement antidumping measures and the use of NME methodology is plainly at odds with those rules.  China’s accession protocol to the WTO exempts members from some of those rules until December 2016.  After that, United States, European Union, or any other WTO member that uses NME methodology against Chinese goods, will be contravening the global trade rules.

But the United States uses NME methodology against Chinese imports because it provides for more protectionist outcomes, not because China doesn’t have a market economy. Surprisingly, when the US pitched for a heavy anti-dumping duty on Chinese steel a few months ago, the United Kingdom (UK) on its part did not impose any such inordinate anti-dumping duty on imported steel in Britain even as its steel industry was in a moribund state with cheap Chinese imports making massive inroads at inexpensive prices! 

That was because British Prime Minister David Cameron and the Chinese President Xi Jinping enjoy a mutual bonhomie that is laced with commercial considerations for a win-win game to both! This is notwithstanding the traditional trans-continental ties between the US and the UK.  The geopolitical realities now make strange bedfellows when national interests outweigh global fears generated by one unipolar power!

But as the continued stalemate in resolving the NME issue affects its global image, China deems this a priority focus for early resolution this year.  Ending NME treatment on time would smooth over relations and enable the United States to work on more important bilateral issues. 

 No wonder, scholars from reputed bodies like the Cato Institute in the US argue that antidumping duties on imports from China harm American consumers and businesses by making the things the US buys more expensive while conferring unjust benefits on inefficient, rent-seeking domestic industries.

This issue apart, the latest WTO report by and large gave a clean chit to the Chinese economy, contending that since its accession to the WTO, China has set up an economic and trade system in line with its national conditions and global prevailing practices through continuous reforms and opening up.

 This has vastly contributed to the development of China’s open economy and the integration of China’s economy with the global economy. Currently, China is the largest trading partner of over 120 countries and regions and has become the main driving force for global economic growth. It is estimated that in the next five years, China would realise 10 trillion dollars worth of goods imports and 500 billion worth of outbound investment, and more than 500 million person-times would travel abroad, WTO reckons.

Reviewing Chinese economy, WTO reckons that in 2014 and 2015, China’s GDP grew by 7.3 percent and 6.9 percent respectively on a year-on-year basis. In 2014, final consumption expenditure, gross capital formation and net export of goods and services contributed to 49.6 percent, 45.9 percent and 4.5 percent of GDP growth respectively and stimulated GDP to grow by 3.6, 3.4 and 0.3 percentage points respectively.

 In 2015, consumption contributed to 60.9 percent of social economic growth, a rise of 11.3 percentage points over 2014. WTO said China has successfully realised the major transition from an economy driven mainly by investment and foreign trade to one mainly driven by domestic demand, especially consumption.

According to WTO, the Chinese government holds that economies at different development levels and phases should embrace the spirit of solidarity, discard zero-sum practices, jointly rise up to the common challenges, promote the development of a new international economic order towards equality fairness and win-win cooperation.

 As China holds the presidency of the prestigious G-20 in which India too is a member, its reassurance to the WTO that China will continue to develop its economic and trade relations with various countries and regions in the world based on the principles of mutual benefit and win-win and progressively participate in the global governance and exerts its influence as a major developing trading nation is salutary! 

The world should give benefit of doubt to the Middle Kingdom without unduly entertaining any suspicion or hostile intentions as the US appears to have in recent years against China, strategic analysts opine. 

IPA