WASHINGTON, D.C.: The Trump administration has confirmed it rejects China’s bid to be considered a market economy in the World Trade Organization (WTO), making it subject to more onerous trade penalties.
In a 41-page legal document presented to the WTO, the US Trade Representative (USTR) defended its right to consider China a non-market economy when ruling on how to handle a flood of cheap imports from the manufacturing behemoth and protect domestic industry.
The European Union and Japan, among others, also reject China’s bid for recognition as a market economy in the WTO. The recognition was expected to kick in a year ago, 15 years after China joined the trade body.
The US position was presented in support of the European Union in a WTO dispute with China over the issue.
An outraged Beijing called the analysis a “serious distortion of the actual situation in China.”
“China urges the United States to earnestly fulfill its international obligations and take practical actions to correct its wrongdoings,” China’s Ministry of Commerce said, warning that “China will take the necessary measures to safeguard the legitimate rights” in the WTO.
The Trump administration position continues the stance maintained by the Obama administration, which said China’s state-directed economy had not made the reforms necessary to operate on market principles.
The distinction is important, since governments use prices in third countries rather than those prevailing in China in cases brought by trading partners to protect domestic industries from Chinese products being dumped at prices below the cost of production.
“The evidence is overwhelming that WTO Members have not surrendered their longstanding rights…to reject prices or costs that are not determined under market economy conditions,” when deciding on anti-dumping cases, the USTR report said.
It argued that the agreement with China when it joined the WTO specified that if market economy conditions “do not prevail in China or in the industry or sector under investigation, then ‘comparable’ prices or costs do not exist for purposes of the dumping comparison.”