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China deserves market economy status
2004-05-17
China Daily
As expected, Premier Wen Jiabao urged European leaders to recognize China as a market economy during his European trip over the past two weeks.
China has urged its European and North American trade partners to grant it "market economy status" (MES) many times, and there are good reasons for this.
One question has long perplexed the Chinese people: Why is China, now a member of the World Trade Organization (WTO), a bloc of market economies, still labelled as a "non-market" economy?
The rationale is in Article 15 of the protocol on China's accession to the WTO, which allows other WTO members to treat China as a non-market economy in dumping and subsidy cases for 15 years after its entry.
That means although China is accepted by the WTO as a market economy in general terms, it is still subject to non-market criteria when it comes to specific trade measures.
The paradoxical "non-market" label on China is more economic than political, as it affects the interests of other WTO members.
Take dumping cases as an example. Once a trade authority deems a country as a non-market economy, it will disregard the prices of products exported from the country, and instead use the costs in a third surrogate country to measure the so-called "normal value" of the products.
Disparities between costs in the exporting country and in the surrogate are very likely to feed the charge that the exported products are sold below normal value. Punitive anti-dumping duties will therefore be levied on products of non-market origin.
With more than 500 dumping charges against it, China has become the No 1 worldwide target in anti-dumping cases for seven straight years.
China spent 15 years negotiating WTO membership in the hope of developing free trade, but now it finds the system is not as "liberal" as it had anticipated.
In particular, the "non-market" label has become a wild card in some countries' hands to contain China's exports and shield local industries, which is unfair.
Such unfairness is deliberately created in that some trade authorities continue to turn a blind eye to the fact that China has already built an all-round market system.
As the WTO entitles member countries to formulate their own dumping, the treatment Chinese exports receives in dumping cases is not only arbitrary but also random and unpredictable.
The abusive use of dumping rules has deviated from the WTO's principle of bolstering free trade. Sadly, China often falls victim to this.
Without a fair mechanism, goodwill alone can by no means guarantee free trade. If the non-market clause continues to be a tool of trade protectionism, it is not only unfair to Chinese companies, but will also hamper the WTO's ideal of free trade.
New Zealand has set a good example by recognizing China's status as a market economy last month. And Singapore also just recognized China as a market economy.
The move came at the time the WTO's multilateral framework suffered from an unprecedented heavy blow with the failure of ministerial talks in Cancun, Mexico, whereas many member countries began to adopt bilateral and regional approaches.
New Zealand's decision reflects respect for reality and the will to promote free trade and avoid frictions.
Despite New Zealand's initiative, it remains very difficult for China to remove the "non-market" label in the near term, because modifying its WTO entry protocol will not be an easy job.
The hope is that there could be some breakthrough at bilateral levels. European Union Trade Commissioner Pascal Lamy has promised a preliminary verdict on China's status in June. China also has perfect reason to require the US to grant it MES.
However, the point is not whether or not China should be given MES. It should have got the status long ago. The nature of China's MES is, after all, a question of haggling for interests. Negotiations with the EU and US for MES will be lengthy and costly. China is likely to have to compromise in such aspects as the service sector and technical standards in some industries.
It is unrealistic to expect absolute fairness, and what China has to pay for negotiations could be costly.
However, the non-market label means endless restrictions and spats. It is impossible for China to trade freely under this label.
What China wants is a basic right that the true development of its market system be recognized objectively.
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