Market status for China is 'political' issue

Updated: 2015-01-23 13:07

By Niu Yue in New York(China Daily USA)

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Market status for China is 'political' issue

William Perry, partner of Dorsey & Whitney LLP

China's market-economy status, which is vital in anti-dumping investigations, is more political than economic, according to an attorney who represents Chinese enterprises and American importers in anti-dumping cases in the United States.

"This is a political decision," William Perry, partner of Dorsey and Whitney LLP, said Wednesday during a seminar on China-US trade disputes at Brooklyn Law School. "Understand that. That's the reality."

Perry has been representing Chinese exporters and manufacturers in anti-dumping cases since 1991 and has worked with the International Trade Commission and the US Department of Commerce (DOC).

The comment comes at a time of heated debate on whether China will be automatically recognized as a market economy.

China agreed that other members of the World Trade Organization (WTO) could regard it as a "non-market economy" for 15 years from Dec 11, 2001, as a condition of joining the WTO in 2001. As the deadline of Dec 11, 2016, draws near, there have been disputes on whether China would be automatically recognized by other WTO members, based on different understandings of China's accession agreement.

China has been negotiating with other WTO members one by one to win market- economy status before 2016. Dozens of countries, including Russia, New Zealand, Australia and Singapore, have granted China that status.

Meanwhile, some of China's major trading partners, including the US and the European Union (EU), have not, saying that China has not met their criteria.

"Some of the bigger problems with China right now [are] the extensive industrial planning in China," said Christopher Cloutier, partner of King & Spalding LLP, which filed and prosecuted the first successful anti-subsidy case against China in 2007.

"There are some elements that are not very market-oriented, for example, preventing foreign ownership," he said, citing an industrial plan to develop China's iron and steel industry.

But Perry insisted the issue is more political, giving Russia and Ukraine as two examples. Russia and Ukraine won US recognition, respectively, in 2002, after the Afghan War, and in 2006 after the Orange Revolution.

If a country regards China as a non-market economy, investigators will not use prices in China to calculate whether Chinese exporters are dumping, as prices in China are considered government-controlled and do not reflect the actual cost of production.

Instead, investigators will turn to a surrogate country with a market-economy status as a reference.

The practice could "provide countless distortions that affect the final dumping margin," wrote K. William Watson, trade analyst with Cato Institute, in a report. It also left Chinese firms unable of knowing what the normal value is until the DOC gets a result through surrogate values, making it difficult to avoid anti-dumping duties, according to the report.

China, if recognized as a market economy, may not see a decline in trade disputes, because "there is no reason to believe people file cases because China is a non-market economy," said Cloutier.

However, he said Chinese companies would be confident of more fairness in trade disputes because China's own data would be used.

"Ultimately, I think China will litigate this, if the US government's practice continues," said Thomas Lee, a law professor with Fordham University. "They will definitely litigate it before the WTO, and the likelihood is that they will probably win before the appellate body."

Perry agreed that China eventually will receive market-economy status from the US.

Lu Huiquan in New York contributed to this story.