Trade Cases

China Commerce Minister Comments on Market Status

Written by Sandy Williams

The anniversary of China joining the World Trade Organization has passed without the key governments of the EU, Japan and the United States recognizing China as a market economy. The following statement is from the Chinese Minister of Commerce Gao Hucheng, published in the People’s Daily and on the Ministry of Commerce website on December 14, 2016, discussing China’s commitment to the WTO and the multilateral trade system.

Minister Gao Hucheng: China will Firmly Protect Its Legitimate Interests and Multilateral Trade System

Fifteen years have passed since China officially joined the WTO on December 11, 2001. Over the years, China, as the biggest developing country in the world, has been committed to liberalization and facilitation of global trade and investment and engaging in economic globalization. China also participated in, protected and contributed to the multilateral trade system by observing WTO rules and fulfilling its promises and responsibilities. After the outbreak of the global financial crisis, China continued its efforts on multilateral trade rules. When the Doha Round met with impasse, China, at both ministerial meetings in Bali and Nairobi, played a leading role as a responsible major trading country, in a bid to help the WTO move forward, bolster global prosperity and boost multilateral trade system.

Since WTO acts as a rule-based multilateral trading system, its rules must be observed to ensure an orderly and sustained development of international trade and investment. Over the years, an effective observation of multilateral trade system and rules, one of the three pillars of the world economic system, has laid a foundation for global economic prosperity and played an irreplaceable part in world peace and stability. The WTO rules are now an integral part of international law.

The basic principles of international law call for each party to abide by the obligations stated in the treaties. As a constituent part of “WTO agreement”, the Article 15 of the Protocol on the Accession of the People’s Republic of China to the WTO stipulates that the “surrogate country approach” used by member countries to calculate anti-dumping measures against Chinese exports will expire 15 years after the date of accession. The provision means that starting from December 11, 2016, any future anti-dumping cases against China should make comparison with prices or costs in China. Since this obligation has been written into the international treaty, each WTO member should fulfill it without doubt by abolishing the “surrogate country system” as scheduled. China’s legitimate interests should be duly protected.

There is an old saying in China that “promises must be kept and actions must be resolute”. The spirit of contract is the foundation of market economy while commitment to fulfill promises is the basic principle of international law. It is the shared obligation and common interest of each member state to honor the terms in the protocol and maintain the authority of the multilateral trading system. Most of the WTO members have fulfilled their obligations stipulated under the Article 15 in the protocol ahead or on schedule by terminating the “surrogate country system” against China.

But a few have refused to do so. They even tried to obscure the term “market economy” with their domestic logic, or cite overcapacity in some industries as an excuse for delay. The WTO rules, as a matter of fact, did not provide detailed definition of “market economy”. The so-called standard of “market economy” was actually created during the Cold War, and only a few of the 164 WTO members have adopted such standards in their internal laws. As for the overcapacity issue, it is a problem faced by, and should be solved by, all countries in the world. They cannot use such excuses to postpone the fulfillment of their obligations. China firmly opposes such misinterpretation of WTO rules and multilateral trading system. China urges each party to keep their words, observe international law and fulfill their international obligations. As for those who refuse to keep their promises, China will adamantly protect its legitimate interests and reserve the right to take further measures. China will join hands with most of the member states to protect the solemnness of multilateral trading system.

In light of risks and challenges confronting current world economy, Chinese President Xi Jinping, at the G20 Summit held in September, called on each side to work in the spirit of partnership to promote mutual help and win-win cooperation and concentrate mind and energy to pursue strong, sustainable, balanced and inclusive growth. Today’s world is trapped in increasing uncertainties brought by a lack of recovery momentum, gloomy trade and investment environment as well as setbacks to economic globalization, but it is at such difficult times that WTO members need to have more cooperation to defend the effectiveness of the multilateral trading system. China is willing to hold hands with other countries in order to combat protectionism, maintain the multilateral trading system, reinstate the driving role of trade and investment in economy, thus building a more energetic, inclusive, sustainable and open world economy.

SMU Note: We saw two excellent reports recently that help explain both the issue of Market Economy status for China as well as the world glut of steel production. The first report we recommend you read comes from MetalMiner (you may remember Lisa Reisman as one of the speakers at the last two Steel Summit Conferences). Their report is about the section referenced by the Chinese in the article above that they believe means they have to be given market economy status. The article is entitled China vs the World. The second is a publication from Lukas Brun at the University of North Carolina and is entitled Overcapacity in Steel: China’s Role in a Global Problem. Now that the December 11, 2015 date has passed look for China to begin pushing back on dumping suits coming out of the U.S. or Europe.

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