China Loses WTO Dispute Against EU – Free PDF Download

• The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994.
• It replaced the General Agreement on Tariffs and Trade(GATT), which commenced in 1948.

China & WTO

• China joined the World Trade Organization (WTO) in December 2001 after some hard-fought and frustrating accession negotiations.
• China was a mid-sized economy in the late 1990s and several WTO members and, most notably the United States, made China’s attempt to join the multilateral body.
• Dispute on Market economy status
• During the accession negotiations, the most debated issue was the treatment of China as a non-market economy (NME) post its WTO entry.

What is Non-market Economy?

• In international trade parlance,
• NME is generally a country where the various factors of production including costs of inputs, raw materials, technology, labour, and investments are not made in response to market signals
• But are often regulated or controlled by the government.
• China should have received the market economy treatment almost as a matter of fact in December 2001 itself, but the WTO members were successful in treating China as an NME at least until December 2016.
• China’s protocol of accession allowed the WTO members treat China differently from other WTO members in antidumping investigations based on its NME status.

What happened after 2016?

• There is a strong view among several WTO members that China has not made market reforms consistent with its WTO obligations.
• Chinese government has substantial ownership and control over allocation of resources and regularly interferes in business planning, and even management decisions.
• In 2017, the U.S. Department of Commerce came out with report as to why China should still be treated as an NME.
• Across the Atlantic, the position is not very dissimilar.
• In 2017, the EU Parliament, brought the “significant distortion” test to keep China’s market economy status at bay.

India’s position?

• India’s stance on China NME status India is also major user of antidumping cases against China—181 as of December, 2018.
• The Government of India has not formally announced a decision concerning China’s NME status.
• China spent four years fighting for market-economy status, a designation that would give it stronger footing with commercial partners while also curtailing their ability to retaliate over trade disputes.
• This week, China quietly lost that battle.

Impact on China

• By ending the dispute China now provides the EU with greater legal certainty to combat low-price Chinese exports with artificially high tariffs.

From India’s perspective

• Similar issues have also been faced by India in terms of “dumping” of low-cost products by China.
• India has imposed anti-dumping duties on several occasions on several items.
• Further, amid the ongoing border tussle, India may impose higher tariffs on products that are mostly imported from China.

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