TRADE WARS: DISPUTE RESOLUTION AT THE WTO

A factor in the deal which saw China’s accession to the ranks of the World Trade Organisation (WTO) in 2001 was an agreement that the People’s Republic would be treated as a non-market economy (NME) by Members for a period of 15 years – accession deal terms which have now resulted in a rather unseemly dispute.

Upon the scheduled discharge of the longstanding agreement in December 2016, it quickly became clear that it was not to be honoured. The US, the European Union (EU) and others refused to adhere to the original accord, opting instead to withhold the status of market economy from China and preserve the tough rules that protect them from cheap Chinese products flooding their markets.

In response to the reneging, China filed a dispute resolution case with the WTO citing the so-called ‘surrogate country’ approach – a methodology used to calculate anti-dumping measures – applied to Chinese exports by fellow Members. Perhaps unsurprisingly, a standoff ensued, with the US, EU and Japan holding that, despite 15 years having elapsed, China had still not done enough to qualify for market economy status (MES). Others, though, say this judgment is nothing more than an example of “covert protectionism” and a “double standard” – all part of a grand strategy toward China.

“The interpretation of the WTO agreement is highly controversial,” says Professor Ann Lee, an adjunct professor of economics and finance at New York University. “The shorthand version is that after 15 years China thinks it will be treated as a market economy for the purposes of evaluating whether its trade goods are being sold at market value. The US has taken the position that this period of time was the minimum amount of time before China could be treated as a market economy, but that there was no specific deadline for when it would start treating China as a market economy. Based on my conversations with international lawyers, China has the more natural reading of the language in the agreement.”

Apr-Jun 2017 issue

Fraser Tennant

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