WASHINGTON • The United States has formally told the World Trade Organisation (WTO) that it opposes granting China market economy status, a position that if upheld would allow Washington to maintain high anti-dumping duties on Chinese goods.
The statement of opposition, made public on Thursday, was submitted as a third-party brief in support of the European Union (EU) in a dispute with China that could have major repercussions for the trade body's future.
China is fighting the EU for recognition as a market economy, a designation that would lead to dramatically lower anti-dumping duties on Chinese goods by prohibiting the use of third-country price comparisons.
The US and EU argue that the state's pervasive role in the Chinese economy, including rampant granting of subsidies, mean that domestic prices are deeply distorted and not market-determined.
A victory for China would weaken many countries' trade defences against a flood of cheap Chinese goods, putting the viability of more Western industries at risk.
US Trade Representative (USTR) Robert Lighthizer told Congress in June that the case was "the most serious litigation we have at the WTO right now" and a decision in China's favour "would be cataclysmic for the WTO". Mr Lighthizer has repeatedly expressed frustration with the WTO's dispute settlement body and has called for major changes at the organisation.
The USTR brief, which follows a Commerce Department finding in October that China fails the tests for a market economy, argues that China should not automatically be granted market economy by virtue of the expiration of its 2001 accession protocol last year.
"The evidence is overwhelming that WTO members have not surrendered their longstanding rights... to reject prices or costs that are not determined under market economy conditions in determining price comparability for purposes of anti-dumping comparisons," the brief concludes.
The move comes as trade tensions between Washington and Beijing are increasing as the Trump administration prepares several possible major trade actions and an investigation into Chinese intellectual property misappropriation.
Chinese Foreign Ministry spokesman Geng Shuang told a news briefing yesterday that some countries were trying to "skirt their responsibility" under WTO rules. "We again urge relevant countries to strictly honour their commitment to international principles and laws, and fulfil their agreed upon international pacts," Mr Geng said.
The US Commerce Department on Tuesday launched the first government-initiated anti-dumping and anti-subsidy probes in decades on Chinese aluminium sheet imports.
US officials say that 16 years of WTO membership has failed to end China's market-distorting state practices. "We are concerned that China's economic liberalisation seems to have slowed or reversed, with the role of the state increasing" Mr David Malpass, US Treasury undersecretary for international affairs, said in New York on Thursday.
"State-owned enterprises have not faced hard budget constraints and China's industrial policy has become more and more problematic for foreign firms. Huge exports credits are flowing in non-economic ways that distort markets," Mr Malpass said.