India is ‘non-committal’ about market economy tag for China

Beijing cites 2001 protocol that status be made effective from Dec. 2016

An MES tag will curb the ability of nations to impose anti-dumping duty on “unfairly priced” Chinese imports.

India is not inclined to automatically grant the coveted ‘Market Economy Status’ (MES) to China this December under World Trade Organisation (WTO) norms, highly placed official sources said.

Citing the provisions in the ‘Protocol on the accession of China to the WTO’ in 2001, Beijing has said WTO member countries must fulfil their promise to deem China a ‘market economy’ from December 2016.

However, granting MES to China will severely curb the ability of nations including India to impose anti-dumping duties on “unfairly priced” Chinese imports. The matter was discussed recently by the Ministries of Commerce & External Affairs, with the Centre for WTO Studies (at the Indian Institute of Foreign Trade).

Of the 535 cases where anti-dumping duties were imposed by India during 1994 to 2014, a maximum of 134 has been on goods from China.

To refuse China the ‘MES’, India has taken sides with the U.S. and European Union in stating that unlike in 'market economies' where prices of items are market determined (based on demand & supply conditions), there is still a significant government influence in the Chinese market.

China subsidies

In this regard, they have referred to the Chinese government subsidies for various sectors, currency ‘manipulation’ and the related ‘price fixing’, ‘absence of transparency’ in lending rates and bad loans of banks as well as in minimum wages & property rights besides the ‘lack of’ proper business accounting standards – all of which in turn cause distortions in global trade, the sources said.

As of now, India is “non-committal” on according MES to China, the sources said, adding that “ultimately it will be a political call after considering the stance of other countries and India’s relations with China.

“The intention will be to ensure India’s manufacturing sector is not hit by unfairly priced Chinese goods.” The sources said decision to “wait-and-watch and to further study the matter” has been conveyed to the Permanent Mission of India to the WTO at its headquarters in Geneva.

There is a clause in the 2001 Protocol, according to which countries need to grant the MES only after China has established that it is a ‘market economy’ “under the national law of the importing WTO Member” — something that allows a country to contend that China might be able to establish itself as a market economy only in the case of some goods, and not all, sources said.

The sources said several nations that have a strong manufacturing base are concerned about according MES to China, while nations including in Africa and Latin America — dependant on Chinese investments to boost manufacturing — are inclined to grant Market Economy Status to China.

Corrections & Clarifications:

This article has been corrected for editing errors.