Finally, World Loses Patience With Anti­-Competitive China Trade Practices

China has maliciously dumped products to eliminate not only competitors but also entire industries, as it did in solar panels. 
By Gordon G. Chang

Friday, Shen Danyang, Commerce Ministry spokesman, said Beijing will employ “necessary measures” against World Trade Organization members that do not treat China as a market economy after December 11.
His country, he said, will “resolutely defend its lawful rights and interests against the members who persist with the ‘surrogate country’ approach in their antidumping investigations into Chinese products.”
China is legally entitled to be treated as a market economy for anti­dumping purposes, but many WTO members will not accord it such status.
Today is the 15 anniversary of China joining the global trading body.
Its accession agreement appears to provide that other members are required to grant it MES, market­economy status.
Having such status makes it more difficult to prove that China has, for WTO purposes, “dumped” its products in another country, in other words, sold goods so that their price in the importing market is below the price of those same goods in China.
If China has MES, complaining nations must, for purposes of determining the existence of dumping, use China’s domestic prices when they make the comparison with export prices.
If, however, China does not have such status, complainers can use prices in so­-called surrogate countries, countries other than China.
Prices in those other countries are almost always higher than China’s, making dumping allegations against China relatively easy to prove.
Although technical arguments can be made to the contrary, the better interpretation is that Article 15 of China’s accession protocol automatically grants market ­economy status on the 15th anniversary of its membership.
That is how other nations in fact have read their obligations up to now.
Now, however, China’s trading partners are reading the accession protocol differently.
Japan, last week, and the U.S., before then, have stated they will not grant China market­ economy status.
As Commerce Secretary Penny Pritzker told Chinese officials last month, “it is not ripe for us to change our protocols.”
The European Union is not as direct as Secretary Pritzker.
It has devised a “country­ neutral” rule that permits it to use third­ country prices for anti­dumping purposes to counteract subsidies and other forms of state intervention.
Shen, not surprisingly, said the new EU rules are “disappointing.”
It is, in one sense, disappointing that major trading nations are welshing on their agreements.
If the international community wants China to abide by its trade obligations, other nations should abide by theirs.
As Claude Barfield of the American Enterprise Institute has written, “a deal is a deal and should be honored.”
Yet there are, aside from arguments based on the technical wording of China’s accession protocol, good reasons for other nations to reconsider their deal with China.
As Robert Pittenger, Republican Congressman from North Carolina, wrote on the Fox News Opinion site, “Why should we reward anti­-competitive practices?”
Virtually everybody 15 years ago thought China would evolve into a market economy by now. Almost nobody saw the rise of leaders like Hu Jintao and Xi Jinping, economic nationalists, who sought to close off the Chinese economy.
Xi, in particular, has used Beijing’s resources to bolster state­-owned enterprises as he has pursued his “Chinese dream,” his signature concept contemplating a China dominated by a strong party­-state.
His moves have resulted in many regressive trends including the market playing less of a role in setting prices.
Most observers believe Beijing will take a case to the WTO’s dispute resolution process if some nation does not use China’s own prices in a dumping case.
Chinese officials will feel aggrieved that others are not honoring their promises to China, but they should remember they have routinely violated their WTO obligations and forced others to go through the WTO process, wasting years in the process.
They should also remember the Gordon G. Chang corollary of Confucius’s Golden Rule.
Confucius famously said, “Do unto others as you would have them do unto you,” and I say “Others will do unto you what you have done unto them.” 
China has maliciously dumped products to eliminate not only competitors but also entire industries, as it did in solar panels.
The Wall Street Journal reports that Beijing is now going after the semiconductor and mobile phone sectors.
And don’t forget steel.
China has been “pumping out” more of the product “than the world wants or needs,” and that does not make China look market­-oriented.
The WTO is not a “suicide pact,” and countries are not—and should not—allow China to continue to game the system in such a destructive matter. 

One way or another, they will protect their industries from increasingly predatory behavior.
So what can other countries do?
They may force a renegotiation of the WTO agreement, withdraw from the pact altogether, or simply club China into not complaining.
China’s trade partners, especially those running deficits with Beijing, can do almost anything they want.
Why?
As George Friedman’s Geopolitical Futures tells us, “China must have access to U.S. consumer markets, and Donald Trump knows it.”
The president has already weighed in on the market­ economy issue, saying China is not one.
Moreover, last Thursday he accused the Chinese of “product dumping.”
As he declared at his rally in Des Moines, “They haven’t played by the rules, and I know it’s time they’re going to start.”
“We are playing by the rules and you need to keep your promise,”said Xue Rongjiu of China’s State Council, speaking this month.
“It’s unfair to blame China for your problems, which have resulted from bad management and operations.”
No, Xue, our problems result from your country’s bad behavior. 
As evident in recent days, China’s major export markets have just signaled their patience with Beijing has run out.
Chinese officials can huff and puff, but there is not much they can do when others just refuse to buy their goods.
It’s called a trade war, and other nations are beginning to recognize it exists and are starting to respond.