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In a breakthrough move commensurate with China's international trade status, New Zealand announced last week it will regard China as a market economy.
New Zealand has agreed not to apply anti-dumping provisions in China's World Trade Organization (WTO) Accession Protocol, which allow other countries to treat China as a non-market economy for 15 years after its entry -- an unfavorable condition China swallowed for WTO membership.
While New Zealand's welcome decision will lead to a win-win scenario in bilateral trade, it should not be interpreted as a signal that China will no longer suffer wide unfair treatment in global trade because of the lingering "non-market" label.
By defining China as a non-market economy, Western trade authorities have long refused to recognize the nation's domestic costs of production. Instead, they use costs of production in a third "surrogate" country to calculate the so-called "normal value" of Chinese exports.
The use of a surrogate, usually an emerging economy such as Turkey or Mexico where material and labor costs are much higher than in China, often means Chinese exports are deemed to be selling below normal value, known as "dumping." As a result, they become subject to harsh anti-dumping duty surcharges that sometimes eclipse 100 percent.
The unfair rules have encouraged foreign companies to request anti-dumping actions to reduce pressure from low-priced Chinese imports.
WTO records show that since the organization was founded in 1995, more than 300 anti-dumping charges, mainly from the United States and the European Union (EU), have been leveled against Chinese exports. The country is now defending a seventh of the world's overall anti-dumping cases.
It is fair to say China's non-market economy status is the result of compromise, but by no means objective assessment.
An academic report commissioned by the Ministry of Commerce last year concluded that about 70 percent of China's economy is market-based - above the recognized minimum level of 60 percent for a market economy.
About two-thirds of China's GDP growth is created by the non-State sector. In State companies, more than 89 percent make decisions free of government influence and have introduced a modern corporate system.
The government's direct intervention in the economy has been substantially reduced and the market plays a dominant role in financing, land use and labor services.
An ever-improving market environment and legal system have also made China a lucrative destination for foreign investors.
China's Constitution, in an amendment made a decade ago, stipulates the country should adhere to a market economy system.
It is ridiculous and intolerable to continue to treat China as a "non-market" economy regardless of ever-improving reality.
While applauding New Zealand's good-faith decision, China needs to make more effort to communicate with other WTO members to win wider recognition of the truth.
China has requested the US and EU to grant full market economy status, and is requesting a revision of a WTO rule that distinguishes between market and non-market economies, on the grounds it is at odds with the organization's criteria that rule out non-market countries from joining it.
The discriminatory use of the market economy criteria has distorted many trade activities and become an obstacle to free trade.
If relative trade authorities eliminate prejudice and expedients of domestic political and economic interests, it is not difficult to acknowledge that China is a market economy, fully deserving the same status as every other WTO member.
(China Daily April 19, 2004)
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