By Zhang Jingwei Source: Beijing Review Published: 2017-12-14
China-U.S. trade ties are facing a tough test after it was made public on November 30 that the Trump administration had submitted a statement to the World Trade Organization (WTO) against granting China market economy status (MES).
According to a Wall Street Journal report, Trump`s aides had long signaled their stance on the issue, but the filing marked the first time the U.S. Government had publicly declared its position and explained its reasoning.
China should have gained MES and the surrogate country approach should have been dropped, as of December 11, 2016 under Section 15 of China`s accession protocol. This means that other WTO members should admit China`s MES and abandon the surrogate country approach in anti-dumping investigations against China.
When the EU rejected China`s bid for MES earlier, the latter took legal proceedings against the former. The U.S. stated that it would not allow China MES no matter what China`s accession protocol says. It also required China to abide by the same "rules" as other WTO members, but gave no explanation of what the "rules" were.
Japan and Canada also sided with the EU and the U.S. in this regard. The Western world unanimously says "no" to granting China MES. It`s a move out of ideological prejudice rather than trade considerations. They ignore and break WTO rules, undermining the WTO`s authority and credibility.
U.S. President Trump emphasizes "America First" in trade ties with America`s major partners. He either dropped or reset the rules in the Trans-Pacific Partnership and the North American Free Trade Agreement, and even threatened to withdraw from the WTO.
In fact, trade disputes prevail in the West. Japan and Germany are seen as currency manipulators by the Trump administration. When visiting the EU and Japan, Trump bluntly criticized the two parties for not being fair in trading with the United States. To counter the effects of Trump`s trade protectionism, Japan and the EU have set up multilateral trade mechanisms which exclude the United States.
Despite such conflicts, the Western world, facing China`s rise as the world`s top goods trader, has reached a certain consensus. That is to criticize China and refuse to grant it MES under the WTO framework. In this way, WTO members from the West can take advantage of the surrogate country approach and obtain more benefits when initiating anti-dumping and anti-subsidy investigations against China.
The unfair containing of China covers up the fact that the Western countries follow no rules in the WTO framework. They want China to suffer not only trade loss, but also reputation erosion.
The Trump administration has never taken any global multilateral trade mechanism seriously. On the one hand it threatens to quit the WTO and ignores WTO rules. On the other, it counters and contains China with WTO rules. It`s a move typical of U.S.-style economic hegemony. But it`s not wise to countervail China in this way.
First, the Trump administration, unlike the EU which is still labeled as a supporter of globalization, has been seen as an advocate of anti-globalization. Breaking WTO rules adds more disgraceful evidence to Trump`s brashness.
Second, China and the U.S. are the world`s two largest economies. Now that the U.S. has refused to grant China MES, China will try to take legal proceedings to solve the problem, as it did with the EU. If China fails to protect itself by legal measures, it may take countervailing measures to fight back. If so, both sides will inevitably suffer, even if their fight does not escalate into a trade war.
Third, although the U.S. registers trade deficits with China, bilateral ties have gained momentum after meetings between the heads of state. Trump`s recent visit to China witnessed Chinese and U.S. companies signing trade and investment agreements worth over $250 billion. The U.S.` refusal to grant China MES will harm trade cooperation and the projects signed between the two sides.
Most importantly, the U.S. has offended almost all of its trade partners under the principle of "America First." China is among the few nations that have managed to work with the U.S. and to gain some momentum in bilateral trade. China has long advocated solving China-U.S. trade disputes in a more reasonable and pragmatic way, setting a good example for global trade.
The U.S.` refusal to give China MES does no good in terms of resolving bilateral trade disagreements.
The U.S. has offended almost all of its trade partners under the principle of "America First." China is the only nation that has managed to work with the U.S. and to gain some momentum in bilateral trade
The author is a visiting fellow of Chongyang Institute for Financial Studies, Renmin University of China.