In a surprising turn of events, the US made a formal statement of opposition to the World Trade Organization, fighting against the measure to grant the Chinese market, economy status.
The statement of opposition was made public on Thursday, and seems to have been submitted as a third-party brief in support of the European Union. If carried through, the U.S.’ motion would allow Washington to maintain its high anti-dumping duties on all Chinese goods. Additionally, the ensuing dispute could have major consequences on the trade body’s future.
Speaking of China’s motion in June, U.S. Trade Representative, Robert Lighthizer told Congress that the case was “the most serious litigation we have at the WTO right now”. He added that the event would be “cataclysmic for the WTO”.
China is currently embroiled in a fight to seek recognition as a market economy. It has made numerous petitions to the EU, demanding that the Union consider its position.
If the motion is passed, there could be a dramatic drop in the anti-dumping duties associated with Chinese goods since it would prohibit the use of any third-country price comparisons.
In a brief submitted to the WTO, Chinas argues that it deserves the treatment meted out to eastern European countries that joined the WTO’s predecessor, the General Agreement on Tariffs and Trade in the 1960s and 70s.
However, both the U.S. and the EU are against the motion, and believe that the vested influence of the state in China’s economy will result in unfair practices.
Since the state grants a number of subsidies, it automatically means the china’s domestic prices are terribly distorted and have no basis in the actual market.
A Chinese victory at WTO would lead to a weakening in trade defenses against the onslaught of cheap China products. This in turn would put the viability of competing western industries at a great risk.