December 15, 2017 / 4:29 PM / a year ago

China goes public in WTO dispute with EU and US

GENEVA (Reuters) - China has accused the United States and the European Union of breaking promises that they made when China joined the World Trade Organization, according to testimony published by China’s Commerce Ministry in an unusual step.

China’s WTO ambassador, Zhang Xiangchen, told a WTO hearing that the high-stakes legal dispute boiled down to one principle: “Agreements must be kept”.

“We are deeply concerned about the systemic implications this will have for the rules-based multilateral trading system,” Zhang said at the start of dispute hearings on Dec. 6.

China took the legal action against the EU because it says that, under China’s 2001 WTO membership terms, it must be recognised as a “market economy” after 15 years. That means other countries have to take Chinese prices at face value.

“China believes that there can be no other plausible reading of this simple and unambiguous treaty language,” Zhang said, calling the text “crystal clear”.

But the United States and the EU disagree. They say Chinese goods — especially commodities such as steel and aluminium — are still heavily underpriced because of subsidies and state-backed oversupply, giving Chinese exporters an unfair advantage.

There was no immediate comment from the United States on the latest statement by China.

The decision on what price to use is key to assessing whether China is “dumping” goods abroad. If Washington or Brussels can show Chinese goods are being dumped, they can impose a punitive tariff on those imports.

“China joined this organization in the belief that the WTO is rule-based, non-discriminatory, and promotes free trade. However, the European Union’s measures at issue defy every single one of those principles: it is rule-bending, discriminatory, and protectionist,” Zhang said.

The United States joined the dispute as a third party, contending that there had been long-standing rights in the WTO and its predecessor, the GATT, to reject prices “not determined under market economy conditions”, Zhang said.

“I was dumbfounded by this proposition,” he said, recalling negotiations with the United States and citing U.S. legislators and former U.S. Trade Representative Charlene Barshefsky saying that the market economy provision would exist for 15 years.

“Now, 18 years later, the United States is...effectively suggesting that all those negotiating efforts on both sides were so much ado about nothing,” he said, calling the U.S. position “a set-up”.

Accepting the non-market economy label for 15 years was a heavy price for WTO membership, with more than 1,000 anti-dumping investigations against Chinese goods between 2001 and 2016, Zhang said.

“In many cases, Chinese businesses subject to such discriminatory anti-dumping duties went bankrupt, and hundreds of thousands of workers lost their jobs,” he said.

Reporting by Tom Miles; Editing by Angus MacSwan

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