India on Monday rejected China’s demand to grant it market economy status, holding that it will continue to treat its northern neighbour as a non-market economy. This will allow India to impose steeper anti-dumping duties on cheap imports from China.
Members of the World Trade Organisation (WTO) are allowed to levy anti-dumping measures on imports, where an exporting company sells a product at a price lower than that in the home market and if dumped imports cause or threaten injury to the domestic industry.
When China joined the WTO in December 2001 after years of arduous negotiations, a condition that it will be treated as a non-market economy by other member countries for anti-dumping proceedings was put down.
A non-market economy refers to a country that has full or substantially complete monopoly of its trade and where all domestic prices are fixed by the state. While the 15-year period ended in December 2016, the European Union and the US have desisted from granting market economy status to China, citing price control on exported commodities exercised by the Chinese government.
“India must fulfill its obligation to WTO and recognise China PR as a market economy status. Surrogate country methodology for China PR expired on 11 December 2016. After the expiry of China’s accession to WTO, it must be treated in same way as any other WTO member and regardless of the domestic law of a particular member, imports from China PR must be demonstrated on the basis of Chinese prices and costs,” Chinese companies submitted before the Directorate General Of Anti-Dumping And Allied Duties (DGTR).
This was in response to the anti-dumping investigations involving imports of organic chemical compound, Aniline, and anti-biotic Ciprofloxacin Hydrochloride from China.
India, however, said since Chinese producers failed to file relevant information to prove the market economy status, it will continue to treat the neighbour as a non-market economy.
“The authority notes that in the past three years China PR has been treated as a non-market economy country in anti-dumping investigations by India and other WTO Members. In view of the same, the authority treats the subject country producers/exporters as non-market economy in the present investigation,” DGTR said in its findings.
Jayant Dasgupta, former ambassador of India to the WTO, said China has to take positive actions, remove distortions from its market and provide evidence for other countries to take an informed decision on its market economy status.
“If 80% of your companies are directly or indirectly controlled by the state and the banks are controlled by the Chinese Communist Party, then how can China claim that its trade partners should give it market economy status,” he added.
India initiated 18 anti-dumping proceedings in 2019, most of them against China, according to the WTO website. However, China remains one of India’s largest trade partners and a major source of intermediate products in India.
India’s exports to China rose 3.8% to $17.1 billion in 2019, while imports contracted 7.5% to $68.3 billion i the same year. The widening bilateral trade deficit with China has remained a cause of concern for India. China in recent times has been diverting a part of its exports to India via Hong Kong to hide the actual extent of trade deficit. However, in 2019, India’s trade deficit with China and Hong Kong put together declined for the first time in recent years to $56.5 billion from $60.1 billion in the preceding year.