india-rejects-market-economy-tag-for-china

Context: India recently rejected China’s demand to grant it market economy status, amid the ongoing face-off between the two armies along the Line of Actual Control (LAC). 

More on the news:

  • India will continue to treat  china as a non-market economy, which allows it to impose steep anti-dumping duties on imports from China.
  • Chinese Stand:
    • China says that India needs to fulfill its obligation to WTO and recognize itself as a market economy status. 
    • Surrogate country methodology for Beijing expired from 11 December 2016. 
      • The surrogate country approach allows World Trade Organization (WTO) members to slap far greater tariffs in anti-dumping investigations.
    • China considers that after the expiry of China’s accession to WTO, it must be treated in the same way as any other WTO member and, regardless of the domestic law of a particular member.
  • India’s stand
    • India has said that since Chinese producers failed to file relevant information to prove the market economy status, it will continue to treat it as a non-market economy.
    • India has initiated 18 anti-dumping proceedings in 2019, most of them against China, according to the WTO website. 
    • But, China also remains one of India’s largest trading partners and a major source for intermediate products for its industry. 
      • India’s exports to China rose 3.8% to $17.1 billion in 2019, while imports contracted 7.5% to $68.3 billion.

Background of the issue:

  • China had joined the WTO in December 2001 after years of negotiations on the condition that it will be treated as a non-market economy by other member countries for anti-dumping proceedings. 
    • A non-market economy is a country that has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the state. 
  • While the 15-year period has already ended in December 2016, the European Union and the US have desisted from granting market economy status to China
    • Primary reasons for this include wide-ranging price control on export commodities by China.

Anti Dumping Duties:

World Trade Organization (WTO) members are allowed to apply anti-dumping measures on any company if it exports a product at a lower price than its home market, and if the product threatens to impact the local industry.

Source:https://www.livemint.com/news/world/india-rejects-china-s-demand-to-grant-it-market-economy-status-11592394036306.html