Context: There is the need for India to abandon the notion that Chinese membership of the World Trade Organisation (WTO) makes it difficult for New Delhi to act against Beijing.
On what basis India can act against China: (Multilateral Agreements - WTO)
- Anti-dumping duties:
- Under the WTO (as under its predecessor arrangement - the General Agreement on Tariffs and Trade (GATT)), if a Chinese product is exported at lower than normal value, dumping occurs.
- The normal value can be determined as:
- The domestic cost of production in China
- The product’s price in China’s domestic market
- Its export price in a third country.
- If a Chinese product is exported to India at a price lower than that of a comparable Indian product, this does not qualify as dumping.
- Market Economy Status of China:
- China joined the World Trade Organization (WTO) in December 2001.
- During the accession negotiations, the most debated issue was the treatment of China as a non-market economy (NME) post its WTO entry and granting market economy status was contingent on China complying with disciplines agreed to at the time it joined the WTO.
- In international trade parlance, NME is generally a country where the various factors of production are not made in response to market signals but are often regulated or controlled by the government.
- The WTO members were successful in treating China as an NME at least until December 2016.
- China’s protocol of accession allowed the WTO members treat China differently from other WTO members in antidumping investigations based on its NME status.
- Since those disciplines haven’t been complied with, China cannot be treated as a market economy, a relevant point for both anti-dumping investigations (and consequent duties) and anti-subsidy investigations (and consequent countervailing duties).
- Article 5: Application of Safeguards Measures
- Safeguard measures are quantitative restrictions or tariff rate quotas, not hikes in basic customs duties.
- A Member shall apply safeguard measures only to the extent necessary to prevent or remedy serious injury to the domestic market.
On what basis India can act against China: (Regional Trade Agreements(RTAs) - APTA)
- Asia Pacific Trade Agreement (APTA), also known as Bangkok Agreement was signed in 1975, with Bangladesh, India, Laos, South Korea and Sri Lanka as members.China became a member in 2001.
- In the India-China trade relationship, it is doubtful that India gains much through APTA, but China gains much more.
- Withdrawing from APTA and negotiating through other channels: India can withdraw from APTA by giving a notice of six months.
- Trading with partners (other than China), can be pushed through the South Asian Free Trade Area (SAFTA) and agreements with the Association of Southeast Asian Nations (ASEAN).
- Applying Rules of origin (part of every RTAs to which India is a party): Which prevents routing of Chinese exports via third countries. Unfortunately, under the GATT/WTO umbrella, there hasn’t been much movement on harmonizing the rule of origin.
The above analysis shows that India has plenty of trade action that can be directed against China, despite it being a WTO member.
Image Source: Livemint