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US steel industry relieved China retains nonmarket economy status

December 14, 2016

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[December 13, 2016 |Platts]

The 15th anniversary of China's accession to the World Trade Organization came and went on Sunday without any change in how the US will treat the country under antidumping duty laws -- to the relief of the US steel industry.

"No decision was made by the US government today or yesterday. We have the same law in effect [as] last week -- same process. Nothing has changed," Kevin Dempsey, senior vice president of public policy for the American Iron and Steel Institute, said.

China has argued that it would automatically become a market economy under antidumping laws for WTO members 15 years after its accession to the organization.

The classification is particularly important in antidumping cases, because of the impact on how duties are figured. The approach taken for a nonmarket economy, where the domestic price is not seen as a reliable indicator of value, can lead to higher duties. Thus if China was reclassified as a market economy by key trading partners such as the US, antidumping duties against it could end up being smaller than in the past.

China on Monday launched a WTO complaint against the US and EU over their pricing methodologies related to antidumping duty investigations, which AISI said was in response to the decision to continue to treat China as a nonmarket economy.

"It doesn't mean that China becomes a market economy today. Exactly what it means, that's what the WTO dispute will figure out," Dempsey said, adding that WTO disputes can take two years to resolve.

The US, EU, Japan, Canada, Mexico and many other countries continue to view China as a nonmarket economy, Dempsey said.

The Manufacturers for Trade Enforcement coalition, which includes AISI, the Steel Manufacturers Association and the Institute of Scrap Recycling Industries, released a statement applauding the US government's commitment to using its nonmarket economy test for China.

US trade law defines a "nonmarket economy country" as any foreign country that does not operate on "market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise."

In determining whether a country has a nonmarket economy, an administering authority looks at six measures: how convertible a foreign currency is to other countries' currencies; the extent to which wages are freely negotiated between labor and managers; how accessible the country is to joint ventures and investments by other foreign countries; the extent of government control or ownership of production; the degree of government control over the distribution of resources, prices and production by enterprises; and other factors deemed to be relevant.

"Fifteen years after acceding to the WTO, China has clearly failed to transition to a market economy. This is not a bilateral dispute or 'trade war'; it is a global problem with massive implications for all trading nations. China cannot be allowed to directly violate the rules of international trade," SMA President Philip Bell said in an emailed statement.

Dempsey noted that the US law regarding nonmarket economies has been successful in pressuring Eastern European countries that were nonmarket economies to adopt market economy practices. "China is not ready, in our view," he said.


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