• The Financial District


China has abandoned the fight to have the European Union (EU) change its standards on what counts as dumping, accepting the status quo that allows the EU, the US and Japan to impose import tariffs by citing low Chinese prices, Issaku Harada wrote for Nikkei Asian Review on Saturday, July 11, 2020.

Due to China's non-market economy status in the World Trade Organization (WTO), the US, Europe and Japan use prices in third countries for comparison in deciding whether China is dumping -- or underpricing -- its products. Beijing challenged this, arguing that they should use China's domestic prices for such a comparison. China initiated a legal challenge against the EU in 2016, but ultimately gave up the effort.

Since China's domestic prices are low due to production overcapacity, a comparison with those prices would make it harder for the US, Europe and Japan to make the case that China is flooding overseas markets with cheap products. Imports could be certified as dumping more easily if higher prices are used as reference, such as those in Singapore.

When it joined the WTO in 2001, Beijing accepted its designation as a nonmarket economy -- which means prices in third countries are used as reference for comparison purposes -- for 15 years. In December 2016, after that period ended, China argued that its status should automatically change to a market economy -- for which domestic prices are used as reference. But the other market-economy nations have not accepted this argument, saying this change should not be automatic. To upgrade its WTO status, Beijing started legal action against the EU and the US in December 2016, and a panel was set up in April 2017 to settle the dispute with the EU. However, China halted the panel's deliberations in June 2019 and subsequently gave up by not seeking a resumption of deliberations by June 2020, finalizing Beijing's defeat.

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