In a landmark development, China has lost a dispute to the European Union at the World Trade Organization (WTO) for a market economy status, as the former allowed the dispute to lapse.
China spent four years fighting for market-economy status, a designation that would give it stronger footing with commercial partners while also curtailing their ability to retaliate over trade disputes.
The Chinese government allowed a landmark World Trade Organization dispute — aimed at forcing the European Union to recognize it as a market economy in trade investigations — to lapse on June 15.
The case was initially brought in 2016 and China lost an interim ruling on the matter last year.
A note by the WTO Secretariat said: “At the request of China, the panel suspended its work on 14 June 2019 (WT/DS516/13). Since the panel has not been requested to resume its work, pursuant to Article 12.12 of the DSU, the authority for establishment of the panel lapsed as of 15 June 2020.”
By ending the dispute China now provides the EU with greater legal certainty to combat low-price Chinese exports with artificially high tariffs.
For China, the lapse is a major setback as the EU steps up efforts to limit its expansionist practices into the continent. Moreover, on the same day that China allowed the dispute to lapse, the EU announced an unprecedented attempt to block Beijing’s subsidies to exporters. The 27-nation bloc will also unveil a proposal this week to protect European companies from Chinese takeovers.
According to the EU, China subsidizes its industries to a great extent, particularly steel and aluminum, making their sales prices in the international market unfair.
After the latest development, to protect their industries, the EU and the United States will be able to apply high anti-dumping tariffs on goods from China.
The U.S. and EU don’t consider Chinese prices reliable, and for decades they have calculated Chinese anti-dumping duties in ways that disregard Chinese costs and prices in favor of data from third countries that adhere to free-market forces. That’s allowed them to add extra duties to Chinese imports that help keep their domestic producers competitive.
China filed the dispute in 2016 and argued that the legal basis that permitted the EU to deviate from standard WTO anti-dumping practices expired in 2016.
China temporarily suspended the dispute after the WTO issued its interim report in 2019, which prevented the ruling from going public. Beijing declined to restart the dispute before the deadline to do so expired on June 15.