Market Economy to china

Market Economy to china

 

Relevancy

ü  Economy ,G.S paper 3

ü  About market economy and anti-dumping duty.

ü  Effect on Indian Market status

 

Recently

  • S. submitted a statement to the World Trade Organization (WTO) against granting China market economy status.
  • The statement was made to support the European Union in a dispute with China.
  • Both the U.S. and the EU make the case that China’s economy has not yet transformed into a market economy due to the use of subsidies which distort market prices, a viewpoint which could potentially harm U.S.-China trade relations.

 

What is market economy status?

  •  Market Economy to china status is a status confered on the country exporting the goods.
  • The prices of the goods on which they are imported by the importing coutry are not questioned.
  • On the other hand the non market economy countries don’t have this privelege and the importing country can decide about the price of the commodity w.r.t some other methodology and accordingly it can impose anti-dumping duties on the country for distorting.

 

What is anti-dumping duty?

  • Dumping is an unfair trade practice of exporting goods to another country at a price lesser than what is paid in the exporting nation or their normal production cost, thereby distorting international trade and causing injury to the domestic manufacturers of the goods in the importing country.

 

Why is china fighting for the recognition as a market economy?

  • China is fighting the EU for recognition as a market economy, a designation that would lead to dramatically lower anti-dumping duties on Chinese goods by prohibiting the use of third-country price comparisons.

 

Why USA is not offering the Market Economy to china?

  • Role of state-The U.S. and EU argue that the state’s pervasive role in the Chinese economy, including rampant granting of subsidies, mean that domestic prices are deeply distorted and not market-determined.
  • What is the recent case filed by USA against china w.r.t alluminium foils?
  • The U.S. Commerce Department has found that China dumped aluminum foil on the U.S. market and imposed duties ranging from 97 percent to 162 percent.

 

What will be the repercussions on India if China is offered market status?

  • Many countries would lose the economic war-A victory for China before the WTO would weaken many countries’ trade defenses against a flood of cheap Chinese goods, putting the viability of more western industries at risk.
  • Moreover this comes against the backdrop of instances of India’s manufacturers in steel, chemicals, electrical and electronics sectors being “severely hurt” by “unfairly low-priced” imports from China, and the extensive usage of anti-dumping duty by India to offset the losses caused to the local manufacturers due to dumping.
  • Of the 535 cases where anti-dumping duties were imposed by India from 1994-2014, a maximum of 134 has been on goods from China.
  • Once China is granted MES, it will severely limit India’s ability to resort to anti-dumping as the authorities (DGAD) will have to accept the production costs and selling price in China as the benchmark

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