China FTA—-NZ pays its dues

The NZ Prime Min­is­ter has “announced”: an agree­ment to begin nego­ti­a­tions next year on a bilat­er­al free trade agree­ment with Chi­na; the first OECD coun­try to do so. The price of this pri­or­i­ty is NZ acknowl­edge­ment that Chi­na is a “mar­kete­con­o­my”. Although the NZ gov­ern­ment says that this is just a ‘tech­ni­cal’ con­ces­sion, the Chi­nese don’t seem to think so. As the “press backgrounder(pdf file, about 50K)”:–04/14/content_1419775.htm for the NZ announce­ment points out, that recog­ni­tion has only one prac­ti­cal con­se­quence in many WTO mem­ber coun­tries: pre­vent­ing the use of ‘non-mar­ket econ­o­my’ anti-dump­ing inves­ti­ga­tion pro­ce­dures against Chi­nese imports. NZ anti-dump­ing law does not, appar­ent­ly, offer such pro­ce­dures, although they are per­mit­ted to do so by the WTO anti-dump­ing rules. The Chi­nese gov­ern­ment, how­ev­er, claims that NZ’s recog­ni­tion of Chi­na’s mar­ket econ­o­my sta­tus is much more than a tech­ni­cal con­ces­sion bq. Chi­nese Pre­mier Wen Jiabao said here Wednes­day that New Zealand’s recog­ni­tion of Chi­na’s mar­ket econ­o­my sta­tus is the objec­tive recog­ni­tion of Chi­na’s tremen­dous achieve­ments in reform and open­ing-up (“Xin­hua news agency”:–04/14/content_1419775.htm)
The NZ Trade Min­is­ter (Jim Sut­ton) admit­ted that the Chi­nese insist­ed on the ‘mar­ket econ­o­my’ recog­ni­tion tag as part of the price of nego­ti­at­ing an FTA bq. “Under the agree­ment to work toward an FTA, New Zealand will recog­nise that Chi­na has estab­lished a mar­ket econ­o­my sys­tem,” Mr Sut­ton said. “That is a pre-con­di­tion for nego­ti­at­ing an FTA with China.”(“Stuff NZ”:,2106,2875107a6160,00.html) Pre­dictably, he crowed about the oppor­tu­ni­ty to take pri­or­i­ty over Aus­tr­lia in the nego­ti­a­tions (by a year) bq. First­ly we are in a posi­tion to meet Chi­na’s need which is recog­ni­tion for their mar­ket econ­o­my sys­tem. Aus­tralia is not imme­di­ate­ly in a posi­tion to do that. Aus­tr­rali­a’s laws were changed to enable them to dis­crim­i­nate against Chi­na in mat­ters of trade reme­dies in this way. New Zealand nev­er took advan­tage of that pro­vi­sion in Chi­na’s acces­sion to the WTO Treaty and we had no inten­tion of ever dis­crim­i­nat­ing in that way against Chi­na. I guess that got us off to a fly­ing start.(“Radio Australia”: Also pre­dictably, Sut­ton’s char­ac­ter­i­za­tion of Aus­trali­a’s laws is off the mark. Aus­tralia changed it’s anti-dump­ing laws (as I report­ed[⇒ relat­ed sto­ry] last year) to reduce the inci­dence of the ‘non-mar­ket econ­o­my’ pro­ce­dures in anti-dump­ing actions against Chi­na, not to ‘allow them to dis­crim­i­nate…’, despite pres­sures[⇒ relat­ed sto­ry] from anti-dump­ing lob­bies. The Aus­tralian gov­ern­ment also renounced—as NZ has now done—the use of Arti­cle XV of Chi­na’s WTO Pro­to­col of Acces­sion. That Arti­cle, nego­ti­at­ed by the USA and EU makes it pos­si­ble for WTO mem­bers to use these penal­ty anti-dump­ing pro­ce­dures as the default pro­ce­dures for anti-dump­ing action against Chi­na until 2016. But the Aus­tralian deci­sion to renounce the dis­crim­i­na­to­ry aspects of the WTO Pro­to­col could not be called a recog­ni­tion of Chi­na’s “mar­ket economomy” sta­tus (what­ev­er that means). Except as a short­hand for accord­ing non-dis­crim­i­na­to­ry treat­ment, the “mar­ket econ­o­my” tag for Chi­na does­n’t pass a laugh test. Chi­na con­tin­ues to use cen­tral plan­ning, con­tin­ues to direct financ­ing for pub­lic and pri­vate invest­ments through the State banks and con­tin­ues to keep much of its nom­i­nal indus­tri­al capac­i­ty in the hands of state-owned enter­pris­es. This “Econ­o­mist Magazine”:–04/14/content_1419775.htm busi­ness sur­vey pro­vides plen­ty of cor­rec­tive evi­dence for any pol­i­cy mak­er who might think that Chi­na has yet adopt­ed mar­ket-econ­o­my man­age­ment at either the macro- or micro- lev­el (Mr Sut­ton? Ms Clarke?). The Chi­nese reac­tion to the NZ con­ces­sion, how­ev­er, indi­cates that they may be expect­ing Aus­tralia to put a dif­fer­ent spin on its with­drawl from ‘non-mar­ket econ­o­my’ treat­ment of Chi­na and suck-up the full ‘mar­ket econ­o­my’ tag—as if there were a difference—before Aus­tralia-Chi­na bilat­er­al nego­ti­a­tions get underway.

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