China FTA—-NZ pays its dues

The NZ Prime Minister has “announced”:http://www.beehive.govt.nz/ViewDocument.cfm?DocumentID=19432 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)”:http://news.xinhuanet.com/english/2004-04/14/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”:http://news.xinhuanet.com/english/2004-04/14/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”:http://www.stuff.co.nz/stuff/0,2106,2875107a6160,00.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”:http://www.abc.net.au/ra/newstories/RANewsStories_1087498.htm) 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”:http://news.xinhuanet.com/english/2004-04/14/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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