As per the Protocol on Accession of China to the WTO, the 2001 Agreement China would be given the Market Economy Status from December 2016 under the World Trade Organisation Norms. This agreement was decided by the WTO member countries themself. But the granting of the Market Economy Status to china would bring problems to India. As a result India’s Commerce Ministry is assessing the implications of China being granted “Market Economy Status” (MES) from December this year under the World Trade Organisation (WTO) norms.
The biggest problem that India faces is the Dumping of goods by China into the world market and especially India. While adjudicating the anti dumping cases in calculating the ‘normal value’ of the exported goods from China, WTO member nations could for 15 years (that is till December 2016) ignore selling price and production costs in China. They could instead calculate the ‘dumping margin’ on the basis of a comparable export price to an appropriate third country and by ‘constructing’ the production cost with ‘reasonable’ additions. This permission to compare prices or costs with external benchmarks to calculate the ‘normal value’ and ‘dumping margin’ of the exported goods, has often led many countries to use the anti-dumping route extensively against China and imposing high anti-dumping duties. This 15-year time period was given to China to carry out internal reforms and transition into a ‘market economy.
The main impact of China being granted MES would be on ‘anti-dumping’ cases. Of the 535 goods on which anti-dumping duties were imposed by India from 1994-2014, a maximum of 134 has been on goods from China.
But this will be affected once China is granted Market Economy Status, it will severely limit India’s ability to resort to anti-dumping as the authorities will have to accept the production costs and selling price in China as the benchmark. It will in turn mean lesser chances of anti-dumping duties being imposed or lesser anti-dumping duties even if they are imposed.