In the debate on China's full market economy status, there has been an attempt by a few countries to invent a set of criteria to define a "market economy" with qualifiers such as a convertible currency and disqualifiers such as State-owned enterprises.

But "non-market economy" is not a World Trade Organization (WTO) designation, it is a label used by some WTO members to justify their discriminatory anti-dumping, countervailing and safeguard actions against Chinese products. The requirements of a market economy are fully laid out by the WTO. Any member that accepts the WTO rules is perforce a market economy. Any attempt to define a non-market economy is an attempt to create a second-class tier in the WTO and therefore should be rejected categorically.

In 2001, China made a market access offer of unprecedented generosity, and at the same time committed to radical reform of its economic and trade regime. The implementation of these concessions has made China one of the most open markets in the world. However, a few major WTO members have sought unreasonable protection for their domestic industries against competitive Chinese products.

Under pressure from these members, China reluctantly agreed to some discriminatory transitional arrangements. These include the product-specific safeguard provision and a price comparability provision.

The product-specific safeguard provision, contrary to the requirements of the General Agreement on Tariffs and Trade (GATT), allows WTO members to apply safeguard measures against Chinese products without applying the same measures to all members.

The price comparability provision, meanwhile, provides two possible options for antidumping investigations against Chinese products. The first option is based on and uses Chinese prices for comparison when market economy conditions prevail in the relevant industry. The second option deals with a situation where the evidence to show that market economy conditions prevail are absent. It allows importing WTO members to use a surrogate market price as the basis for comparison in antidumping investigations against Chinese products.

The surrogate market concept is based on a footnote of GATT Article VI which says that "in the case of imports from a country which has a complete or substantially complete monopoly of its trade, and where all domestic prices are fixed by the state, special difficulties may exist in determining price comparability for the purpose of paragraph 1, and in such cases importing contracting parties may find it necessary to take into account the possibility that a strict comparison with domestic prices in such a country may not always be appropriate".

However, China is not such a country. Foreign-invested enterprises conduct more than half of China's foreign trade. They, like all Chinese enterprises, have complete freedom in deciding their prices. China's Foreign Trade Law has been amended to abolish the restriction on foreign trading rights. All enterprises now have the right to register for trading rights. The so-called complete monopoly or substantially complete monopoly of trade is non-existent in China. Therefore there is no justification for the continued application of the price comparability provision contained in the Protocol of Accession and it should be terminated immediately.

The proponents of these discriminatory provisions argue they are necessary until China finishes implementing its commitments. However, China has already fully implemented all its commitments.

Many WTO members in signing a free trade agreement with China have recognized China's full market economy status and ceased to apply the surrogate market provisions. Only a few major WTO members continue to resort to such protectionist provisions.

The experience of the past 10 years clearly shows that the price comparability provision and the transitional product-specific safeguard mechanism have been misused for protectionist purposes. Even though China has completed the implementation of all its accession commitments, it has been the main target for the majority of antidumping, countervailing and safeguard actions in the past few years. In some of the cases, the purpose of the actions has gone well beyond trade remedy. There are cases with simultaneous use of anti-dumping, countervailing and safeguard measures on one product that push the duty to over 100 percent. Generally speaking, 20 percent of duty is already prohibitive. Duty of over 100 percent is absurd, an outright violation of WTO principles and rules. This is not trade remedy that can be justified by GATT rules, it is trade prohibition and as such contrary to the fundamental WTO principle of open trade.

For the sake of the credibility of the multilateral trading system and for the benefit of producers, traders and consumers, it is time to terminate the application of the price comparability provision and the product-specific safeguard mechanism contained in the Protocol of Accession. The conclusion of the final round of the Transitional Review on China this year proclaimed the end of the transition period and China is a now a WTO member with equal rights to all other WTO members.

The author is a former official from the Ministry of Commerce and a WTO expert from the EU-China Trade Project.

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