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Granting China “Market Economy” Status Would Have Devastating Impact, Say NAFTA Steel Producers

Posted November 12, 2015

A new report commissioned by six trade groups representing steel producers in North America warns against re-classifying China as a “market economy” under U.S., Canadian and Mexican antidumping laws, even as Beijing is petitioning the World Trade Organization to ensure such changes take place before the end of next year.

The report’s authors contend that treating China as a market economy in antidumping investigations would “severely damage the NAFTA steel industries and harm NAFTA economies.”

They further note that “China is a state-run economy and does not operate on market principles, yet it argues that it must be treated as a market economy as of the 15th anniversary of its accession to the WTO in December 2016.” 

The report also suggests that China’s present competitiveness in steel is largely artificial, “a creation of steel-oriented industrial policies that led to outsized increases in capacity, production and exports since 2002-2004,” the study says.

Comprised of three individual analyses, the report was conducted by leading economists from Capital Trade Incorporated in Washington, DC; the Centre for Spatial Economics in Ontario, Canada; and IMCO in Mexico City, Mexico.

Citing the report’s findings, a statement issued by the North American trade groups earlier this week claimed that acceding to China’s demands for market economy status is “premature” and predicted that it would lead to significant job losses in the steel manufacturing sector and the communities “where plants are being idled and jobs are already being decimated.”  

“This is unacceptable,” they stated. The groups also cited findings in the studies that show granting market economy status to China would:

  • Cause NAFTA steel industry output to shrink by $31.5 billion and NAFTA economic welfare to decrease by $42.5-$68.5 billion.
  • Cause job losses of 400,000 to 600,000 workers in the U.S. and near-term job losses in Canada of up to 60,000 highly-skilled, well-paying jobs.
  • Make antidumping laws much less effective for remedying injury from dumping, since dumping margins would likely drop to zero or close to zero.

The report summary concludes: “China is a reforming economy, not a market economy, and now accounts for nearly half of global steel output.  [China’s] share is likely to continue growing if it is treated as a market economy for purposes of antidumping laws. Allowing China the benefit of this treatment, without requiring a completion of economic reforms, would remove a powerful incentive for completion of the reform program.”

Click here to download the report.