China and the WTO: Mark Your Calendars

November 1st, 2016 by Trey Barrineau

On December 11, 2016, one sentence in China’s protocol of accession to the World Trade Organization (WTO) will expire. Depending on how that provision is handled, China may have to be treated as a market economy by WTO members, which would have massive ramifications for the U.S. aluminum industry — and many other parts of the global economy.

During the recent Aluminum Extruders Council (AEC) Management Conference in Washington, D.C., Alan H. Price, chair of international trade at the Wiley Rein law firm, outlined the latest developments in China’s attempt to become recognized by the WTO as a market-based economy. He explained the ramifications of this issue for the extrusion industry and manufacturing in general.

According to the AEC, China has claimed that it should be automatically accorded treatment as if it were a market economy after the 15th anniversary of its accession to the WTO in December 2016. U.S. law requires that the Department of Commerce make determination of market-economy status for China based on established criteria.

First, Price made it clear that there is wide bipartisan agreement in Washington on this issue.

“Clinton and Trump both agree that China should not get market economy status,” he said. “Congress is fully aware, on a bipartisan basis, how important this is. This one issue will affect billions of dollars of trade in U.S. manufacturing and global manufacturing.”

Price said China is the world’s largest or second-largest economy depending on which metrics are used. Growth there continues to be led by infrastructure investment, which in turn drives industrial expansion.

In aluminum extrusions, China is flooding the market, Price said, pointing out that it more than doubled its exports from 2008 to 2010. Partly as a result of that, the U.S. International Trade Commission imposed anti-dumping duties on China beginning in May 2011.

Price said the Chinese aluminum industry is a perfect example of how the nation’s communist government controls the economy. While China has no natural competitive advantage in aluminum production, he said the Chinese government has put billions into the industry via low-cost loans and grants, as well as artificially low prices for coal.

“Because of continued government intervention in the economy, Chinese prices and costs do not reflect the operation of market forces,” Price said.

Additionally, Price said the use of coal in Chinese aluminum production is a massive contributor to carbon emissions and pollution.

“The one place in the world you should not be building an aluminum industry is China,” he said.

If China ends up being declared a market economy by the WTO, all members would be required to treat it as a market economy or pay compensation.

“If they do that, it’ll be devastating to the aluminum industry,” Price said.

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