Negotiating for Market Economy Status: Journey to the West for Transitioning Countries

Abstract

Commentators often claim that the original impetus of the special treatment for non-market economy (NME) is to eliminate unfair practices in international trade and to guide transitioning economies into operating under the market principle. In reality, it turns out that NME treatment can also be used as a form of protectionism, which goes against the objective of free trade itself. The notion of NME and more importantly, the use of surrogate methodology in anti-dumping investigations are not specifically defined either in the WTO anti-dumping rules nor in the statute of its two most frequent users, the United States and European Union. This incentive gives the investigating authorities broad discretion in determining who is a NME country and what is the appropriate duties to offset dumping, resulting in detrimental effects to the alleged-NME countries. Instead of having recourse to litigation or relying on the current Doha Round talks, NME countries should collectively negotiate with the U.S. and EU on this matter. By effectively utilizing their leverage, giving concessions and acting as a coalition, the parties can redress this problem through granting market economy status to certain industries in NME or adding predictability in anti-dumping investigations. Given the current era of flourishing globalization, the U.S. and the EU do have common interests in giving NME countries some flexibilities during their transition period and such satisfactory result will benefit the parties as well as liberalizing trade.