China's Evolved Economy

24/04/2009 12:00 - 663 Views

Your editorial "The Vietnam Tariff?" (April 9) mistakenly states that the U.S. Commerce Department has designated China a market economy for the purposes of imposing countervailing duties (CVD) in trade cases. As an international trade attorney, I have worked on a sizeable portion of the recent CVD cases against Chinese companies.

Commerce still treats China as a nonmarket economy for purposes of the antidumping and countervailing duty law. As you write, Commerce previously did not apply the CVD law against nonmarket economies because "in a command-and-control economy, it's hard to untangle what constitutes an 'illegal' subsidy and what is normal government support." But the Journal must recognize -- as Commerce did -- that the Chinese economy has evolved, though not to the extent that it can be fairly termed a "market" economy for purposes of determining whether China has engaged in illegal dumping or subsidization of products.

Recognizing this special circumstance, Commerce determined in 2007 that the CVD law could be applied to China while treating China as a nonmarket economy, since China has eliminated price controls and guidance on most products, thus overcoming the primary reason for not applying the CVD law to China in the past.

It is clear that Soviet-era economics is not the zeitgeist of China, but that Chinese government insistence on export-led growth makes China a special case in global trade. Thus, the Commerce Department must be afforded flexibility in administering our trade laws. When Commerce applies the CVD law to China and requires it to live up to its WTO commitments on subsidies, it is simply enforcement of what China agreed to when it joined the World Trade Organization.

The Journal should stand for the rules-based international trade system by recognizing that it is China's egregious subsidies that distort trade patterns and risk trade wars, not any decision by President Barack Obama or Commerce Secretary Gary Locke to hold China to her international obligations.

Jeff Farrah

Washington, D.C.