Politics of marketing
THE European Union sees limitless demand in China for its Airbus planes, cars, nuclear power stations and luxury fashion goods. It would take a laisser-faire economy, which EU private-sector people unquestionably regard China as, to digest all those riches. But when it comes to selling goods to Europe much more modest, such as textiles and wooden furniture, China is a certified command economy. That would place the country in the company of Cuba, North Korea and many of the former Soviet republics. This is the China whose industrial production and export machine have made Americans uneasy (and Europeans slightly less so), to the extent the command robots are said to be threatening American economic supremacy. How's that for two-faced dealing? This makes the irony of the EU refusing this week to grant China market-economy status to be a case of stage fright, if not out-and-out protectionism. The European Commission had studied Chinese manufacturers' costing and determined that the state still micromanaged the economy, down to influencing costs and prices. That kept China firmly in the non-market economy category. The rigmarole will persist for a while, as political trade-offs, more than textbook principles, decide the issue.
In its eagerness to be accepted into the World Trade Organisation (WTO), China ceded ground it now has cause to regret. It agreed to be counted as a non-market economy for 15 years, until 2016. But its export prowess has grown so fast that market entry to the United States and Europe is increasingly hamstrung by a pernicious anti-dumping law that penalises goods that are deemed to be sold below production cost. China's sudden enthusiasm for the label of a market economy is not therefore a faddish craving, but essential to gaining smoother market entry without being handicapped by an artificial obstacle. As a market economy, its own data will be used when the WTO adjudicates whether it is dumping. As a non-market economy, comparable data from a third country that is rated a market economy (for China, it is usually India) are used. This invites manipulation. The net effect is that uncompetitive sectors are protected from foreign competition. This unabashedly is the objective. The US has shut out Vietnamese catfish by arbitrarily assigning costs in calculating what the 'proper cost' of the fish should be. It was making no bones about protecting its own costly fish production.
China will have even less clout when negotiating with the US for market-economy status. Talks have been scheduled but, as US Commerce Secretary Donald Evans has hinted, China can expect no movement on the matter until it unpegs the yuan to make it convertible. The US also contends Chinese labour is not 'free' and wages are 'too low'. It seems not to matter that the abundance of labour and low monetised living costs are factors to compute. All the shilly-shallying over a label would be of little consequence but for the market dynamic: exporters are denied fair market access, which means consumers are denied cheaper goods of comparable quality. China's exclusion looks ludicrous when Russia had been so recognised by both the US and the EU in 2002. President Vladimir Putin's attempts to bring wealthy businessmen and the empires they control into line smacked of 'state control'. But no matter. An independent study ordered by Beijing's Commerce Ministry found that about two-thirds of China's gross domestic product was now produced by the non-state sector. The cutoff point for conferment of market status is around 60 per cent. Might the arbiters relent at 100 per cent?
straitstimes.asia1.com.sg |
