Shift in China's status could deliver Canadian economy a $9.1 billion shock
OTTAWA—As a result of Chinese government efforts to prop up and grow a range of the country’s industries, including its steel sector, some of the country’s imports have long been subject to anti-dumping laws in many countries around the world.
On Dec. 12, 2016, that could all come to an end.
Though that contentious day—15 years after China’s ascension into the World Trade Organization—is more than a year away, the debate over whether or not to grant China “market economy” status, which in turn would give Chinese steel imports the all-important “market” stamp, is already raging.
According to a new Capital Trade Inc. report, which was commissioned by a number of North American steel industry associations, treating China as a “market economy” from a global trade perspective would “severely damage” the steel industry in Canada and other NAFTA countries and lead to significant job and GDP losses.
“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 groups said, following the report’s release. “This third party report found that granting China market economy status is premature and would lead to significant job losses in our sector, and in steel communities where plants are being idled and jobs are already being decimated. This is unacceptable.”
According to the report, granting Chinese steel “market economy” status would cause NAFTA steel outputs to drop $31.5 billion and result in 400,000 to 600,000 jobs losses in the U.S. as well as 60,000 jobs in Canada. Meanwhile, the analysis estimates the annual loss in labour income from virtually all sectors of the Canadian economy would be amount to as much as $8 billion. The country could also experience a near-term GDP reduction of up to 9.1 billion.
“China is a reforming economy, not a market economy, and now accounts for nearly half of global steel output,” the report says. “[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.”
Affecting a large number of government and industry stakeholders, China’s potential “market economy” status is likely to climb to the top of numerous trade agendas in 2016.