Similarly, the US demanded long-term, manipulation of trade flows through the application of special anti-dumping methodology. Dumping in trade terms is defined as selling below costs at an "unfair" price. Even for market economies, economists are virtually unanimous in their condemnation of anti-dumping actions as a protectionist front for uncompetitive domestic industries. The Clinton administration, however, proposes to worsen the situation by continuing to define China as a "non-market economy" for 15 years, thereby perpetuating an even more arbitrary methodology to determine whether Chinese exports are "unfairly" traded. (Using non-market criteria allows the complainant to ignore local Chinese prices and use surrogate or constructed prices, a practice which allows large-scale manipulation of data, as the US Commerce Department has demonstrated over the years.) Cynically, US Trade Representative Charlene Barshefsky stated that US laws do "provide for the graduation of sectors or an economy as a whole from (non-market) rules," knowing full well that US government agencies in recent years have cravenly succumbed to interest groups pressure against such graduation. China will be in anti-dumping limbo for the full 15 years.
There is a two-fold danger in this result. On the one hand, protectionist interests in WTO members will become accustomed to the protection afforded by "managing" trade and will move heaven and earth to perpetuate the system in the future. On the Chinese side, it sends just the wrong message to government bureaucrats who will preside over the export quotas on Chinese companies which will surely result from the safeguards and antidumping actions. The old-style Communist "command and control" attitude thus will be all the more difficult to eradicate.
Finally, there is the apparent silence with regard to transparency. Given the primitive state of Chinese law and administrative procedures, foreign businesses face years of daunting obstacles when commercial disputes arise. The protocol of accession should have spelled out in some detail minimum standards of due process, including such things as notice of hearings, standards of evidence, and publication of the rationale behind agency decisions. In addition, building on steps the Chinese themselves have already taken, the protocol should have provided for specialized courts for handling international economic disputes. Transparency and contingency protection measures do not have the sex appeal of market access negotiations so dear to the hearts of western businessmen but mistakes made in these areas are likely to haunt the WTO for years to come.
The authors are Claude E. Barfield of the American Enterprise Institute and Mark A. Groombridge of the Center for Trade Policy Studies at the Cato Institute. They recently co-authored Tiger by the Tail: China and the World Trade Organization (The AEI Press).
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