• Indian government has indicated that it is not inclined to automatically grant the coveted ‘Market Economy Status’ (MES) to China this December under World Trade Organisation (WTO) norm.
• According to India, granting MES to China will severely curb the ability of nations including India to impose anti-dumping duties on “unfairly priced” Chinese imports.

About MES (Market Economy Status)
China became WTO member in 2001.In the WTO Accession Protocol, a transitional period (up to 11 December 2016) was agreed upon in respect to several topics, one of those being the potential granting of “Market Economy Status” (MES)
WTO and MES are, de facto and de jure, two independent concepts:

• There are WTO members which were not granted MES at the time of their accession (China)
• There are non WTO members which were granted MES (Russia)

Article 15(a) of the Accession Protocol provides specific measures for comparing prices in anti-dumping actions. If Chinese producers can show that ME conditions prevail in their industry in China, then importing WTO members must use Chinese costs and prices to determine the normal value. If Chinese producers cannot show that ME conditions prevail in their industry, then importing Members can use methodologies not based on a strict comparison with Chinese prices and costs. In December 2016, this second provision (ii) expires.
Analysis:

• The WTO did not distinguish between non-market economy and market economies before 1955, when the second paragraph of the addendum to article VI of the General Agreement on Tariffs and Trade (GATT) was introduced. The addendum acknowledges that non-market economy policies can introduce price distortions.
• The addendum's alternative approach can be used by any importing country that can prove the exporting country complies with the definition of a Non-Market Economy under the addendum.
• The main implication of NME (Non market economy) status in anti-dumping proceedings is the possibility to use other methodologies to determine the normal value of the good, instead of using domestic prices to compute the dumping margin. In general, NME methodologies to calculate normal value have proven to lead to higher anti-dumping duties. In view of these higher duties, and the fact that China faces the highest number of anti-dumping investigations, obtaining earlier recognition of Market Economy Status (MES) has been one of the country's major foreign policy objectives since 2003.
• India also has a large number of anti-dumping investigations against China. Out of the 131 measures in force, 87 measures are against China. In these investigations, in several cases, China has been considered a Non Market Economy (NME) on account of significant direct or indirect state control in the enterprise or in major operation, raw material and utility supplies, provision of land and transfer of erstwhile State controlled old plants and production units at nominal prices thereby affecting the cost and prices of the goods and services
• Under Section 15 of the Chinese WTO Accession Protocol, China can be treated as a non-market economy (NME) in anti-dumping proceedings if Chinese firms cannot prove that they operate under market economy conditions.
• Several countries have granted earlier recognition of MES to China, mainly as a condition for negotiating free trade agreements (FTA) with China.
• In addition to India, the main countries which still consider China an NME are the US, Canada, Japan and the European Union (EU).