Bursting the Bubble

EU Dumping Policy 3: NME, MES and the Linguistic Division of Labour

9 December 2016 | by

China was the first hybrid economy with features of a non-market economy (NME) to accede to the WTO. A statement in its Accession Protocol says that the provision alluding to NME status will “in any event” expire fifteen year after its accession, on 11 December 2016. China therefore considers receiving market economy status (MES) as a formality. The EU, however, disputes this interpretation and argues that a country must actually be a market economy before this status can be awarded. This argument is unsurprising considering that the absence of MES is a necessary prerequisite for the continued legitimacy of the analogue country method. Maintaining control over the ability to grant the MES has therefore been a matter of supreme importance to the EU.

China’s Accession Protocol to the WTO

The legal possibility of considering China a NME rests on an allusion in its Accession Protocol to the WTO. Section 15 raises concerns about the difficulties of determining dumping where market conditions do not prevail:

Although there is a clear allusion to the concept of a NME, the Protocol does not provide a legally detailed description of what the term exactly means. The WTO offers no relief, as it does not provide a definition either. Considering that the WTO was not designated to regulate the trade practices of NMEs, nor to force them to transform them into market economies, we could forgive it this oversight. Moreover, the subtle gradations between a NME and a market economy make providing a legally detailed description difficult. But without it, as the dispute between the EU and China over the interpretation of its Protocol evidences, the WTO is unable to properly supervise and regulate international trade. It is clear that China is not a market economy yet. But determining when China will no longer be a NME, which would imply that alternative methods for calculating dumping duties cannot be used anymore, is not exactly clear.

 

Linguistic Division of Labour

Definitions are the key to acceptable justifications of practices. The philosopher Hilary Putnam identified this legitimacy of definitions as being the result of a linguistic division of labour. He suggested that every linguistic community

Putnam, in other words, believed that there are terms which can only be used because of the implicit cooperation with between popular speakers and experts, who determine which applications of the term are correct. For example, in a situation where we would need to know whether something is really gold, we would need to rely on the expertise of specialists that are charged with verifying the meaning of gold. The colloquial use of the word does not entail a need to acquire the method of recognising whether something is actually gold, but relies on the expertise of a special subclass of speakers, such as metallurgists or goldsmiths. Putnam’s concept of a division of linguistic labour consequently highlights the specialised distribution of authority in defining what can be considered as ‘valid’ conceptualisations and the power certain professions hold over discursive domains.

 

EU Five Criteria

Accepting that China is a not a market economy is a necessary prerequisite for the continued legitimacy of the analogue country method. This method gives a considerable competitive advantage to the EU because it increases the level of dumping duties that are imposed on Chinese goods entering the market. Establishing the meaning of the term ‘market economy’ is therefore a tool of incredible power vis-à-vis certain countries in practices such as anti-dumping proceedings.

The EU stipulates five criteria for determining whether a country merits to be removed from the list of NME countries under anti-dumping law. The legal ability of European companies to believe that China is not a market economy in anti-dumping matters thus relies on specialist language users, such a policy makers and legal specialists, who determine what the conditions for MES are. The attempt to make this the discursive prerogative of the EU evidences that the meaning of the term ‘market economy’ ultimately depends on its construction by powerful experts. Establishing market economy conditions makes it possible to argue that a country does not merit this MES and that it can therefore be considered – as it were per definition – a NME.

 

WTO definition

It is clear that the EU is able to dispute the interpretation of China’s Accession Protocol only because of the absence of a definition of the term NME on WTO level. Therefore, a proper linguistic division of labour in the field of international trade requires developing a discursive basis in WTO law. This would not only help to shed light on the legitimacy of certain trade practices, but possibly also put an end to future semantic disputes.

What do you think?