Soon after becoming the full member of the World Trade Organisation(WTO) in 2001, China has been insisting that India should grant it the status of a market economy. China HAD earlier agreed to continue as a non-market economy for 15 years till 2016 unless any individual WTO members, on the basis of their own assessment and AS per their national laws, reviewed the status earlier and granted it before 2016.More than 60 countries which are mostly developing and in the less developed category have granted MES to China but the major trading partners like USA,EU and Japan have not granted the status. China is putting pressure on India because India is a big trading partner now and its agreeing to the grant of MES to China will strengthen its battle for recognition from the other big trading partners.

According to official sources, treating a country as a non-market economy is relevant in the context of investigations for anti-dumping measures. The prices and costs incurred in producing a good in a NME are presumed to be not reflecting the forces of free market and are not relied on during anti-dumping investigations.Instead, comparison is made with the costs and prices of producing similar goods,called shadow prices, in another known market economy country.

Rebutting the Chinese position that granting of MES is a sign of friendship and it was imposed in 2001 when China was not in a position to oppose the decision by the major powers, India has argued that this is not a political matter, rather this is a matter of economic, legal and technical assessment. India needs to be sure that costs and prices of Chinese companies reflect free flow of market forces. Even now, the prices in China including the most important price, the price of its currency, are apparently not determined by free market.

For instance, China globally has the largest number of anti-dumping cases against it and India is not the only one complaining against the artificially kept low prices. The granting of MES to China will be hampering the interests of the Indian manufacturers who are totally against granting it to China. The MES issue is regularly raised by the Chinese side in the meeting of the Joint working group and will continue to be discussed at the next meetings. The Indian side has given to the Chinese officials along questionnaire to respond on this issue but the Chinese side is yet to give a final reply to the Indian questionnaire.

Most Indian industry associations are generally apprehensive that any further trade liberalisation with China would expose their members to unfair competition with cheaper Chinese imports and are therefore not in favour of trade liberalisation agreement with China. The official sources mention that the domestic manufacturing industry will be at a disadvantage vis-a-vis imports from china if adequate measures are not taken to provide a level playing field to the Indian manufacturing industry.

Further, there is a need to be extremely cautious while launching negotiations with China to ensure that non-tariff barriers/SPS/TBT issues are clearly settled to India's advantage during the negotiations. There is also a simultaneous need to negotiate with China on the issue of market driven exchange rate. As India sees it, the present huge trade deficit of India vis-a-vis China is not sustainable in the long run and there are various non-tariff barriers on imports of agricultural products to China.

Commerce Ministry sources mention that the composition of trade between India and China is of a very skewed nature. While India exports raw materials, mainly iron ore, cotton, minerals, etc, the imports from China are mainly of finished goods and machinery. Export of just one item iron ore, constitutes more than 50 per cent of India's exports. Such over-dependence on just one item and large exports of mineral resources without value addition, may not be good for the Indian economy in the long run.

As the Indian experts see it, the Chinese economy is still significantly state controlled and the prices of various inputs are not market determined. Chinese currency is undervalued despite its modest rise in recent years. The huge surpluses on the current and the capital accounts justify a higher appreciation. The macroeconomic policies of China have restricted the domestic demand and resulted in very high domestic saving rates. Further, there are various non-tariff barriers on imports of agricultural products to China.

Indian companies belonging to the pharma sector point out that registration in China for exporting pharmaceutical products for sale in the Chinese market takes a long time and there is also a hefty fee for such registration. This discourages potential exporters of pharma products to China. Further, there are complaints about Chinese manufacturers of pharmaceuticals supplying sub-standard raw materials and intermediates.

The bilateral trade between India and China has increased manifold in the recent years and as of now, China is India's largest single trading partner.Both the countries are recording high growth rates though China has surpassed India in many areas of economy. But the cooperation and collaboration between the two countries are of paramount importance from the point of Asia as also global economic growth.The two economies account for about 40 per cent of the total world population and there is a general consensus that these two countries will continue to be the engines of global economic growth in the present century. (IPA)