Criteria of Market Economy

Updated: 2006-10-09 16:11

Obviously, the criteria of market economy defined by the European and American countries are based on the factors that may affect fairness of trade in anti-dumping actions, and are precisely related to the issues in question. Naturally there are differences between the criteria of market economy put forward by the USA and those by the EU and Canada, for the USA has directly raised the issue of criteria for a country to be a market economy, while the EU and Canada mainly target on the criteria of market economy of an enterprise and an industry. It is obvious, however, that such differences are only superficial. As far as the contents are concerned, they are the same or similar, and in essence they are exactly the same. These criteria form an integrated system and thus one single criterion should not be applied independently. The European countries and the USA will not make their judgment just according to one criterion. but will sum up the results of investigations in all aspects covered by these criteria in determining whether or not enterprise or the industry has reached the critical point of a market economy so as to reach a conclusion whether the country, the industry or the enterprise in question has achieved the status of a market economy. Of course, in actual treatment of an anti-dumping case, the defending party will have to be prepared in line with the standards of the country that is initiating the anti--dumping action.

II. Five Major Factors of Market Economy

In view of the actual development of market economy in China and abroad, and taking into consideration of the criteria of market economy formulated by the USA, the EU and Canada for anti-dumping purposes, we are of the opinion that five major aspects are particularly important in defining a market economy country, from which five universally applicable standards can be obtained.

l. The Role of the Government

The European countries and the USA are concerned with the following issues: the governmental possession, allocation and control of natural resources, capital and human resources; the governmental control of and authority over the performance of the national economy; the government's control on production, where the control is manifested in property ownership of enterprises, the distribution of profits and the mechanism for bankruptcy, while the production mainly refers to questions such as who produces, what are produced, how much is to be produced and for whom to produce; the government's control on international and domestic trade and the government's control on intermediary organizations such as chambers of commerce and industrial associations etc. All of these issues, to sum up, are the roles of the government, or, to put it more precisely, are the roles to be played by the government in a market economy and refer to the relations between the government and enterprises. We shall call this the "standardization of governmental behavior".

2. Enterprises' Rights and Behaviors

The US Department of Commerce is concerned with whether there is governmental intervention in enterprises' decision on output quantity and pricing, whether enterprises have independence in their operation and exports, whether they enjoy independent power in choosing their managing bodies, in distribution of profits and in remedying losses, whether they have the independent power in negotiation of contract terms and signing contracts, particularly if these enterprises are in the export businesses. The EU is likewise concerned whether enterprises have the right to take decisions on the prices and quantities of their exports, whether they have basic book-keeping systems in compliance with the international accounting standards, whether they are entitled to obtain financing and to transfer their profits abroad, whether they enjoy full freedom in carrying out business activities. In the case of Canada, the investigation authorities apart from being concerned about the above-mentioned aspects, they are curious about the type of ownership of enterprises and the ownership transformations in state-owned enterprises etc. In essence, whether enterprises are market-oriented or administration-oriented in their production and operation is critical to draw a conclusion In a word, this issue concerns enterprises' rights and behaviors. Here we may call it the "liberalization or economic entities".


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