Today’s Wall Street Journal has a story about China’s defense of price fixing with potentially vital implications for American trade policy.
A group of PRC vitamin-makers admit illegal price fixing in the United States, but claim they are immune to prosecution because China’s Ministry of Commerce made them do it, which is known as sovereign immunity. The ministry agrees it did order them to fix prices and admits it may do so in other industries. Moreover, its justification is simply that the PRC is in transition from a command economy.
Fortunately, the judge for the case does not seem inclined to find this acceptable. What should happen is that the vitamin-makers are punished in accordance with American law and the correct signal is sent to other Chinese producers and the Ministry of Commerce itself.
If an unexpected development should occur and the vitamin-makers win the court case, the U.S. must move quickly and aggressively to use existing trade law to curb their anti-competitive practices. Otherwise, we face the possibility of predatory pricing in a huge range of Chinese goods shipped here.
The core issue is that Chinese firms want to be treated as competitive commercial enterprises under WTO rules and American law right up until the time that is better to be treated purely as tools of the Chinese government, even when that government is instructing them to undermine competition and violate commercial law.
This must stop, preferably because the PRC becomes willing to behave responsibly.