[FALSE] Will 32 nations, including EU member states, the UK, and Canada, remove China from most-favored-nations treatment in December 2021?

Screenshot of the Facebook post.

The Claim and Our Verdict

• The claim: A Facebook post published Nov. 2, 2021 claims 32 countries, including European Union (EU) member states, the U.K. and Canada, will remove China from most-favored-nations treatment (MFN) in December 2021.
• Fact-checking:
  • According to an official announcement by General Administration of Customs of China (GACC), China will stop issuing Generalized System of Preferences (GSP) certificates of origin to goods exported to EU, the U.K., Canada and other countries effective Dec. 1, 2021. But the announcement doesn’t indicate these countries will remove China from GSP treatment.
  • According to World Trade Organization (WTO)’s definitions, GSP is distinctly different from MFN. GSP refers to programs within developed countries granting preferential tariffs to imports from developing countries, whereas MFN is the principle of treating other countries equally under the WTO agreements. GSP’s beneficiaries are mainly developing countries, particularly Less Developed Countries (LDCs), while MFN is eligible for all WTO members. China remains a member state of WTO, thus it is still entitled to MFN.
  • China has already been removed from the GSP scheme of EU, the U.K., Canada, and other countries before Dec. 1, 2021. Canada and EU, including the U.K., removed China on Jan. 1, 2015. Japan and the Eurasian Economic Union, i.e., Russia, Belarus and Kazakhstan, stopped granting GSP benefits to goods from China on April 1, 2019 and Oct. 12, 2021, respectively.
• Our ruling: Therefore, we rate the claim as FALSE.

News Brief

A Facebook post published Nov. 2, 2021, claims 32 countries, including EU member states, the U.K. and Canada, will remove China from MFN treatment in December 2021.

As of the issuance of this report, the post had been shared 45 times, and had received 79 comments and 1,218 likes or reactions.

Fact-checking

A keyword search found an announcement issued Oct. 25, 2021 by General Administration of Customs of China (GACC). It appears to be the source of the claim. The announcement says, “GACC will stop issuing Generalized System of Preferences (GSP) certificates of origin to goods exported to EU, the U.K., Canada, Turkey, Ukraine and Liechtenstein effective Dec. 1, 2021, as they have already stopped granting GSP benefits to goods from China. Exporters shipping to these countries can apply for non-preferential certificates of origin for shipment.” The announcement doesn’t mention MFN. 

According to the World Trade Organization (WTO)’s definitions of GSP and MFN, GSP refers to programs within developed countries granting preferential tariffs to imports from developing countries, whereas MFN is the principle of not discriminating between one’s trading partners—GSP is distinctly different from MFN. According to the United Nations Conference on Trade and Development (UNCTAD)’s definitions, GSP is the preferential tariff arrangements aiming to create an enabling trading environment for developing countries. GSP’s beneficiaries are mainly developing countries (the list is updated periodically), particularly Less Developed Countries (LDCs). According to WTO’s principles of the trading system,  MFN  means treating other people equally—“Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favor (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.”

WTO’s definitions of GSP and MFN.

BU FactCheck also sent our enquiries concerning this claim to Dr. Aries Kin-Ming Wong, senior lecturer with the department of economics, School of Business at Hong Kong Baptist University. Wong said, “MFN clause is one of two important principles of WTO. The clause applies to all WTO members and technically, a WTO member cannot revoke the MFN status of another WTO member. However, as you can see from the China-U.S. trade war, countries can always impose additional tariffs (without officially revoking the MFN clause under WTO) ‘outside’ the WTO mechanism.”

According to the WTO’s official website, it currently has 164 members. China remains a member of the WTO, thus it is still entitled to MFN.

Screenshot of WTO’s “Trade without discrimination” principle on its website.

Screenshot of “China and WTO” page on the WTO’s website.

GACC published an article on Oct. 27, 2021 to further explain GSP and GSP certificate of origin. According to the article, GSP refers to a universal, non-discriminatory and non-reciprocal tariff preferences system that developed countries (GSP granting countries) grant preferential tariffs to finished/half-finished products exported from developing countries and regions (GSP beneficiaries). Since its implementation in 1978, China has been granted GSP benefits by 40 countries, most of which are China’s important trading partners, such as EU, the U.K., Russia, Canada, and Japan. A GSP certificate of origin is an official document that gives preferential tariff to exported goods and is issued by the beneficiary’s authorized agency in accordance with the origin rules and related requirements made by the granting countries. After GSP granting countries notified China of the GSP treatment cancellation, China’s exports can no longer enjoy preferential tariffs by virtue of GSP certificates of origin, and GACC has taken relevant measures to adjust the issuance of certificates accordingly. Therefore, the Oct. 25 announcement means that starting from Dec. 1, 2021, GACC will no longer issue GSP certificates of origin for goods exported to EU member states, the U.K., Canada and other countries. It doesn’t indicate these countries will revoke China’s GSP privileges.

The article also says that in recent years, EU member states and other GSP granting countries ceased granting China GSP privileges one after another because the World Bank upgraded China’s economic status to an “upper-middle income country.” Currently, only New Zealand, Australia, and Norway still grant China GSP status.

According to “the Handbook on the Scheme of Canada” and “the Handbook on the Scheme of the European Union” on UNCTAD’s official website, Canada and the EU both cancelled China’s GSP benefits on Jan. 1, 2015. An Q&A article published by a local sector of China customs shows that the U.K., still as an EU member (the U.K. left the EU at the end of Jan. 31, 2020) on Jan. 1 2015, removed China from GSP scheme on the same day. Japan and the Eurasian Economic Union, i.e., Russia, Belarus and Kazakhstan, stopped granting GSP benefits to goods from China on April 1, 2019 and Oct. 12, 2021, respectively. Therefore, the countries mentioned in the Oct. 25 announcement, i.e., the EU member states, the U.K., Canada, and other countries, have already removed China before Dec. 1, 2021.

GPT entitlement withdrawal list, effective Jan. 1, 2015, Handbook on the Scheme of Canada.
*NB：According to the handbook’s explanatory notes on Page 4, Canada designated General Preferential Tariff (GPT) for the GSP scheme.

China, Ecuador, and other countries will not be entitled to status as beneficiary countries of the EU GSP scheme from Jan. 1, 2015, Handbook on the Scheme of the European Union.

In conclusion, GSP and MFN are two different concepts. In recent years, EU and many other GSP granting countries have successively announced the cancellation of GSP treatment to China. However, China is still a member of the WTO and therefore enjoys the MFN treatment.