In 1985, Zuo Guizhen thought China's economic reforms and the American market had put her on the road to riches. The candlemaker's factory was churning out 700 tons of candles a year for romantic Americans, and her staff grew from seven employees in 1983 to 120 in 1985.
Then the U.S. Commerce Department ruled that Chinese candlemakers such as Zuo were "dumping" their products, or selling them in the United States at unfairly low prices. It slapped duties of 54.6 percent on candles made in China. Zuo's firm was shut out of the U.S. market, and it nearly went bankrupt.
Zuo, 53, a diminutive woman who favors a pixie haircut and a motorcycle mama's all-leather outfit, survived by breaking into the European market in 1987. Now, with Monday's historic agreement paving the way for China to enter the World Trade Organization (WTO), she and her colleagues want to get back their piece of the American pie.
"We're happy about this deal," said Liu Zhongfa, general manager of Zuo's firm, the Fushun Candle Corp. "We're ready to compete all over the world."
Zuo's story, which unfolded in a grimy factory in the heart of China's northeastern rust belt about 415 miles from Beijing, underscores a new battlefield in trade relations between the United States and China: the convoluted but economically important arena of anti-dumping regulations. It also illustrates the revolutionary role China's accession to the WTO will play for China's businesses as Beijing slowly sheds the vestiges of a planned economy and embraces the free market.
U.S. anti-dumping provisions--which protect American companies against subsidies and other unfair international competition--were one of the most hotly negotiated topics in six days of marathon talks between Washington and Beijing that ended Monday in the Chinese capital with an agreement. American sources said it was partly China's opposition to the anti-dumping provisions that held up the deal on Monday, requiring Premier Zhu Rongji to step in and remove the logjam.
In the end, both sides agreed that U.S. anti-dumping provisions will remain in force for 15 years after China joins the WTO. On Monday, U.S. national security adviser Samuel R. "Sandy" Berger pointed to the anti-dumping provisions of the deal as a major selling point to American businesses and labor unions, contending that they would "protect American industries from unfair or inordinate import surges from China."
But for companies such as Zuo's, membership in the WTO offers a fresh opportunity to prove that things have changed in China, that subsidies are fading in importance in many sectors and firms can compete in the U.S. market without cheating. If they succeed, that could raise pressure on U.S. competitors. Chinese companies once had 30 percent of the U.S. candle market.
Since 1994, China has overtaken Japan to become the prime target of anti-dumping cases in the United States and around the world. Chinese officials say $10 billion of China's $70 billion worth of exports a year are goods that fall under American anti-dumping provisions--such as steel, bicycles, honey and mushrooms.
In the past, China rarely challenged the anti-dumping rulings made by the Commerce Department. In February this year, Commerce ruled that China and Chile were dumping canned mushrooms on the American market and slapped duties of 198 percent on the goods. China had no representation at the hearings.
"I was crushed like a bug on a windshield," said Bart Fisher, a prominent trade lawyer in Washington who represented Chilean firms.
Now, China is fighting back. It has hired Fisher and a Beijing law firm, Zy & Partners, to challenge the rulings in the United States. Under U.S. law, China can request a review to determine if an economic sector is market oriented and thus no longer subject to withering anti-dumping duties.
Fisher now finds himself traipsing around China's countryside, researching the economics of Chinese candle and garlic manufacturers--two cases he has been hired to argue before the Commerce Department and the International Trade Commission.
The crux of Fisher's argument is simple. First, the anti-dumping rules are an anachronism designed to protect inefficient American firms--exactly the type of thing U.S. negotiators have been lecturing China about for the last six days of market-opening talks. Second, the ruling that China is a non-market economy--at least when it comes to garlic growers and candlemakers--is dead wrong.
Fisher points to Zuo's firm as an example that the market is alive and prospering in China.
Once the chief of a production brigade at a Chinese commune, Zuo was given the task of starting a factory in her village in 1983. She and six other farmers banded together and made a few candles. Zuo barged into the offices of an official Chinese exporter, waved a sample in front of a visiting American businessman, and he expressed interest. That same day, Zuo had a contract and within weeks was exporting candles to the United States.
The candle business belonged then to the planned economy, and Zuo's firm belonged to the village government. The Liaoning Native Produce Import & Export Corp., a state-run firm that was controlled directly by a ministry in Beijing, sold her paraffin at 50 percent below market prices, subsidizing Zuo so she could earn hard currency by exporting to the United States. The Liaoning firm also determined how much she could export and to whom she could sell.
When the Americans ruled that Zuo was dumping candles on the U.S. market in 1985, they were probably right, said Fisher. But China's economy has changed, he said.
In the early 1990s, China stopped allowing the Liaoning firm to sell paraffin and other raw materials below market prices. The Liaoning firm was forced to cut its ties to the ministry in Beijing. The government also permitted Zuo's firm to sell her goods to other state-run exporters as far away as Guangdong province in southern China.
Then Zuo was presented with an even bigger opportunity for transformation. On July 6, 1994, she was called into the office of the village chief. Zuo thought she was going to be praised. The candle company had recovered from the American antidumping case, sales to Europe had hit $3.6 million a year and annual profits were up to $120,000.
Instead, the village chief fired Zuo and replaced her with a relative of the mayor of Fushun, an attempt to curry favor with the local Communist Party boss.
"I could have fought the village chief, but I figured I'd win in the end," Zuo said. "I've been to America. I know the world is changing. I didn't need to be controlled by the collective anymore."
The chief of another village, who had heard of Zuo's plight, invited her to set up a firm in his town. Zuo went to visit the site of a shuttered pharmaceutical firm a few days later. From nowhere, 100 workers from her old firm appeared at the gate. "I told them to go back to the old place, but they wouldn't leave," said Zuo. "So we built it together."
Within 22 days of losing her job, she was at the helm of a start-up candlemaker. Today, the Fushun Candle Corp. is exporting 2,000 tons of candles a year as a completely private venture. It buys its raw materials at market prices; it sells to the highest bidder. Its only relationship to local government is to pay taxes and rent to the village. And earlier this year, as a boost to the depressed provincial economy, it was granted the right to export on its own--a revolutionary provision now included in the WTO accord.
Regardless of the changes, Fisher won't have an easy time proving his case. China's economy is always more complicated than it appears. There are hidden subsidies everywhere.
Randolph Stayin, a lawyer representing the National Candle Association, said Chinese candle-dumping in the United States is "worse than ever." He is hoping that the administrative review requested by Fisher will result in greater duties against Chinese firms--of at least 100 percent.
Fisher counters that China is actually changing.
"If you talk with these factory bosses, they will tell you that they're going to get fired if they don't produce and make money," he said. "They sound like capitalists to me."