Daily Management Review

The United States: China is not a market economy


The United States officially announced to the World Trade Organization (WTO) that they oppose giving China the status of a market economy. Such a position will allow Washington to maintain high anti-dumping duties on Chinese goods, reports Reuters.

U.S. Department of Agriculture via flickr
U.S. Department of Agriculture via flickr
This decision supports the position of the European Union in the dispute with China, which may have serious consequences for future trade.

China is fighting with the EU for the status of a market economy, which would lead to a significant reduction in anti-dumping duties on Chinese goods.

The US and the EU argue that active government intervention in the Chinese economy, including the very widespread practice of subsidies, means that domestic prices are not determined by the market.

US Trade Representative Robert Lighthizer told Congress in June that this is "the most serious WTO case now" and the decision in favor of China "would be a catastrophe for the WTO." Recall that in September Lighthizer called China's practices "an unprecedented threat to world trade." 

In October, the US Department of Commerce came to the conclusion that China does not meet the criteria of a market economy. Now, the US has officially declared that China should not automatically get the status of a market economy. In December last year, China noted that the conditions for its accession to the WTO in 2001 provided for the automatic appropriation of this status by the 15th anniversary of accession to the trade organization.

Meanwhile, tension between Washington and Beijing is growing, as the US President's administration is preparing several possible major trade measures, including tariffs or quotas for the import of steel and aluminum, as well as the investigation of cases of misappropriation of intellectual property by China.

The US Department of Commerce on Tuesday launched an investigation into the import of sheet aluminum from China, which could lead to the establishment of anti-dumping tariffs.

US officials argue that 16 years of membership in the WTO could not put an end to the market-distorting practice of China.

The document submitted to the WTO also affirms that China should be treated in the same way as communist Eastern European countries, including Poland, Romania and Hungary, when they joined the organization that preceded the WTO - the General Agreement on Tariffs and Trade - in the late 1960s and early 1970's.

A senior US official noted that these countries eventually acquired the status of a market economy when evidence that the problem of government subsidies and market distortions was resolved.

source: reuters.com

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