US Denial of Market Economy Status is Costing China Billions

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The Trump administration’s official decision to refuse China recognition as a “market economy” could end up costing Chinese enterprises billions of dollars in lost trade.

The US has just announced that it denied China market economy recognition via a filing made to the World Trade Organization in mid-November, marking the first time that the Trump administration has made public its position on the matter.

The move is likely to hamper Sino-US trade relations, given that it grants the White House greater latitude to ratchet up tariffs on Chinese imports.

According to a report from the Wall Street Journal report the ongoing refusal by the US and the EU to grant China market economy status has already cost its manufacturing sector billions of dollars in business, with some products subject to over 100% tariffs.

The roots of China’s current trade dispute traced to December last year, when both the US and EU opposed Beijing’s request that the WTO grant it market economy status, given that 15 years have elapsed since it first acceded to the trade organisation.

China submitted an appeal the WTO court against the US and the EU, requiring that both economies acknowledge its market economy status.

The Wall Street Journal points out that Trump’s “America first” policy has had an adverse impact upon many relations with US trading partners.

China has responded forcefully to America’s efforts to put roadblocks in the way of trade, with Wang Hejun (王贺军), head of the Trade Remedies Bureau of the Ministry of Commerce previously stating that its anti-dumping measures against Chinese aluminium foil not only hurt the interests of Chinese enterprises, but also harmed the authority of multi-lateral trading regulations.

Wang said that China would adopt necessary measures to protect the lawful rights and interests of Chinese enterprises, as well as retained the right to seek dispute resolution with the WTO.

China also slammed America’s decision to use the “surrogate country approach” to determine anti-dumping measures.

The surrogate country approach involves the use of costs of production in a third country to determine the value of products from countries that are categorised as “non-market economies,” and has been criticised for allowing WTO members to impose excessive tariffs.

A MOFCOM spokesperson said that the continued use of surrogate country prices by the US is in breach of article 15 of the Protocol on the Accession of the People’s Republic of China to the WTO concerning international responsibilities, and called for the US government to “take substantive action to rectify its errors.”

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