ICYMI: Why President Obama Must Tell Chinese President Xi Jinping That China’s Not a Market Economy
President Obama is meeting with Chinese President Xi Jinping today on the sidelines of the nuclear summit in Washington D.C. to discuss a few issues, including economy and trade.
In a new piece published at Medium, Alliance for American Manufacturing President Scott Paul highlights China’s “non-market economy” status, which sometimes gets lost amid China’s overcapacity issues and the growing trade deficit:
“It started 15 years ago, when China joined the World Trade Organization. It did so on the condition that other economies like the United States and the European Union could treat it as a ‘non-market economy’ for 15 years, while China supposedly implemented a series of market-liberalizing reforms."
Gaining a market economy status would be a big deal for China as it would allow the communist government to release numbers, and the world would have to accept them as fact despite years of untrustworthy trade practices.
“When one country considers duties against another that it suspects of offloading subsidized exports — also known as ‘dumping’ — into their market for an impossible price, WTO rules stipulate the suspect country’s domestic prices must be considered … if the country holds market economy status. That’s a very big if, because non-market economy status allows other governments to ignore a suspect country’s official numbers...Because while you can trust a market, you can’t necessarily trust another government — especially when it takes an active role in managing its economy.”
Paul argues that instead of gradually transforming itself into a market economy the past 15 years, China has, in many ways, doubled down on state control. As a result, imports captured roughly 30 percent of the U.S. steel market last year and roughly 12,000 American steelworkers were laid off.
“China’s non-market economy status is correct, and should stay in place,” Paul says. Without it the Chinese goods trade deficit will continue to break records and American workers will lose jobs.