Market Status Latest in Long Line of US/China Trade Disputes

Today, The Financial Times reported the latest in a series of what seem to be daily squabbles between the US and China on trade issues. Though disputes over individual products like tires and poultry receive many of the day-to-day headlines, larger disputes over the framework of trade between the nations are much more important to the overall bilateral relationship. Some of the more highly publicized among these have been claims of Chinese currency manipulation by the US, and US protectionism by China. The latest issue in the limelight, though not necessarily a new one, is the status that the US gives China for purposes of trade disputes.

The Department of Commerce, a central player in many disputes due to its role as the tariff-setting body in the US, does not currently list China as a Market Economy. Not giving market status to China may seem to be an obvious decision to someone who still thinks of China as a socialist nation. However, despite continued ntervention, China's economy grows freer daily, and not granting Market Economy Status (MES) has as many political implications as it does economic. This is because though MES would make it more difficult to bring trade disputes against China, it would also likely reduce the number of day to day disputes the US finds itself in. It would also likely improve the overall relationship between the two nations.

Though nations do not need to grant China Market Economy Status for about 7 more years per its accession agreement with the WTO, they may decide to do so in the interim. Doing so would undoubtedly make it more difficult to bring anti-dumping cases against China, likely one of the main reasons the decision has not yet been made. Domestic and foreign policy considerations also impact the decision. US industry is weary of granting MES to China for fear of the Chinese taking advantage of poor labor standards to flood the US with cheap products, a possibly legitimate claim that could also be based in protectionist fear. On the other side, the Chinese point to incredible changes made in both the human rights area and in its economy as proof that MES should be granted. However, the government retains controls over industry and human rights concerns have not been entirely alleviated. In this situation, logical arguments can be made by both camps, and the US needs to continually weigh the health of domestic producers against concerns about protectionism and its relationship with a growing power.

The latest in a long line of trade issues with China, and by no means the last, it will be interesting to see how the US handles this going forward. Whatever the outcome, however, it is merely a reminder that China's growing stature will undoubtedly keep it in focus for policymakers for the short, medium, and long term.