July 25, 2016

Finance, Ways & Means Ranking Members Agree With MSCI: China Must Not Be Granted Market Economy Status

On Friday, July 15, Manufacturers for Trade Enforcement (MTE), a coalition of U.S. manufacturers of steel, aluminum, textiles and other industrial goods that the Metals Service Center Institute (MSCI) is a member of, issued a statement praising the U.S. federal government’s position that China should not be granted market economy at the end of 2016 when a provision of the country’s 2001 accession agreement with the World Trade Organization (WTO) expires. The statement argued, “Under U.S. law, the Commerce Department is empowered to make a market economy status determination under established criteria, which, based on the experience of our industries, China has not met.” (Click here to read the full statement.) 

Last week, the Democratic ranking members of the two congressional committees that oversee trade policy seemed to agree with MTE’s assessment. Senate Finance Committee Ranking Member Ron Wyden (D-OR) and House Ways and Means Committee Ranking Member Sander Levin (D-MI) last week sent a letter to the European Trade Commissioner Cecilia Malmström and U.S. Trade Representative Michael Froman urging the two to cooperate more closely on the issue and to address “the unique challenges posed by continued market distorting behavior in China.” Specifically, the two lawmakers said they want the United States and Europe to more closely coordinate their efforts and to address concerns about some of the decisions of the WTO dispute settlement panels and Appellate Body. 

The lawmakers’ letter also argued, as MSCI has, that the WTO’s granting of market economy status to China need not be automatic. In their letter, Sen. Wyden and Rep. Levin said, “In our view, the expiration of subparagraph 15(a)(ii) of China's WTO Accession Protocol does not require WTO Members to grant China market economy status.” Click here to read the full letter. 

According to Politico, in a joint call last week with U.S. Trade Representative Froman, European Commissioner for Trade Malmström made it clear that she also believes that China’s ascendency to market status need not be automatic, arguing, “The issue of China's market economy status is not really an issue of market economy because obviously China is not a market economy … It's about some provisions in a WTO accession protocol that we are discussing intensively now in the European Union and in other countries.” 

Unfortunately, Politico also reported that “a number of powerful EU member states are inclined to give Beijing market economy status, but Brussels could try to mitigate the decision by tweaking its trade remedy laws or creating special arrangements for certain industries that would be especially affected by the decision.” To that end, Politico reported later in the week that, in a letter to Chinese Premier Li Keqiang, officials from the European Union proposed that a first meeting of a new “steel platform” to address China's steel overcapacity should be led by Commissioner Malmström in Brussels in September. The letter said European and Chinese officials should discuss “subsidies and other types of support from governments or government-sponsored institutions that can cause market distortions and contribute to global excess capacity.” It also argued, “The platform should also be used to monitor and verify commitments taken in this regard.” Click here to read more.