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December 12, 2016

MSCI Coalition Scores Win: U.S. Will Not Grant Market Economy Status To China

According to a report late last week in The Wall Street Journal, “The Obama administration has officially decided” that it won’t grant market economy status (MES) to China. The nation became eligible for the status yesterday, December 11, the 15th anniversary of its admittance to the World Trade Organization (WTO). The Journal quoted a senior Obama administration official who argued, “China’s protocol of accession to the WTO does not require the U.S. or any other WTO member automatically grant China market economy status after December 11, 2016.” 

In fact, U.S. law requires that the Department of Commerce make a market economy status determination based on established criteria. In a press conference in late November, U.S. Commerce Secretary Penny Pritzker also had argued this notion, saying that market economy status determinations are strictly governed by six statutory factors and due process determinations. 

The official also said, “If China wants to benefit from treatment as a market economy country, it must change its own practices to let the market play a decisive role in the economy.” 

The Metals Service Center Institute (MSCI) believes China has not met the criteria for MES and therefore strongly opposes giving China market economy status, a move that would allow tariffs on Chinese products to be reduced. MSCI believes China continues to provide state support to its own manufacturers, a fact that distorts global markets and hurts U.S. manufacturers. 

MSCI is a member of the Manufacturers for Trade Enforcement (MTE) coalition, a of group of leading U.S. industry groups opposed to the automatic granting of MES for China. Collectively, the industries represented by MTE directly employ more than one million American workers. The MTE coalition released a statement, available here, praising the Obama administration’s decision. 

The Obama administration’s stance is not likely to change when President Obama leaves office in January. According to The Journal, “The incoming Donald Trump administration isn’t likely to reverse the Obama administration’s decision, given that the president-elect and his transition team have said they plan to levy higher tariffs on Chinese importers, blaming the country for many of the American economy’s ails.” In Iowa last week, President-elect Trump said, “China is not a market economy” and cited alleged dumping of artificially low-priced goods on the U.S. market and theft of intellectual property by Chinese companies.