Should the United States Recognize China as a Market Economy?

Chad Bown

No PB16-24, Policy Briefs from Peterson Institute for International Economics

Abstract: China’s accession to the World Trade Organization (WTO) in 2001 came after lengthy negotiations. More than 160 WTO member countries granted nondiscriminatory tariff treatment to China’s exporters. For its part, China agreed to carry out numerous steps to open itself to global trade and investment markets. In return for its agreement to abide by certain rules that normally govern a market economy, China was led to believe that trading partners like the United States would officially revoke its nonmarket economy status in December 2016. The battle is about to begin over whether the United States and other countries will deliver on their earlier implicit promise. This Policy Brief examines whether granting China market economy status reduces the US government’s access to special trade policies to address imports from China in a way that might result in a sudden surge in imports from China. The answer is likely no, due to a recent US policy decision to begin use of countervailing duties (CVDs) against China. Most US antidumping duties applied against China since 2007 have been accompanied by a simultaneous CVD. A change in China’s nonmarket economy status that reduced the size of applied antidumping duties may thus result in only a modest increase in imports.

Date: 2016-12
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