West divided over China’s market economy status

China is completing fifteen years at WTO in December 2016, as it had joined the trade governing body in 2001. But the occasion is more important for rest of the world than for China. This is because as per the WTO provision, others should give Market Economy Status (MES) to a member after fifteen years.

The awarding of market economy status is usually related with former Communist countries of East Europe where economy was highly regulated by the government. In the WTO, such state patronization of economic activities is against market principles. China was accommodated as a non market economy and hence it is going to get the MES like all other members.

Why there is the surge of fear among others about China getting the MES?

This is because till now, most countries can claim that Chinese products gets some undue advantage back at home; because its government is giving freebies to its producers. That is the feature of non –market economies. Many European countries imposed antidumping and other restrictive measures on imports from China.

Western countries and industrial pressure groups there argue that granting MES to China is a discretionary power of the members as China continues with lot of non-market features. On the other, China claims that MES is an automatic process which it should get in 2016.

The reason for alarm in China’s trade partners and competitors is that with the granting of market economy status China’s trade partners can’t initiate such restrictive measures.

Many predict that after MES, China can widen its edge it has in the supply of cheap exports. Differential measures on the ground that Chinese exports are hurting (in case countries can impose Special Safeguard Duty) and are instances of dumping (where other countries can impose anti-dumping duties) are to be reduced by its trade partners.

The most affected in Europe will be steel companies as China is known for cheap steel production.

MES has divided the advanced countries. The US has cautioned Europe for offering the status without ‘thinking’.

In Europe, Angela Merkel’s Germany is in favour of granting it; so is Britain. The supporters of China hope that a pro-mindset will help them to accrue substantial benefits from the Middle Kingdom.

Ultimately, countries may put up a resistance, before granting it; because China’s economic overweight is tempting.