Trade Status of China

The really big news of the day was not North Korea’s missile or the stock market highs;  it was a buried story of the US position on China’s status in the World Trade Organization.

Within the WTO there are market economies and non-market economies and China has always been the latter since it came into the organization.  Non-market economies have state-run businesses and funding of state monopolies that conflict with the way market economies work.  They can manipulate markets to their own advantage so market economies can respond by adding additional tariffs.  In several public statements made to any country that would listen, China has said it is a market economy and would be treated like one.  It went on to say that in any future trade talks, that issue was “non negotiable”.

So, non-negotiable meets contrary position, and we are about to find out what China can do about changing its status in the WTO, which is probably nothing.  Still, it will be interesting to see what they try.  China claims, as it always does, that the WTO entry was conditional upon China being named a market economy in 15 years from its entry.  The US is saying that was contingent on certain changes that China has not made.  The drumbeat will be that the member nations are “not living up to their obligations under the membership agreement”.   You will probably hear this from every trade official in every WTO country China visits.  There will be scholarly articles written explaining how the WTO works, and Businessmen pointing to their independence from the Chinese Central Government.  We are just like you, they will say.  They will keep this up for 100 years if need be.  Non-negotiable to the Chinese is forever.