The Trump administration has formally opposed China’s bid to be recognized as a “market economy.”  Aligning itself with the European Union and other countries including Japan, the U.S. submitted a statement to the World Trade Organization (“WTO”) in mid-November and made its decision to oppose public on November 30, 2017.

Under a market economy status, China would be protected from WTO members applying non-market economy methodologies when investigating China’s anti-dumping regulations.  China was expecting to automatically be considered a market economy last year pursuant to paragraph 15 of China’s Protocol of Accession.  If the WTO denies market economy status, China will face increased tariffs and stands to lose billions in exports.

The Trump administration maintains the long-held position that China’s economy is state-controlled and its use of subsidies distorts the market.  The U.S. Treasury’s undersecretary of international affairs, David Malpass, expressed concern that “China’s economic liberalization seems to have slowed or reversed, with the role of the state increasing.”  Robert Lighthizer, U.S. Trade Representative, has previously rejected China’s bid for recognition as a market economy, noting the “evidence is overwhelming that WTO members have not surrendered their longstanding rights … to reject prices or costs that are not determined under market economy conditions in determining price comparability for purposes of anti-dumping comparisons.”

China’s Ministry of Commerce, Wang Hejun, warned the U.S.’s decision to oppose China’s market economy status “undermines the seriousness and authority of multilateral rules” and stated China “will take necessary measures to protect legitimate benefits of Chinese enterprises.”