WASHINGTON—The Trump administration appears poised to cement China’s unfavorable status in trade cases, making Chinese goods eligible for higher U.S. tariffs well into the future.
[William Mauldin] March 29, 2017 [The Wall Street Journal]
U.S. officials are preparing a review of China’s “market-economy status” under the World Trade Organization, according to official documents on the Commerce Department website.
The review is expected to be announced as early as this week, just days before a high-stakes meeting between President Xi Jinping and President Donald Trump.
U.S. labor unions on Wednesday applauded the review and urged the Trump administration to avoid granting market-economy status. “The preferential status China is seeking would allow them to dump more unfairly priced products into the market, while claiming to abide to market economics,” said Leo Gerard, president of the United Steelworkers union, in a statement.
Beijing has said members of the WTO were required to start treating it as a market economy in December 2016, on the 15th anniversary of its membership in the Geneva-based body that oversees global trade.
However, the Obama administration declined to take steps to grant China that status, continuing to treat one of its largest trade partners as a nonmarket economy. Mr. Trump said in December that China is “not a market economy.”
Adopting full market-economy status would involve changing the way the U.S. conducts trade cases and likely make it harder for American firms to win big punitive tariffs against Chinese companies blamed for dumping products on the U.S. market or selling goods that benefit from improper subsidies.
The U.S. has dozens of punitive tariffs on steel products and other allegedly dumped products.
The Trump administration is working out how to deal with trade cases against Chinese industries and whether to continue to calculate the tariffs treating China as a nonmarket economy.
The Commerce Department linked the notice of its review to a new case in which it is investigating possible aluminum-foil dumping by China.
Wang Hejun, head of the trade remedy and investigation bureau of China’s commerce ministry, urged the U.S. on Wednesday to abide by WTO rules in its aluminum-foil investigation. Chinese companies shouldn’t be blamed for reduced U.S. output since American producers have been walking away from low-value aluminum-foil production for 20 years, he said, according to the official Xinhua News Agency. Improper trade remedies would hurt both sides, he said.
China has benefited enormously in recent decades from open global trading systems, but economists and political scientists say Beijing needs to further open its markets, reduce government’s heavy hand in the economy and allow unprofitable companies to fail if it wants to live up to its verbal embrace of free trade and globalization.
Mr. Trump has repeatedly accused Beijing of cheating at trade and threatened during the 2016 campaign to impose across-the-board tariffs on Chinese imports. Trade experts say the Trump administration is almost certain to step up the types and number of trade cases against China, even at the risk of a backlash at the WTO or from U.S. importers.
Beijing is likely to fight the new administration’s trade cases at the WTO and has also said it would challenge the way the U.S. calculates its tariffs in line with its status at the WTO.
Trade lawyers expect a protracted battle and a final ruling in Geneva several years in the future.
For nonmarket economies, trading partners can use other countries’ price data in calculating China’s costs, a method that has been employed when assessing punitive tariffs against China.
—Mark Magnier contributed to this article.