Poi­son­ing The Wa­ters

The U.S. uses the USMCA trade agree­ment to at­tack China and the rest of the world

Beijing Review - - WORLD - By Li Yong

It is easy to take sides po­lit­i­cally or ide­o­log­i­cally on trade is­sues, but the politi­ciza­tion of these mat­ters is a poi­son pill that no one will be able to es­cape. This pill, as em­bed­ded in the Us-mex­ico-canada Agree­ment (USMCA), is ex­tremely ven­omous, not only for China, but also for the world at large.

The trade deal, which was con­cluded at the end of Septem­ber, con­tained a clause in ar­ti­cle 32.10 which states, “En­try by any Party into a free trade agree­ment with a non-mar­ket coun­try, shall al­low the other Par­ties to ter­mi­nate this Agree­ment on six­month no­tice and re­place this Agree­ment with an agree­ment as be­tween them (bi­lat­eral agree­ment).”

This clause and the whole of ar­ti­cle 32.10, by de­sign, os­ten­si­bly prevent Mex­ico and Canada from en­ter­ing into any free trade ar­range­ments with a non-mar­ket coun­try. The un­spo­ken mes­sage is: I (the United States) am the boss, and you (Canada and Mex­ico) will have to fol­low my pref­er­ences in your free trade de­ci­sions.

But which is the non-mar­ket coun­try the clause is re­fer­ring to?

White House Na­tional Eco­nomic Coun­cil Di­rec­tor Larry Kud­low ex­plained to re­porters on Oc­to­ber 2, “It starts with a C and ends with an A.” He seemed to shy away from ac­tu­ally men­tion­ing the coun­try. But it’s def­i­nitely not Croa­tia, Colom­bia or even Cuba. It’s China that the United States is try­ing to tar­get in the USMCA.

So why is China la­beled as a non-mar­ket econ­omy?

China’s non-mar­ket sta­tus was sup­posed to end upon the com­ple­tion of its 15-year tran­si­tion pe­riod in the World Trade Or­ga­ni­za­tion (WTO) by iden­ti­fy­ing the cost com­par­isons of prod­ucts in trade dis­pute cases. By De­cem­ber 11, 2016, the United States was sup­posed to honor its com­mit­ment as it had promised and de­tailed in Ar­ti­cle 15 of China’s WTO accession agree­ment. This would typ­i­cally en­tail giv­ing Chi­nese com­pa­nies fair and mar­ket­based treat­ment in as­sess­ing the value of their prod­ucts. How­ever, the United States re­fused to carry out its obli­ga­tions and pur­pose­fully des­ig­nated China a non-mar­ket econ­omy.

There is no mar­ket econ­omy def­i­ni­tion within the WTO. The U.S. it­self is not an in­ter­na­tion­ally rec­og­nized mar­ket econ­omy. Thus, the U.S. def­i­ni­tion of a non-mar­ket econ­omy is based only on its own do­mes­tic law.

The United States has cho­sen to ig­nore China’s re­form and mar­ke­ti­za­tion achieve-

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