Non-market Economy Status
11-05-2024
Non-market Economy Status
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For Prelims: About Non-market Economy Status, Why does Vietnam want to get the ‘market economy’ status? What is market Economy? Key facts about anti-dumping duty, What are the challenges? |
Why in the news?
Vietnam has been pushing the President of the United States of America to quickly change its “non-market economy” classification to “market economy” status.
About Non-market Economy Status:
- The United States of America designates a country as non-market economy based on several factors namely
○If the country’s currency is convertible;
○If wage rates are determined by free bargaining between labour and management;
○If joint ventures or other foreign investment are allowed;
○whether the means of production are owned by the state; and
- If the state controls the allocation of resources and price and output decisions.
○Other factors like human rights are also considered.
- The non-market economy label allows the US to impose “anti-dumping” duties on goods imported from designated countries.
Why does Vietnam want to get the ‘market economy’ status?
- Vietnam has argued that in recent years it has implemented enough economic reforms that should get its name off the non-market economies list.
- The country does meet a number of criteria for the status to be changed. For instance, Vietnam allows foreign investment, wages are determined by free negotiations between workers and management, and most of the means of production are not owned by the state, according to a report by the Center for Strategic and International Studies (CSIS).
- The change in status will also help Vietnam get rid of the anti-dumping duties, making its products more competitive in the US market.
- Vietnam’s Center for WTO and International Trade has said that the method of calculating anti-dumping duties is flawed as it causes “the dumping margin to be pushed up very high” and does not actually reflect the situation of Vietnamese companies.
What is market Economy?
- It is a system in which production decisions and the prices of goods and services are guided primarily by the interactions of consumers and businesses.
- That is, the law of supply and demand, not a central government's policy, is allowed to determine what is available and at what price.
- A market economy gives entrepreneurs the freedom to pursue profits by creating new products, and the freedom to fail if they misread the market.
Key facts about anti-dumping duty:
- It is a tariff imposed on imports manufactured in foreign countries that are priced below the fair market value of similar goods in the domestic market.
- The government imposes anti-dumping duty on foreign imports when it believes that the goods are being “dumped” through low pricing in the domestic market.
- It is imposed to protect local businesses and markets from unfair competition by foreign imports.
What are the challenges?
- The road to Vietnam getting the market economy tag is dotted with roadblocks. The US steelmakers and the American Shrimp Processors Association have asked the Biden administration to not change Vietnam’s status. The association has cited Vietnam’s restrictions on land ownership, the country’s weak labour laws, and lower shrimp duties that would hurt its members, to make its case.
- The move could also see opposition in Congress, where eight US senators and 31 members of the House of Representatives claim that the change in Vietnam’s status “would aid Chinese state firms that have invested heavily in Vietnam, by letting them more easily circumvent US tariffs on their goods,”.
Source: Indian Express
With reference to Market Economy, consider the following statements:
1. It is a system in which prices of goods and services are guided by the interactions of consumers and businesses.
2. It follows the law of supply and demand.
3. It gives entrepreneurs the freedom to pursue profits by creating new products.
How many of the above statements are correct?
A.Only one
B.Only two
C.All three
D.None
Answer C