Non-market Economy Status

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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.

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.
  • Anti-dumping duty is imposed to protect local businesses and markets from unfair competition by foreign imports.

Q1: What is Inverted duty structure?

It is a situation where import duty on finished goods is low compared to the import duty on raw materials that are used in the production of such finished goods.

Source: Why Vietnam wants US to change its ‘non-market economy’ status